{"url_path":"/sec/pmnt/10-k/2026/item-1a","section_key":"item-1a","section_title":"Item 1A RISK FACTORS**","topic":"sec","document":{"doc_type":"10-K","doc_date":"2026-06-29","source_url":"https://www.sec.gov/Archives/edgar/data/1849221/0001493152-26-030418-index.html","accession_number":"0001493152-26-030418","cik":"0001849221","ticker":"PMNT","issuer_name":"Perfect Moment Ltd.","edgar_url":"https://www.sec.gov/Archives/edgar/data/1849221/0001493152-26-030418-index.html","primary_entity_key":"0001849221","primary_entity_name":"Perfect Moment Ltd."},"word_count":16489,"has_tables":true,"body_markdown":"**ITEM\n1A. RISK FACTORS**\n\n \n\nInvesting\nin our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together\nwith all of the other information contained in this Annual Report, including the section titled “Management’s Discussion\nand Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes\nthereto, before making a decision to invest in our common stock. These risks and uncertainties are not the only ones we face. Additional\nrisks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that\naffect us. If any of the following risks occur, our business, financial condition, results of operations and prospects could be materially\nand adversely affected. In that event, the price of our common stock could decline, and you could lose part or all of your investment.\nYou should not interpret our disclosure of any of the following risks to imply that such risks have not already materialized.\n\n \n\n**Risk\nFactors Summary**\n\n \n\nOur\nbusiness is subject to numerous risks and uncertainties. These risks include, but are not limited to, the following:\n\n \n\n \n●\nOur\nhistory of losses and the substantial doubt about our ability to continue as a going concern, which could cause our stockholders\nto lose some or all of their investment in us.\n\n \n \n \n\n \n●\nOur\nbusiness depends on our strong brand, and if we are not able to maintain and enhance our brand we may be unable to sell our products,\nwhich would adversely affect our business.\n\n \n \n \n\n \n●\nOur\nbusiness partially depends on our wholesale partners, and our failure to maintain and further develop our relationships with our\nwholesale partners could harm our business.\n\n \n \n \n\n \n●\nA\ndownturn in the global economy will likely affect customer purchases of discretionary items, which could materially harm our sales,\nprofitability and financial condition.\n\n \n \n \n\n \n●\nOur\nfinancial performance is subject to significant seasonality and variability, which could significantly impact our cash flow and cause\nthe price of our common stock to decline.\n\n \n \n \n\n \n●\nWe\ncurrently do not operate Perfect Moment owned physical retail stores. Our plans to open Perfect Moment owned physical retail stores\nare dependent on a variety of factors, including store locations being available for lease and the stores being economically viable\nto operate.\n\n \n\n7\n\n \n\n \n\n \n●\nOur\nlimited operating experience and limited brand recognition in new international markets may limit our expansion and cause our business\nand growth to suffer.\n\n \n \n \n\n \n●\nOur\nsuccess is substantially dependent on the service of certain members of our board of directors and senior management.\n\n \n \n \n\n \n●\nThe\nfluctuating cost of raw materials could increase our cost of goods sold and cause our results of operations and financial condition\nto suffer.\n\n \n \n \n\n \n●\nOur\nbusiness is reliant on a limited number of third-party manufacturers and raw material suppliers.\n\n \n \n \n\n \n●\nOur\nability to deliver our products to the market and to meet customer expectations could be harmed if we encounter problems with our\ndistribution system.\n\n \n \n \n\n \n●\nData\nsecurity breaches and other cyber security events could result in disruption to our operations or financial losses and could negatively\naffect our reputation, credibility and business.\n\n \n \n \n\n \n●\nOur\nfabrics and manufacturing technology generally are not patented and can be imitated by our competitors. If our competitors sell products\nsimilar to ours at lower prices, our net revenue and profitability could suffer.\n\n \n \n \n\n \n●\nOur common stock has been delisted from NYSE American and now trades on\nthe OTCQB Venture Market, which may adversely affect the liquidity and market price of our common stock and our ability to raise capital.\n\n \n \n \n\n \n●\nOur\nshare price may be volatile, and you may be unable to sell your shares at or above the price at which you purchased them.\n\n \n\n**Risks\nRelated to Our Business, Our Brand, Our Products and Our Industry**\n\n \n\n**We\nhave a history of losses, expect to continue to incur losses in the near term and may not achieve or sustain profitability in the future,\nand as a result, our management has identified and our auditors reported that there is a substantial doubt about our ability to continue\nas a going concern.**\n\n \n\nFor\nthe fiscal years ended March 31, 2026 and 2025, our operating loss was $5,240, and $13,796, respectively. We intend to rely on debt and\nequity financing for working capital until positive cash flows from operations can be achieved, which may never occur. These matters\nraise substantial doubt about our ability to continue as a going concern. Based upon our current operating plan and assumptions, we expect\nthat our existing cash balances and expected cash flows from operations, alongside the continuance of our existing financing arrangements,\nwill be sufficient to fund our operations for at least the next 12 months, excluding financing to support production (i.e. timing of\nworking capital). However, our operating plan may change, and our assumptions may prove to be wrong, as a result of many factors currently\nunknown to us, and we could use our available capital resources sooner than we expect. We may need to seek additional funds sooner than\nplanned, through public or private equity or debt financings or other third-party funding or a combination of these approaches. Even\nif we believe we have sufficient funds for our current or future operating plans, we may seek additional capital if market conditions\nare favorable or based upon specific strategic considerations.\n\n \n\nAny\nadditional capital-raising efforts may divert our management’s attention from the operation of our business. In addition, we cannot\nguarantee that future financing will be available in sufficient amounts or on terms acceptable to us, if at all. If we are unable to\nobtain sufficient amounts of additional capital, when and if we require it, we may be required to reduce the scope of our operations,\nwhich could harm our business, financial condition and results of operations. Our consolidated financial statements do not include any\nadjustments that might result from the outcome of these uncertainties.\n\n \n\nThe\nreport of our independent registered public accounting firm that accompanies our audited consolidated financial statements for the fiscal\nyears ended March 31, 2026 and March 31, 2025 contains a going concern explanatory paragraph in which such firm stated that there is\nsubstantial doubt about our ability to continue as a going concern. Our consolidated financial statements contained in this report do\nnot include any adjustments that might result if we are unable to continue as a going concern. If we are unable to continue as a going\nconcern, holders of our securities might lose their entire investment. These factors, among others, may make it difficult to raise any\nadditional capital and may cause us to be unable to continue to operate our business.\n\n \n\n8\n\n \n\n \n\n**Our\nfinancial performance is subject to significant seasonality and variability, which could cause the price of our common stock to decline.**\n\n \n\nOur\nbusiness is affected by a number of factors common to our industry and by other factors specific to our business model, which drive seasonality\nand variability. Historically, key metrics, including those related to our growth, profitability and financial condition, have fluctuated\nsignificantly across fiscal periods. Consumer purchases of Women, Men and Kids skiwear and outerwear, which are the Perfect Moment core\ncategories, are concentrated in the Fall/Winter season. As a result, a large proportion of our direct-to-consumer revenue is recognized\nin the third and fourth fiscal quarter. Our wholesale revenue is weighted earlier in the second and third fiscal quarters, when most\norders are shipped to wholesale partners. At the consolidated level, our net revenue is concentrated in the second, third and fourth\nfiscal quarters, while our operating costs are more evenly distributed throughout the year. In the fiscal year ended March 31, 2026,\nthe second, third and fourth fiscal quarters represented 94% of total net revenue. Working capital requirements typically increase throughout\nthe first, second and early third quarters as overheads continue to be incurred and inventory builds to support our peak shipping and\nselling periods in the second and third quarters. Cash provided by operating activities is typically highest in the fourth quarter following\nthe significant inflows associated with our peak selling season. Historical results, especially comparisons across fiscal quarters, should\nnot be considered indicative of the results to be expected for any future periods. In addition to the seasonality of demand for our products,\nour financial performance is influenced by a number of factors which are difficult to predict and variable in nature. These include input\ncost volatility, the timing of consumer purchases and wholesale deliveries which very often shift between fiscal quarters, demand forecast\naccuracy, inventory availability and the evolution of our channel mix, as well as external trends in weather and discretionary consumer\nspending. A number of other factors which are difficult to predict could also affect the seasonality or variability of our financial\nperformance. Therefore, you should not rely on the results of a single fiscal quarter as an indication of our annual results or future\nperformance.\n\n** **\n\n**Our\nbusiness depends on our strong brand, and if we are not able to maintain and enhance our brand we may be unable to sell our products,\nwhich would adversely affect our business.**\n\n \n\nThe\nPerfect Moment name and brand image are integral to the growth of our business, and to the implementation of our strategies for expanding\nour business. We believe that the brand image we have developed has significantly contributed to the success of our business and is critical\nto maintaining and expanding our customer base. Maintaining and enhancing our brand will depend largely on the success of our marketing\nand merchandising efforts and our ability to provide a consistent, high-quality product and customer experience. Maintaining and enhancing\nour brand may require us to make substantial investments in areas such as product design, store openings and operations, marketing, ecommerce,\ncommunity relations and employee training, and these investments may not be successful. We anticipate that, as our business continues\nto expand into new markets and new product categories and as the market becomes increasingly competitive, maintaining and enhancing our\nbrand may become difficult and expensive. Conversely, as we penetrate these new markets and our brand becomes more widely available,\nit could potentially detract from the appeal stemming from the scarcity of our brand. Our brand may also be adversely affected if our\npublic image or reputation is tarnished by negative publicity. In addition, ineffective marketing, product diversion to unauthorized\ndistribution channels, product defects, counterfeit products, unfair labor practices, and failure to protect the intellectual property\nrights in our brand are some of the potential threats to the strength of our brand, and those and other factors could rapidly and severely\ndiminish consumer confidence in us. Maintaining and enhancing our brand will depend largely on our ability to be a leader in affordable\nluxury skiwear, outerwear and activewear and to continue to offer a range of high-quality products to our customers, which we may not\nexecute successfully. Any of these factors could harm our sales, profitability or financial condition. A key element of our growth strategy\nis the expansion of our product offerings into new product categories. We may be unsuccessful in designing products that meet our customers’\nexpectations for our brand or that are attractive to new customers. If we are unable to anticipate customer preferences or industry changes,\nor if we are unable to modify our products on a timely basis or expand effectively into new product categories, we may lose customers.\nAs we expand into new geographic markets, consumers in these new markets may be less compelled by our brand image and may not be willing\nto pay a higher price to purchase our products as compared to traditional outerwear. More generally, our results of operations would\nsuffer if our investments and innovations do not anticipate the needs of our customers, are not appropriately timed with market opportunities\nor are not effectively brought to market.\n\n \n\n**We\ncontinue to focus on our direct-to-consumer channel, which may be costly and could materially harm our sales, profitability and financial\ncondition.**\n\n \n\nOur\nbusiness operates on a multi-channel distribution model, which includes distributing products on a wholesale basis for resale by others\nand online by us. Focusing on our ecommerce platform is essential to our future strategy. This strategy has and will continue to require\nsignificant investment in cross-functional operations and management focus, along with investment in supporting technologies. If we are\nunable to provide a convenient and consistent experience for our customers, our ability to compete and our results of operations could\nbe adversely affected. In addition, if our ecommerce platform does not appeal to our customers, reliably function as designed, or maintain\nthe privacy of customer data, or if we are unable to consistently meet our brand promise to our customers, we may experience a loss of\ncustomer confidence or lost sales, or be exposed to fraudulent purchases, which could adversely affect our reputation and results of\noperations.\n\n \n\n9\n\n \n\n \n\n**A\ndownturn in the global economy will likely affect customer purchases of discretionary items, which could materially impact our sales,\nprofitability and financial condition.**\n\n \n\nMany\nfactors affect the level of consumer spending for discretionary items including performance luxury outerwear. These factors include general\neconomic conditions, interest and tax rates, the availability of consumer credit, disposable consumer income, unemployment and consumer\nconfidence in future economic conditions. Consumer purchases of discretionary items, such as our performance luxury outerwear, tend to\ndecline during recessionary periods when disposable income is lower. During our history, we have experienced recessionary periods, but\nwe cannot predict the effect of future recessionary periods on our sales and profitability. A downturn in the economy in markets in which\nwe sell our products may materially harm our sales, profitability and financial condition. If periods of decreased consumer spending\npersist, our sales could decrease, and our financial condition and results of operations could be adversely affected.\n\n \n\n**We\noperate in a highly competitive market and the size and resources of some of our competitors may allow them to compete more effectively\nthan we can, resulting in a loss of our market share and a decrease in our revenue and profitability.**\n\n \n\nThe\nmarket for premium outerwear is highly fragmented. We compete against a wide range of brands and retailers. Many of our competitors have\nsignificant competitive advantages, including larger and broader customer bases, more established relationships with a broader set of\nsuppliers, greater brand recognition, greater financial resources, more established research and development processes, a longer history\nof store development, greater marketing resources, more established distribution processes, and other resources which we do not have.\nOur competitors may be able to achieve and maintain brand affinity and market share more quickly and effectively than we can. Many of\nour competitors have more established and diversified marketing programs, including with respect to promotion of their brands through\ntraditional forms of advertising, such as print media and television commercials, and through celebrity endorsements, and have substantial\nresources to devote to such efforts. Our competitors may also create and maintain brand affinity using traditional forms of advertising\nmore quickly than we can. Our competitors may also be able to increase sales in their new and existing markets faster than we can by\nemphasizing different distribution channels than we can, such as catalog sales or an extensive retail network, and many of our competitors\nhave substantial resources to devote toward increasing sales in such ways.\n\n \n\n**Use\nof social media and influencers may adversely affect our reputation or subject us to fines or other penalties.**\n\n \n\nWe\nuse third-party social media platforms as, among other things, marketing tools. For example, we maintain Instagram, Facebook (Meta),\nPinterest and TikTok accounts. We also maintain relationships with thousands of social media influencers and engage in collaborations.\nAs existing ecommerce and social media platforms continue to rapidly evolve and new platforms develop, we must continue to maintain a\npresence on these platforms and establish presences on new or emerging social media platforms. If we are unable to cost-effectively use\nsocial media platforms as marketing tools or if the social media platforms we use change their policies or algorithms, we may not be\nable to fully optimize such platforms, and our ability to maintain and acquire consumers and our financial condition may suffer. Furthermore,\nas laws and regulations and public opinion rapidly evolve to govern the use of these platforms and devices, the failure by us, our employees,\nour network of social media influencers, our sponsors or third parties acting at our direction to abide by applicable laws and regulations\nin the use of these platforms and devices or otherwise could subject us to regulatory investigations, class action lawsuits, liability,\nfines or other penalties and have an adverse effect on our business, financial condition, results of operations and prospects.\n\n \n\nIn\naddition, an increase in the use of social media influencers for product promotion and marketing may cause an increase in the burden\non us to monitor compliance of the content they post and increase the risk that such content could contain problematic product or marketing\nclaims in violation of applicable laws and regulations. For example, in some cases, the Federal Trade Commission has sought enforcement\naction where an endorsement has failed to clearly and conspicuously disclose a financial relationship or material connection between\nan influencer and an advertiser. We do not control the content that our influencers post, and if we were held responsible for any false,\nmisleading or otherwise unlawful content of their posts or their actions, we could be fined or subjected to other monetary liabilities\nor forced to alter our practices, which could have an adverse impact on our business.\n\n \n\nNegative\ncommentary regarding us, our products or influencers and other third parties who are affiliated with us may also be posted on social\nmedia platforms and may be adverse to our reputation or business. Influencers with whom we maintain relationships could engage in behavior\nor use their platforms to communicate directly with our consumers in a manner that reflects poorly on our brand and may be attributed\nto us or otherwise adversely affect us. It is not possible to prevent such behavior, and the precautions we take to detect this activity\nmay not be effective in all cases. Our target consumers often value readily available information and often act on such information without\nfurther investigation and without regard to its accuracy. The harm may be immediate, without affording us an opportunity for redress\nor correction.\n\n \n\n10\n\n \n\n \n\n**Our\ncurrent and future products may experience quality problems from time to time that can result in negative publicity, litigation, product\nrecalls and warranty claims, which could result in decreased revenue and operating margin, and harm to our brand.**\n\n \n\nWe\nhave occasionally received, and may in the future receive, shipments of products that fail to comply with our technical specifications\nor that fail to conform to our quality control standards. We have also received, and may in the future receive, products that are otherwise\nunacceptable to us or our customers. Under these circumstances, unless we are able to obtain replacement products in a timely manner,\nwe risk the loss of revenue resulting from the inability to sell those products and related increased administrative and shipping costs.\nAdditionally, if the unacceptability of our products is not discovered until after such products are sold, our customers could lose confidence\nin our products or we could face a product recall and our results of operations could suffer and our business, reputation, and brand\ncould be harmed. There can be no assurance we will be able to detect, prevent, or fix all defects that may affect our products. Failure\nto detect, prevent, or fix defects, or the occurrence of real or perceived quality, health or safety problems or material defects in\nour current and future products, could result in a variety of consequences, including a greater number of product returns than expected\nfrom customers and our wholesale partners, litigation, product recalls, and credit, warranty or other claims, among others, which could\nharm our brand, sales, profitability and financial condition. Each Perfect Moment clothing product has a warranty against defects with\nreasonable use, for two years from the date of purchase. Because of this comprehensive warranty, quality problems could lead to increased\nwarranty costs, and divert the attention of our manufacturing facilities. Such problems could hurt our luxury brand image, which is critical\nto maintaining and expanding our business. Any negative publicity or lawsuits filed against us related to the perceived quality and safety\nof our products could harm our brand and decrease demand for our products.\n\n \n\n**If\nwe are unable to manage our operations at our current size or to manage any future growth effectively, our growth may be slowed.**\n\n \n\nWe\nhave expanded our operations for many years and plan to continue our expansion efforts. In order to support growth, of which there can\nbe no assurance, we will be required to continue to expand our sales and marketing, product development, manufacturing and distribution\nfunctions, to upgrade our management information systems and other processes, and to obtain more space for our expanding administrative\nsupport and other personnel. Continued or fluctuating growth could strain our resources, and we could experience operating difficulties,\nincluding difficulties in hiring, training and managing an increasing number of employees and manufacturing capacity to produce our products,\nand delays in production and shipments. These difficulties may result in the erosion of our brand image, divert the attention of management\nand key employees and impact financial and results of operations. In order to continue to expand our direct-to-consumer channel, we expect\nto add selling, general and administrative expenses to our cost base. These costs, which include capital assets, lease commitments and\nheadcount, could result in decreased margins if we are unable to drive commensurate direct-to-consumer revenue growth.\n\n \n\n**Our\nsales and profitability may decline as a result of increasing product costs and decreasing selling prices.**\n\n \n\nOur\nbusiness is subject to significant pressure on costs and pricing caused by many factors, including intense competition, constrained sourcing\ncapacity and related inflationary pressure, pressure from consumers to reduce the prices we charge for our products, and changes in consumer\ndemand. These factors may cause us to experience increased costs, reduce our prices to consumers or experience reduced sales in response\nto increased prices, any of which could cause our operating margin to decline if we are unable to offset these factors with reductions\nin operating costs and could have a material adverse effect on our financial condition, results of operations and cash flows.\n\n \n\n**Our\nsuccess depends on our ability to identify and originate product trends as well as to anticipate and react to changing consumer demands\nin a timely manner.**\n\n \n\nAll\nof our products are subject to changing consumer preferences that cannot be predicted with certainty. If we are unable to introduce new\nproducts or novel technologies in a timely manner or our new products or technologies are not accepted by our customers, our competitors\nmay introduce similar products in a timelier fashion, which could hurt our goal to be viewed as a leader in affordable luxury skiwear\nand activewear. Our new products may not receive consumer acceptance as consumer preferences could shift rapidly to different types of\nathletic apparel or away from these types of products altogether, and our future success depends in part on our ability to anticipate\nand respond to these changes. If we are unable to anticipate consumer preferences and successfully develop and introduce new, innovative,\nand differentiated products, we may not be able to maintain or increase our sales and profitability. Even if we are successful in anticipating\nconsumer preferences, our ability to adequately react to and address those preferences will in part depend upon our continued ability\nto develop and introduce innovative, high-quality products. Our failure to effectively introduce new products that are accepted by consumers\ncould result in a decrease in net revenue and excess inventory levels, which could have a material adverse effect on our financial condition.\n\n \n\n11\n\n \n\n \n\n**Our\nbusiness and results of operations could be materially harmed if we are unable to accurately forecast customer demand for our products.**\n\n \n\nOur\nability to forecast accurately has become increasingly important as we have expanded our direct-to-consumer channel globally and could\nbe affected by many factors outside of our control, including an increase or decrease in consumer demand for our products or for products\nof our competitors, our failure to accurately forecast consumer acceptance of new products, product introductions by competitors, unanticipated\nchanges in general market conditions and, therefore, consumer spending in the sector and weakening of economic conditions or consumer\nconfidence in future economic conditions. In our wholesale channel, a majority of orders delivered in a given fiscal year are received\nin the prior fiscal year, enabling us to manufacture inventory relative to a defined order book. In the direct-to-consumer channel, we\nmanufacture according to our forecasts of consumer demand. If we overestimate the demand for our products, we could face inventory levels\nin excess of demand, which could result in inventory write-downs or write-offs and the sale of excess inventory at discounted prices,\nwhich would harm our gross margins and our brand management efforts. The impact of overestimation is expected to increase as a larger\nportion of our sales comes through our direct-to-consumer channel, and as we expand our product offerings. If we underestimate the demand\nfor our products, we may not be able to produce products to meet our wholesale partner requirements, and this could result in delays\nin the shipment of our products and our failure to satisfy demand, as well as damage to our reputation and wholesale partner relationships.\nOverall, failures to accurately predict the level of demand for our products could harm our profitability and financial condition.\n\n \n\n**Our\nplans to improve and expand our product offerings may not be successful, and implementation of these plans may divert our operational,\nmanagerial and administrative resources, which could harm our competitive position and reduce our net revenue and profitability.**\n\n \n\nIn\naddition to our global expansion plans, we are growing our business by expanding our product offerings outside performance luxury outerwear,\nincluding an expanded winter and summer collection, knitwear, activewear and accessories. The principal risks to our ability to successfully\ncarry out our plans to expand our product offering include:\n\n \n\n \n●\nthe\nsuccess of new products and new product lines will depend on market demand and there is a risk that new products and new product\nlines will not deliver expected results, which could negatively impact our future sales and results of operations;\n\n \n \n \n\n \n●\nif\nour expanded product offerings fail to maintain and enhance our distinctive brand identity, our brand image may be diminished and\nour sales may decrease;\n\n \n \n \n\n \n●\nimplementation\nof these plans may divert management’s attention from other aspects of our business and place a strain on our management, operational\nand financial resources, as well as our information systems; and\n\n \n \n \n\n \n●\nincorporation\nof novel materials or features into our products may not be accepted by our customers or may be considered inferior to similar products\noffered by our competitors.\n\n \n\nWe\nalso may fail to create adequate brand awareness around new product offerings. In addition, our ability to successfully carry out our\nplans to expand our product offerings may be affected by economic and competitive conditions, changes in consumer spending patterns and\nchanges in consumer preferences and styles. These plans could be abandoned, could cost more than anticipated and could divert resources\nfrom other areas of our business, any of which could negatively impact our competitive position and reduce our net revenue and profitability.\n\n \n\n**We\ncurrently do not operate Perfect Moment owned physical retail stores. Our plans to open Perfect Moment owned physical retail stores are\ndependent on a variety of factors, including store locations being available for lease and the stores being economically viable to operate.**\n\n \n\nOne\nof our growth strategies is to own and operate Perfect Moment owned physical retail stores. Our revenue and profit forecasts beginning\nwith fiscal year ending March 31, 2027 include the opening of directly operated retail stores that will need to be leased, staffed, replenished\nwith inventory and operated profitably. In addition, the stores will need to be furnished with the appropriate fittings. As this will\nbe a new selling channel for Perfect Moment, sourcing locations introduces the risk that leases might not be available or be more expensive\nthan our estimates. The initial capital expenditure and ongoing costs and complexities of operating a store, such as staffing and energy\ncosts, could be higher than our forecasts, leading to lower profitability or losses. Brands often see a halo impact on their other revenue\nchannels (for example, online channels) when operating physical stores. However, there is a risk that new stores will cannibalize sales\nfrom these channels, which could harm our future business and results of operations.\n\n \n\n12\n\n \n\n \n\n**Our\nlimited operating experience and limited brand recognition in new international markets may limit our expansion and cause our business\nand growth to suffer.**\n\n \n\nOur\nfuture growth partially depends on our geographical expansion, starting with establishing a presence in China. We have limited experience\nwith regulatory environments and market practices internationally, and we may not be able to penetrate or successfully operate in any\nnew market. In connection with our expansion efforts we may encounter obstacles we did not face in our current markets, including cultural\nand linguistic differences, differences in regulatory environments, labor practices and market practices, difficulties in keeping abreast\nof market, business and technical developments, and foreign customer tastes and preferences. We may also encounter difficulty expanding\ninto new international markets because of limited brand recognition leading to delayed acceptance of our luxury products by customers\nin these new international markets. Our failure to develop our business in new international markets or disappointing growth outside\nof existing markets could harm our future business and results of operations.\n\n \n\n**If\nwe fail to attract new customers, we may not be able to increase sales.**\n\n \n\nOur\nsuccess depends, in part, on our ability to attract new customers. In order to expand our customer base, we must appeal to and attract\nconsumers who identify with our brand and products. We have made significant investments in enhancing our brand and attracting new customers.\nWe expect to continue to make significant investments to promote our current products to new customers and new products to current and\nnew customers, including through our ecommerce platform. Such marketing investments can be expensive and may not result in increased\nsales. Further, as our brand becomes more widely known, we may not attract new customers as we have in the past. If we are unable to\nattract new customers, we may not be able to increase our sales.\n\n \n\n**We\npartially depend on our wholesale partners to display and present our products to customers in their wholesale channel, and our failure\nto maintain and further develop our relationships with our wholesale partners could harm our business.**\n\n \n\nWe\nsell our products in our wholesale channel either directly or indirectly, through distributors and to wholesale partners. Our wholesale\npartners service customers by stocking and displaying our products and explaining our product attributes. Our relationships with these\npartners are important to the authenticity of our brand and the marketing programs we continue to deploy. Our failure to maintain these\nrelationships with our wholesale partners or financial difficulties experienced by these wholesale partners could harm our business.\nOur sales depend, in part, on wholesale partners effectively displaying our products, including providing attractive space in their online\nor physical stores or marketing campaigns, including shop-in-shops, and training their sales personnel to sell our products. If our wholesale\npartners reduce or terminate those activities, we may experience reduced sales of our products, resulting in lower revenue and gross\nmargins, which would harm our profitability and financial condition. If we lose any of our wholesale partners, or if they reduce their\npurchases of our existing or new products, or their number of stores or operations are reduced, or they promote products of our competitors\nover ours, or they suffer financial difficulty or insolvency, our sales would be harmed. Such conditions, among other things, have resulted,\nand in the future may result, in financial difficulties leading to restructurings, bankruptcies, liquidations and other unfavorable events\nfor our wholesale partners and may cause such partners to reduce or discontinue orders of our products or be unable to pay us for products\nthey have purchased from us. This has caused us to negotiate shortened payment terms and reduce credit limits in certain cases. If the\noverall retail environment continues to decline or if one or more of our wholesale partners is unable or unwilling to meet our payment\nterms, our business and results of operations could be harmed.\n\n \n\n**We\nrely on payment cards to receive payments and are subject to payment-related risks.**\n\n \n\nFor\nour direct-to-consumer sales, we accept a variety of payment methods, including credit cards, debit cards and mobile payment methods.\nAccordingly, we are, and will continue to be, subject to significant and evolving regulations and compliance requirements relating to\npayment card processing. This includes laws governing the collection, processing and storage of sensitive consumer information, as well\nas industry requirements such as the Payment Card Industry Data Security Standard (“PCI-DSS”). These laws and obligations\nmay require us to implement enhanced authentication and payment processes that could result in increased costs and liability and reduce\nthe ease of use of certain payment methods. For certain payment methods, including credit and debit cards, we pay interchange and other\nfees, which may increase over time. We rely on independent service providers for payment processing, including credit and debit cards.\nIf these independent service providers become unwilling or unable to provide these services to us or if the cost of using these providers\nincreases, our business could be harmed. We are also subject to payment card association operating rules and agreements, including PCI-DSS,\ncertification requirements and rules governing electronic funds transfers, which could change or be reinterpreted to make it difficult\nor impossible for us to comply. If we fail to comply with these rules or requirements, or if our data security systems are breached or\ncompromised, we may be liable for losses incurred by card issuing banks or consumers, subject to fines and higher transaction fees, lose\nour ability to accept credit or debit card payments from our consumers, or process electronic fund transfers or facilitate other types\nof payments. Any failure to comply could significantly harm our brand, reputation, business, and results of operations.\n\n \n\n13\n\n \n\n \n\n**Our\nsuccess is substantially dependent on the service of certain members of our board or directors and senior management.**\n\n \n\nThe\nloss of the services of our senior management could make it more difficult to successfully operate our business and achieve our business\ngoals. We also may be unable to retain existing management, or technical, sales and client support personnel that are critical to our\nsuccess, which could result in harm to our customer and employee relationships, loss of key information, expertise or know-how and unanticipated\nrecruitment and training costs. We have not obtained key man life insurance policies on any members of our senior management team. As\na result, we would not be protected against the associated financial loss if we were to lose the services of members of our senior management\nteam.\n\n \n\n**We\nface various risks related to health epidemics, pandemics and similar outbreaks, which may adversely affect our business.**\n\n \n\nOur\nglobal operations, and those of the third parties upon whom we rely, have been, and could be in the future, adversely affected by health\nepidemics, pandemics and similar outbreaks. Despite our efforts, and the efforts of third parties upon whom we rely, to manage these\nmatters, their ultimate effects also depend on factors beyond our knowledge or control, including the duration, severity and recurrence\nof any outbreak and actions taken to contain its spread and mitigate its public health effects. Health epidemics, pandemics and similar\noutbreaks may adversely affect our business, including by resulting in (i) significant volatility in demand for our products and services,\n(ii) changes in consumer behavior and preferences, (iii) disruptions of our manufacturing and supply chain operations, (iv) limitations\non our employees’ ability to work and travel and (v) changes to economic or political conditions in markets in which we operate.\n\n \n\n**We\nare subject to many hazards and operational risks that can disrupt our business, some of which may not be insured or fully covered by\ninsurance.**\n\n \n\nOur\noperations are subject to many hazards and operational risks inherent to our business, including general business risks, product liability,\nproduct recall and damage to third parties. Our insurance coverage may be inadequate to cover our liabilities related to such hazards\nor operational risks. In addition, we may not be able to maintain adequate insurance in the future at rates we consider reasonable and\ncommercially justifiable, and insurance may not continue to be available on terms as favorable as our current arrangements. The occurrence\nof a significant uninsured claim, or a claim in excess of the insurance coverage limits maintained by us could harm our business, results\nof operations and financial condition.\n\n \n\n**Risks\nRelated to Our Supply Chain**\n\n \n\n**We\nmay be unable to source and sell our merchandise profitably or at all if new trade restrictions are imposed or existing restrictions\nbecome more burdensome.**\n\n** **\n\nThe\nUnited States and the countries in which our products are produced or sold have imposed and may impose additional quotas, duties, tariffs,\nor other restrictions or regulations, or may adversely adjust prevailing quota, duty, or tariff levels. The results of any audits or\nrelated disputes regarding these restrictions or regulations could have an adverse effect on our financial statements for the period\nor periods for which the applicable final determinations are made. Countries impose, modify, and remove tariffs and other trade restrictions\nin response to a diverse array of factors, including global and national economic and political conditions, which make it impossible\nfor us to predict future developments regarding tariffs and other trade restrictions. Trade restrictions, including tariffs, quotas,\nembargoes, safeguards, and customs restrictions, have and could result in a higher cost or restrictions on the importation of the\nproducts we sell. Although we have and may continue to look for alternative sourcing options, we may not be able to shift production\nin a timely or cost-effective manner, if at all, from various countries in which we manufacture our products to offset those costs or\nrestrictions. Therefore, we may not be able to mitigate the entire increase to our cost resulting from tariffs and we may not be able\nto, or may choose not to, pass any cost increase onto consumers. Any increase in our prices could have an adverse impact on our direct\nsales to consumers, as well as sales by our wholesale customers. In addition, the uncertainty in the global trade environment may have\nadverse impacts on capital markets or consumer discretionary spending, which could lower demand for our products. Any adverse impact\non our costs or on consumer demand could have a material adverse effect on our business, financial condition and results of operations.\n\n \n\nWe\nare dependent on international trade agreements and regulations. The countries in which we produce and sell our products could impose\nor increase tariffs, duties, or other similar charges that could negatively affect our results of operations, financial position, or\ncash flows.\n\n \n\n14\n\n \n\n \n\nAdverse\nchanges in, or withdrawal from, trade agreements or political relationships between the United States and the PRC, Europe, Canada, or\nother countries where we sell or source our products, could negatively impact our results of operations or cash flows. General geopolitical\ninstability and the responses to it, such as the possibility of sanctions, trade restrictions, and changes in tariffs, including sanctions\nagainst the PRC, tariffs imposed by the United States and the PRC, and the possibility of additional tariffs or other trade restrictions,\ncould adversely impact our business. It is possible that further tariffs may be introduced or increased. Such changes could adversely\nimpact our business and could increase the costs of sourcing our products from the PRC as well as other countries, or could require us\nto source our products from different countries. The Uyghur Forced Labor Prevention Act and other similar legislation may lead to greater\nsupply chain compliance costs and delays to us and to our vendors.\n\n \n\n**We\nrely on a limited number of third-party suppliers to provide high quality raw materials.**\n\n \n\nOur\nproducts require high quality raw materials, including down, softshell, wool, neoprene, and cotton. We do not manufacture our products\nor the raw materials for them and rely instead on suppliers. Many of the specialty fabrics used in our products are technically advanced\ntextile products developed and manufactured by third parties and may be available, in the short-term, from only one or a limited number\nof sources. We have no long-term contracts with any of our suppliers or manufacturers for the production and supply of our raw materials\nand products, and we compete with other companies for fabrics, other raw materials, and production.\n\n \n\nWe\nwork with a group of approximately 31 vendors that manufacture our products, 24 of which produced products in the fiscal year ended March\n31, 2026. During the fiscal year ended March 31, 2026, the largest single manufacturer produced approximately 31% of our products. We\nwork with a group of approximately 54 suppliers to provide the fabrics for our products.\n\n \n\nThe\nprice of raw materials depends on a wide variety of factors largely beyond the control of the Company. A shortage, delay or interruption\nof supply for any reason could negatively impact our ability to fulfill orders and have an adverse impact on our financial results.\nIn addition, while our suppliers, in turn, source from a number of sub-suppliers, we rely on a very small number of direct suppliers\nfor certain raw materials. As a result, any disruption to these relationships could have an adverse effect on our business. Events that\nadversely affect our suppliers could impair our ability to obtain inventory in the quantities and at the quality that we require. Such\nevents include difficulties or problems with our suppliers’ businesses, finances, labor relations, ability to import raw materials,\ncosts, production, insurance and reputation, as well as natural disasters, public health emergencies or other catastrophic occurrences.\nA significant slowdown in the retail industry as a whole may also result in bankruptcies or permanent closures of some of our suppliers\nand third-party vendors. Furthermore, there can be no assurance that our suppliers will continue to provide fabrics and raw materials\nor provide products that are consistent with our standards. More generally, if we need to replace an existing supplier, additional supplies\nor additional manufacturing capacity may not be available when required on terms that are acceptable to us, or at all, and any new supplier\nmay not meet our strict quality requirements. In the event we are required to find new sources of supply, we may encounter delays in\nproduction, inconsistencies in quality and added costs as a result of the time it takes to train our suppliers and manufacturers in our\nmethods, products and quality control standards. Any delays, interruption or increased costs in the supply of our raw materials could\nhave an adverse effect on our ability to meet customer demand for our products and result in lower revenue and profitability both in\nthe short and long-term.\n\n \n\n**If\nour independent manufacturers or our suppliers fail to use ethical business practices and fail to comply with changing laws and regulations\nor our applicable guidelines, our brand image could be harmed due to negative publicity.**\n\n \n\nOur\ncore values, which include developing the highest quality products while operating with integrity, are an important component of our\nbrand image, which makes our reputation sensitive to allegations of unethical or improper business practices, whether real or perceived.\nWe do not control our suppliers and manufacturers or their business practices. Accordingly, we cannot guarantee their compliance with\nour guidelines or the law. A lack of compliance could lead to reduced sales or recalls or damage to our brand or cause us to seek alternative\nsuppliers, which could increase our costs and result in delayed delivery of our products, product shortages or other disruptions of our\noperations. In addition, many of our products include materials that are heavily regulated in many jurisdictions. Certain jurisdictions\nin which we sell have various regulations related to manufacturing processes and the chemical content of our products, including their\ncomponent parts. Monitoring compliance by our manufacturers and suppliers is complicated, and we are reliant on their compliance reporting\nin order to comply with regulations applicable to our products. This is further complicated by the fact that expectations of ethical\nbusiness practices continually evolve and may be substantially more demanding than applicable legal requirements. Ethical business practices\nare also driven in part by legal developments and by diverse groups active in publicizing and organizing public responses to perceived\nethical shortcomings. Accordingly, we cannot predict how such regulations or expectations might develop in the future and cannot be certain\nthat our guidelines or current practices would satisfy all parties who are active in monitoring our products or other business practices\nworldwide.\n\n \n\n15\n\n \n\n \n\n**Labor-related\nmatters, including labor disputes, relating to our suppliers may adversely affect our operations.**\n\n \n\nPotential\nlabor disputes at independent factories where our goods are produced, shipping ports, or transportation carriers create risks for our\nbusiness, particularly if a dispute results in work slowdowns, lockouts, strikes or other disruptions during our peak manufacturing,\nshipping and selling seasons. Any potential labor dispute could materially affect our costs, decrease our sales, harm our reputation\nor otherwise negatively affect our sales, profitability or financial condition. Further, the risks to our business due to a pandemic\nor other public health emergency, include risks to worker health and safety, prolonged restrictive measures put in place in order to\ncontrol the crisis and limitations on travel, which may result in temporary shortages of staff or unavailability of certain workers with\nkey expertise or knowledge of our business and, impact on productivity.\n\n \n\n**The\noperations of many of our suppliers are subject to additional risks that are beyond our control.**\n\n \n\nAlmost\nall of our suppliers are located outside of North America and the United Kingdom, and as a result, we are subject to risks associated\nwith doing business outside of these regions, including:\n\n \n\n \n●\nthe\nimpact of health conditions, and related government and private sector responsive actions, and other changes in local economic conditions\nin countries where our suppliers or manufacturers are located;\n\n \n \n \n\n \n●\npolitical\nunrest, terrorism, labor disputes, and economic instability resulting in the disruption of trade from foreign countries in which\nour products are manufactured;\n\n \n \n \n\n \n●\nfluctuations\nin foreign currency exchange rates;\n\n \n \n \n\n \n●\nthe\nimposition of new laws and regulations, including those relating to labor conditions, quality and safety standards, imports, duties,\ntaxes and other charges on imports, as well as trade restrictions and restrictions on currency exchange or the transfer of funds;\n\n \n \n \n\n \n●\nreduced\nprotection for intellectual property rights, including trademark protection, in some countries, particularly in the PRC; and\n\n \n \n \n\n \n●\ndisruptions\nor delays in shipments whether due to port congestion, labor disputes, product regulations and/or inspections or other factors, natural\ndisasters or health pandemics, or other transportation disruptions.\n\n \n\nThese\nand other factors beyond our control could interrupt our suppliers’ production in offshore facilities, influence the ability of\nour suppliers to export our products cost-effectively or at all and inhibit our suppliers’ ability to procure certain materials,\nany of which could harm our business, financial condition, and results of operations.\n\n \n\n**The\nfluctuating cost of raw materials could increase our cost of goods sold and cause our results of operations and financial condition to\nsuffer.**\n\n \n\nThe\nfabrics used to make our products include synthetic fabrics whose raw materials include petroleum-based products. Our products also include\nsilver and natural fibers, including cotton. Our costs for raw materials are affected by, among other things, weather, consumer demand,\nspeculation on the commodities market, the relative valuations and fluctuations of the currencies of producer versus consumer countries,\nand other factors that are generally unpredictable and beyond our control. Increases in the cost of raw materials, including petroleum\nor the prices we pay for silver and our cotton yarn and cotton-based textiles, could have a material adverse effect on our cost of goods\nsold, results of operations, financial condition, and cash flows.\n\n \n\nAdditionally,\nincreasing costs of labor, freight and energy could increase our and our suppliers’ cost of goods. If our suppliers are affected\nby increases in their costs of labor, freight and energy, they may attempt to pass these cost increases on to us. If we pay such increases,\nwe may not be able to offset them through increases in our pricing, which could adversely affect our results of operations and financial\ncondition.\n\n \n\n**If\nwe encounter problems with our distribution system, our ability to deliver our products to the market and to meet customer expectations\ncould be harmed.**\n\n \n\nWe\nrely on our distribution facilities for substantially all of our product distribution. Our distribution facilities include computer controlled\nand automated equipment, which means their operations may be subject to a number of risks related to security or computer viruses, the\nproper operation of software and hardware, electronic or power interruptions, or other system failures. In addition, our operations could\nalso be interrupted by labor difficulties, extreme or severe weather conditions or by floods, fires, or other natural disasters near\nour distribution centers. If we encounter problems with our distribution system, our ability to meet customer expectations, manage inventory,\ncomplete sales, and achieve objectives for operating efficiencies could be harmed.\n\n \n\n16\n\n \n\n \n\n**Increasing\nlabor costs and other factors associated with the production of our products in China could increase the costs to produce our products.**\n\n \n\nSubstantially\nall of our products are produced in China and increases in the costs of labor and other costs of doing business in the countries in this\narea could significantly increase our costs to produce our products and could have a negative impact on our operations and earnings.\nFactors that could negatively affect our business include labor shortages and increases in labor costs, difficulties and additional costs\nin transporting products manufactured from these countries to our distribution centers and significant revaluation of the currencies\nused in these countries, which may result in an increase in the cost of producing products. Also, the imposition of trade sanctions or\nother regulations against products imported by us from, or the loss of “normal trade relations” status with any country in\nwhich our products are manufactured, could significantly increase our cost of products and harm our business.\n\n \n\n**Risks\nRelated to Information Security and Technology**\n\n \n\n**Our\nmarketing programs, ecommerce initiatives and use of customer information are governed by an evolving set of laws and enforcement trends\nand unfavorable changes in those laws or trends, or our failure to comply with existing or future laws, could substantially harm our\nbusiness and results of operations.**\n\n \n\nWe\ncollect, process, maintain and use data, including sensitive information on individuals, available to us through online activities and\nother customer interactions in our business. Our current and future marketing programs may depend on our ability to collect, maintain\nand use this information, and our ability to do so is subject to evolving and increasingly demanding international, U.S., U.K., European\nand other laws and enforcement trends. We are subject to laws and regulations such as the European Union’s General Data Privacy\nRegulation (“GDPR”), the United Kingdom’s General Data Privacy Regulation (“UK-GDPR”) and the California\nConsumer Privacy Act (“CCPA”). These regulations require companies to satisfy new requirements regarding the handling of\npersonal and sensitive data, including its use, protection, and the ability of persons whose data is stored to correct or delete such\ndata about themselves. Failure to comply with GDPR and UK-GDPR requirements could result in penalties of up to four percent of worldwide\nrevenue. The GDPR, UK-GDPR, CCPA, and other similar laws and regulations, as well as any associated inquiries or investigations or any\nother government actions, may be costly to comply with, increase our operating costs, require significant management time and attention,\nand subject us to remedies that may harm our business, including fines, negative publicity, or demands or orders that we modify or cease\nexisting business practices. We strive to comply with all applicable laws and other legal obligations relating to privacy, data protection\nand customer protection, including those relating to the use of data for marketing purposes. It is possible, however, that these requirements\nmay be interpreted and applied in a manner that is inconsistent from one jurisdiction to another, may conflict with other rules, may\nconflict with our practices or fail to be observed by our employees or business partners. If so, we may suffer damage to our reputation\nand be subject to proceedings or actions against us by governmental entities or others. Any such proceeding or action could hurt our\nreputation, force us to spend significant amounts to defend our practices, distract our management or otherwise have an adverse effect\non our business. Certain of our marketing practices rely upon e-mail to communicate with consumers on our behalf. We may face risk if\nour use of e-mail is found to violate the applicable law. We post our privacy policy and practices concerning the use and disclosure\nof user data on our websites. Any failure by us to comply with our posted privacy policy or other privacy-related laws and regulations\ncould result in proceedings which could potentially harm our business. In addition, as data privacy and marketing laws change, we may\nincur additional costs to ensure we remain in compliance. If applicable data privacy and marketing laws become more restrictive at the\ninternational, federal or state levels, our compliance costs may increase, our ability to effectively engage customers via personalized\nmarketing may decrease, our investment in our ecommerce platform may not be fully realized, our opportunities for growth may be curtailed\nby our compliance burden and our potential reputational harm or liability for security breaches may increase.\n\n \n\n**Disruption\nof our information technology systems or unexpected network interruption could disrupt our business.**\n\n \n\nMany\nof our customers shop with us through our ecommerce website. Increasingly, customers are using tablets and smart phones to shop online\nwith us and with our competitors and to do comparison shopping. We are increasingly using social media and proprietary mobile apps to\ninteract with our customers and as a means to enhance their shopping experience. Any failure on our part to provide attractive, effective,\nreliable, user-friendly ecommerce platforms that offer a wide assortment of merchandise with rapid delivery options and that continually\nmeet the changing expectations of online shoppers could place us at a competitive disadvantage, result in the loss of ecommerce and other\nsales, harm our reputation with customers, have a material adverse impact on the growth of our ecommerce business globally and could\nhave a material adverse impact on our business and results of operations.\n\n \n\n17\n\n \n\n \n\nWe\nare increasingly dependent on information technology systems and third-parties to operate our ecommerce websites, process transactions,\nprocess and handle inventory, producing, selling and shipping goods on a timely basis and maintain cost-efficient operations. We rely\non a number of third parties to help us effectively manage these systems. The failure of our information technology systems to operate\nproperly or effectively, problems with transitioning to upgraded or replacement systems, or difficulty in integrating new systems, could\nadversely affect our business. In addition, we have a global ecommerce website, with the ability to localize content internationally.\nOur information technology systems, website and operations of third parties on whom we rely may encounter damage or disruption or slowdown\ncaused by a failure to successfully upgrade systems, system failures, viruses, computer “hackers”, natural disasters or other\ncauses. These could cause information, including data related to customer orders, to be lost or delayed which could, especially if the\ndisruption or slowdown occurred during the holiday season, result in delays in the delivery of products to our customers or lost sales,\nwhich could reduce demand for our products and cause our sales to decline. For example, we implemented a work-from-home policy due to\nthe COVID-19 pandemic for our workforce. This increase in working remotely could increase our cyber security risk, create data accessibility\nconcerns, and make us more susceptible to communication disruptions, any of which could adversely impact our business operations. In\naddition, if changes in technology cause our information systems to become obsolete, or if our information systems are inadequate to\nhandle our growth, we could lose customers. We have limited back-up systems and redundancies, and our information technology systems\nand websites have experienced system failures and electrical outages in the past which have disrupted our operations. Any significant\ndisruption in our information technology systems or websites could harm our reputation and credibility and could have a material adverse\neffect on our business, financial condition and results of operations.\n\n \n\n**Data\nsecurity breaches and other cyber security events could result in disruption to our operations or financial losses and could negatively\naffect our reputation, credibility and business.**\n\n \n\nAs\nwith other companies, we are subject to risks associated with data security breaches and other cyber security events. We collect, process,\nmaintain and use personal information relating to our customers, employees and job-applicants and rely on third parties for the operation\nof our ecommerce site and for the various social media tools and websites we use as part of our marketing strategy. Any attempted or\nactual unauthorized disclosure of personally identifiable information regarding our employees, customers or website visitors could harm\nour reputation and credibility, reduce our ecommerce sales, impair our ability to attract website visitors, reduce our ability to attract\nand retain customers and could result in litigation against us or the imposition of significant fines or penalties. Attacks may be targeted\nat us, our vendors or customers, or others who have entrusted us with information. Our on-line activities, including our ecommerce websites,\nalso may be subject to denial of service or other forms of cyber-attacks. While we have taken measures we believe are reasonable to protect\nagainst those types of attacks, those measures may not adequately protect our on-line activities from such attacks. If a denial-of-service\nattack or other cyber event were to affect our ecommerce sites or other information technology systems, our business could be disrupted,\nwe may lose sales or valuable data, and our reputation may be adversely affected. Additionally, new and evolving data protection legislation\nsuch as the GDPR impose new requirements such as shorter notification timeframes that could increase the risks associated with data security\nbreaches. We have procedures and technology in place designed to safeguard our customers’ debit and credit cards and our customers’\nand employees’ other personal information, and we continue to devote significant resources to network security, backup and disaster\nrecovery, and other security measures. Nevertheless, these security measures cannot provide absolute security or guarantee that we will\nbe successful in preventing or responding to every such breach or disruption. Recently, data security breaches suffered by well-known\ncompanies and institutions have attracted a substantial amount of media attention, prompting new foreign, federal, provincial and state\nlaws and legislative proposals addressing data privacy and security, as well as increased data protection obligations imposed on merchants\nby credit card issuers. As a result, we may become subject to more extensive requirements to protect the customer information that we\nprocess in connection with the purchase of our products, resulting in increased compliance costs. Actual or anticipated attacks may cause\nus to incur increasing costs including costs to deploy additional personnel and protection technologies, train employees and engage third\nparty experts and consultants. Advances in computer capabilities, new technological discoveries or other developments may result in the\ntechnology used by us to protect transaction or other data being breached or compromised. Measures we implement to protect against cyber-attacks\nmay also have the potential to impact our customers’ shopping experience or decrease activity on our websites by making them more\ndifficult to use. Data and security breaches can also occur as a result of non-technical issues including intentional or inadvertent\nbreach by employees or persons with whom we have commercial relationships that result in the unauthorized release of personal or confidential\ninformation. Any compromise or breach of our security could result in a violation of applicable privacy and other laws, significant legal\nand financial exposure and damage to our brand and reputation or other harm to our business.\n\n \n\n18\n\n \n\n \n\n**Risks\nRelated to Environmental, Social and Governance Issues**\n\n \n\n**Climate\nchange, and related legislative and regulatory responses to climate change, may adversely impact our business.**\n\n \n\nThere\nis increasing concern that a gradual rise in global average temperatures due to increased concentration of carbon dioxide and other greenhouse\ngases in the atmosphere will cause significant changes in weather patterns around the globe, an increase in the frequency, severity and\nduration of extreme weather conditions and natural disasters, and water scarcity and poor water quality. A significant portion of our\nbusiness is highly dependent on cold-weather seasons and patterns to generate consumer demand for our products. Consumer demand for our\nproducts may be negatively affected to the extent global weather patterns trend warmer, reducing typical patterns of cold-weather events\nor increasing weather volatility, which could have an adverse effect on our financial condition, results of operations or cash flows.\n\n \n\nThese\nevents could also adversely impact the cultivation of cotton, which is a key resource in the production of our products, disrupt the\noperation of our supply chain and the productivity of our contract manufacturers, increase our production costs, impose capacity restraints\nand impact the types of apparel products that consumers purchase.\n\n \n\nThese\nevents could also compound adverse economic conditions and impact consumer confidence and discretionary spending. As a result, the effects\nof climate change could have a long-term adverse impact on our business and results of operations. In many countries, governmental bodies\nare enacting new or additional legislation and regulations to reduce or mitigate the potential impacts of climate change. If we, our\nsuppliers or our contract manufacturers are required to comply with these laws and regulations, or if we choose to take voluntary steps\nto reduce or mitigate our impact on climate change, we may experience increases in energy, production, transportation and raw material\ncosts, capital expenditures or insurance premiums and deductibles, which could adversely impact our operations. Inconsistency of legislation\nand regulations among jurisdictions may also affect the costs of compliance with such laws and regulations. Any assessment of the potential\nimpact of future climate change legislation, regulations or industry standards, as well as any international treaties and accords, is\nuncertain given the wide scope of potential regulatory change in the countries in which we operate.\n\n \n\n**Increased\nscrutiny from investors and others regarding our environmental, social, governance or sustainability responsibilities could result in\nadditional costs or risks and adversely impact our reputation, employee retention and willingness of customers and suppliers to do business\nwith us.**\n\n \n\nInvestor\nadvocacy groups, certain institutional investors, investment funds, other market participants, stockholders and customers have focused\nincreasingly on the environmental, social and governance (“ESG”) or “sustainability” practices of companies.\nThese parties have placed increased importance on the implications of the social cost of their investments. If our ESG practices do not\nmeet investor or other industry stakeholder expectations and standards, which continue to evolve, our brand, reputation and employee\nretention may be negatively impacted based on an assessment of our ESG practices. Any sustainability report that we publish or other\nsustainability disclosure we make may include our policies and practices on a variety of social and ethical matters, including corporate\ngovernance, environmental compliance, employee health and safety practices, human capital management, product quality, supply chain management\nand workforce inclusion and diversity. It is possible that stakeholders may not be satisfied with our ESG practices or the speed of their\nadoption. We could also incur additional costs and require additional resources to monitor, report and comply with various ESG practices.\nAlso, our failure, or perceived failure, to meet the standards included in any sustainability disclosure could negatively impact our\nreputation, employee retention and the willingness of our customers and suppliers to do business with us.\n\n \n\n**Risks\nRelated to Global Economic, Political and Regulatory Conditions**\n\n \n\n**Our\nfinancial results and ability to grow our business may be negatively impacted by global events beyond our control.**\n\n** **\n\nWe\noperate distribution and warehousing facilities and offices around the world and substantially all of our manufacturers are located outside\nof the United States. We are subject to numerous risks and global events beyond our control which could negatively impact consumer spending\nor our own operations or operations of our customers or business partners, and therefore our results of operations, including: changes\nin diplomatic and trade relationships, trade policy or actions of foreign or U.S. governmental authorities impacting trade and foreign\ninvestment; inflation; military conflict; political or labor unrest; terrorism; public health crises, disease epidemics or pandemics;\nnatural disasters and extreme weather conditions, which may increase in frequency and severity due to climate change; economic instability\nresulting in the disruption of trade from foreign countries; the imposition of new laws, regulations and rules, including those relating\nto sustainability and climate change, data privacy, labor conditions, minimum wage, quality and safety standards and disease epidemics\nor other public health concerns; and changes in local economic conditions in countries where our stores, customers, manufacturers and\nsuppliers are located.\n\n \n\n19\n\n \n\n \n\nThese\nrisks could hamper our ability to sell products, negatively affect the ability of our manufacturers to produce or deliver our products\nor procure materials and increase our cost of doing business generally, any of which could have an adverse effect on our results of operations,\nprofitability, cash flows and financial condition. In the event that one or more of these factors make it undesirable or impractical\nfor us to conduct business in a particular country, our business could be adversely affected.\n\n \n\n**An\neconomic recession, depression, downturn or economic or political uncertainty in our key markets may adversely affect consumer discretionary\nspending and demand for our products.**\n\n \n\nMany\nof our products may be considered discretionary items for consumers. Uncertain or challenging global economic and political conditions\ncould impact our performance, including our ability to successfully expand internationally. Some of the factors that may influence consumer\nspending on discretionary items include general economic conditions (particularly those in North America), high levels of unemployment,\nhealth pandemics, higher consumer debt levels, reductions in net worth based on market declines and uncertainty, home foreclosures and\nreductions in home values, fluctuating interest and foreign currency rates and credit availability, government austerity measures, fluctuating\nfuel and other energy costs, fluctuating commodity prices, tax rates and general uncertainty regarding the overall future economic environment.\nPolitical unrest could also negatively impact our customers and employees, reduce consumer spending and adversely impact our business\nand results of operations. As global economic conditions continue to be volatile or economic uncertainty remains, trends in consumer\ndiscretionary spending also remain unpredictable and subject to reductions due to credit constraints and uncertainties about the future.\nUnfavorable economic conditions may lead consumers to delay or reduce purchases of our products. Consumer demand for our products may\nnot reach our targets, or may decline, when there is an economic downturn or economic uncertainty in our key markets, particularly in\nNorth America. China is a target growth market for us, although consumer demand for our products there may also be impacted by unfavorable\neconomic conditions in China. Our sensitivity to economic cycles and any related fluctuation in consumer demand may have a material adverse\neffect on our financial condition.\n\n \n\n**Changes\nin tax laws or unanticipated tax liabilities could adversely affect our effective income tax rate and profitability.**\n\n \n\nWe\nare subject to the income tax laws of the United States, the United Kingdom and several other foreign jurisdictions. Our effective income\ntax rates could be unfavorably impacted by a number of factors, including changes in the mix of earnings amongst countries with differing\nstatutory tax rates, changes in the valuation of deferred tax assets and liabilities, changes in tax laws, new tax interpretations and\nguidance, the outcome of income tax audits in various jurisdictions around the world and any repatriation of unremitted earnings for\nwhich we have not previously accrued applicable U.S. income taxes and foreign withholding taxes.\n\n \n\nWe\nand our subsidiaries engage in a number of intercompany transactions across multiple tax jurisdictions and the profit allocation and\ntransfer pricing terms and conditions may be scrutinized by local tax authorities during an audit and any resulting changes may impact\nour mix of earnings in countries with differing statutory tax rates.\n\n \n\nCurrent\neconomic and political conditions make tax rules in any jurisdiction, including the United States and the United Kingdom, subject to\nsignificant change. Changes in applicable U.S., U.K. or other foreign tax laws and regulations, or their interpretation and application,\nincluding the possibility of retroactive effect, could affect our income tax expense and profitability.\n\n \n\n**Our\nfailure to comply with trade and other regulations could lead to investigations or actions by government regulators and negative publicity.**\n\n \n\nThe\nlabeling, distribution, importation, marketing and sale of our products are subject to extensive regulation by various federal agencies,\nincluding the Federal Trade Commission, Consumer Product Safety Commission and state attorneys general in the United States, as well\nas by various other federal, state, local and international regulatory authorities in the countries in which our products are distributed\nor sold. If we fail to comply with any of these regulations, we could become subject to enforcement actions or the imposition of significant\npenalties or claims, which could harm our results of operations or our ability to conduct our business. In addition, any audits and inspections\nby governmental agencies related to these matters could result in significant settlement amounts, damages, fines or other penalties,\ndivert financial and management resources and result in significant legal fees. An unfavorable outcome of any particular proceeding could\nhave an adverse impact on our business, financial condition and results of operations. In addition, the adoption of new regulations or\nchanges in the interpretation of existing regulations may result in significant compliance costs or discontinuation of product sales\nand could impair the marketing of our products, resulting in significant loss of net revenue.\n\n \n\n20\n\n \n\n \n\nOur\ninternational operations are also subject to compliance with the U.S. Foreign Corrupt Practices Act (the “FCPA”) and other\nanti-bribery laws applicable to our operations. In many countries, particularly in those with developing economies, it may be a local\ncustom that businesses operating in such countries engage in business practices that are prohibited by the FCPA or other U.S. and international\nlaws and regulations applicable to us. Although we have implemented procedures designed to ensure compliance with the FCPA and similar\nlaws, some of our employees, agents or other partners, as well as those companies to which we outsource certain of our business operations,\ncould take actions in violation of our policies. Any such violation could have a material and adverse effect on our business.\n\n \n\n**Because\na significant portion of our net revenue and expenses are generated in countries other than the United States, fluctuations in foreign\ncurrency exchange rates have affected our results of operations and may continue to do so in the future.**\n\n \n\nThe\nfunctional currency of our foreign subsidiaries is generally the applicable local currency. Our consolidated financial statements are\npresented in U.S. dollars. Therefore, the net revenue, expenses, assets and liabilities of our foreign subsidiaries are translated from\ntheir functional currencies into U.S. dollars. Fluctuations in the value of the U.S. dollar affect the reported amounts of net revenue,\nexpenses, assets and liabilities. Foreign exchange differences which arise on translation of our foreign subsidiaries’ balance\nsheets into U.S. dollars are recorded as a foreign currency translation adjustment in accumulated other comprehensive income or loss\nwithin stockholders’ (deficit) equity. We also have exposure to changes in foreign exchange rates associated with transactions\nwhich are undertaken by our subsidiaries in currencies other than their functional currency. Such transactions include intercompany transactions\nand inventory purchases denominated in currencies other than the functional currency of the purchasing entity. As a result, we have been\nimpacted by changes in exchange rates and may be impacted for the foreseeable future. The potential impact of currency fluctuation increases\nas our international expansion increases. We are exposed to credit-related losses in the event of nonperformance by the counterparties\nto forward currency contracts used in our hedging strategies.\n\n \n\n**Risks\nRelated to Intellectual Property**\n\n \n\n**Our\nfabrics and manufacturing technology generally are not patented and can be imitated by our competitors. If our competitors sell products\nsimilar to ours at lower prices, our net revenue and profitability could suffer.**\n\n \n\nThe\nintellectual property rights in the technology, fabrics and processes used to manufacture our products generally are owned or controlled\nby our suppliers and are generally not unique to us. Our ability to obtain intellectual property protection for our products is therefore\nlimited and we do not generally own patents or hold exclusive intellectual property rights in the technology, fabrics or processes underlying\nour products. As a result, our current and future competitors are able to manufacture and sell products with performance characteristics,\nfabrics and styling similar to our products. Because many of our competitors have significantly greater financial, distribution, marketing\nand other resources than we do, they may be able to manufacture and sell products based on our fabrics and manufacturing technology at\nlower prices than we can. If our competitors sell products similar to ours at lower prices, our net revenue and profitability could suffer.\n\n \n\n**If\nwe are unable to establish and protect our trademarks and other intellectual property rights, counterfeiters may produce copies of our\nproducts and such counterfeit products could damage our brand image.**\n\n \n\nWe\ncurrently rely on a combination of copyright, trademark, trade dress and unfair competition laws, as well as confidentiality procedures\nand licensing arrangements, to establish and protect our intellectual property rights. The steps we take to protect our intellectual\nproperty rights may not be adequate to prevent infringement of these rights by others, including imitation of our products and misappropriation\nof our brand. In addition, intellectual property protection may be unavailable or limited in some foreign countries where laws or law\nenforcement practices may not protect our intellectual property rights as fully as in the United States, and it may be more difficult\nfor us to successfully challenge the use of our intellectual property rights by other parties in these countries. We expect that there\nis a high likelihood that counterfeit products or other products infringing on our intellectual property rights will continue to emerge,\nseeking to benefit from the consumer demand for Perfect Moment products. These counterfeit products do not provide the functionality\nof our products and we believe they are of substantially lower quality, and if customers are not able to differentiate between our products\nand counterfeit products, this could damage our brand image. In order to protect our brand, we devote significant resources to the registration\nand protection of our trademarks and to anti-counterfeiting efforts worldwide. We actively pursue entities involved in the trafficking\nand sale of counterfeit merchandise through legal action or other appropriate measures. In spite of our efforts, counterfeiting still\noccurs and, if we are unsuccessful in challenging a third-party’s rights related to trademark, copyright or other intellectual\nproperty rights, this could adversely affect our future sales, financial condition and results of operations. We cannot guarantee that\nthe actions we have taken to curb counterfeiting and protect our intellectual property will be adequate to protect the brand and prevent\ncounterfeiting in the future or that we will be able to identify and pursue all counterfeiters who may seek to benefit from our brand.\n\n \n\n21\n\n \n\n \n\n**Our\ntrademarks and other proprietary rights could potentially conflict with the rights of others and we may be prevented from selling some\nof our products.**\n\n \n\nOur\nsuccess depends in large part on our brand image. We believe that our trademarks and other proprietary rights have significant value\nand are important to identifying and differentiating our products from those of our competitors and creating and sustaining demand for\nour products. We have applied for and obtained some United States, United Kingdom and foreign trademark registrations, and will continue\nto evaluate the registration of additional trademarks as appropriate. However, some or all of these pending trademark applications may\nnot be approved by the applicable governmental authorities. Moreover, even if the applications are approved, third parties may seek to\noppose or otherwise challenge these registrations. Additionally, we may face obstacles as we expand our product line and the geographic\nscope of our sales and marketing. Third parties may assert intellectual property claims against us, particularly as we expand our business\nand the number of products we offer. Our defense of any claim, regardless of its merit, could be expensive and time consuming and could\ndivert management resources. Successful infringement claims against us could result in significant monetary liability or prevent us from\nselling some of our products. In addition, resolution of claims may require us to redesign our products, license rights from third parties,\nor cease using those rights altogether. Any of these events could harm our business and cause our results of operations, liquidity and\nfinancial condition to suffer.\n\n \n\n**Risks\nRelated to Legal and Governance Matters**\n\n \n\n**We\nare subject to periodic claims, litigation, legal proceedings and audits that could result in unexpected expenses and could ultimately\nbe resolved against us.**\n\n \n\nOur\nbusiness requires compliance with many laws and regulations, including labor and employment, sales and other taxes, customs and consumer\nprotection laws and ordinances that regulate retailers generally and/or govern the importation, promotion and sale of merchandise, and\nthe operation of stores and warehouse facilities. Failure to comply with these laws and regulations could subject us to lawsuits and\nother proceedings, and could also lead to damage awards, fines and penalties. The outcome of some of these legal proceedings, audits\nand other contingencies could require us to take, or refrain from taking, actions that could harm our operations or require us to pay\nsubstantial amounts of money, harming our financial condition.\n\n \n\nIn\naddition, from time to time, we are involved in litigation and other proceedings, including matters related to product liability claims,\nstockholder class action and derivative claims, commercial disputes and intellectual property, as well as trade, regulatory, employment\nand other claims related to our business. See Note 14 of the Notes to Consolidated Financial Statements included elsewhere in this\nAnnual Report.\n\n \n\nWe\nhave in the past and may become involved in legal proceedings or audits, including government and agency investigations, and consumer,\nemployment, tort and other litigation. Any of these proceedings could result in significant settlement amounts, damages, fines or other\npenalties, divert financial and management resources and result in significant legal fees. An unfavorable outcome of any particular proceeding\ncould exceed the limits of our insurance policies or the carriers may decline to fund such final settlements and/or judgments and could\nhave an adverse impact on our business, financial condition and results of operations. In addition, any proceeding could negatively impact\nour reputation among our customers and our brand image.\n\n \n\n**Our\nbusiness could be negatively affected as a result of actions of activist stockholders or others.**\n\n \n\nWe\nmay be subject to actions or proposals from stockholders or others that may not align with our business strategies or the interests of\nour other stockholders. Responding to such actions can be costly and time-consuming, disrupt our business and operations and divert the\nattention of our board of directors, management and employees from the pursuit of our business strategies. Such activities could interfere\nwith our ability to execute our strategic plan. Activist stockholders or others may create perceived uncertainties as to the future direction\nof our business or strategy which may be exploited by our competitors and may make it more difficult to attract and retain qualified\npersonnel and potential customers, and may affect our relationships with current customers, vendors, investors and other third parties.\nIn addition, a proxy contest for the election of directors at our annual meeting would require us to incur significant legal fees and\nproxy solicitation expenses and require significant time and attention by management and our board of directors. The perceived uncertainties\nas to our future direction also could affect the market price and volatility of our securities.\n\n \n\n22\n\n \n\n \n\n**Anti-takeover\nprovisions in our charter documents and under the General Corporation Law of the State of Delaware could make an acquisition of us more\ndifficult and may prevent attempts by our stockholders to replace or remove our management.**\n\n \n\nProvisions\nin our amended and restated certificate of incorporation and our bylaws may delay or prevent an acquisition of us or a change in our\nmanagement. These provisions impact the ability of the board of directors to issue preferred stock without stockholder approval. In addition,\nbecause we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law (the\n“DGCL”), which prohibits stockholders owning in excess of 15% of our outstanding voting stock from merging or combining with\nus for a period of three years after the date of the transaction in which the person acquired more than 15% of our outstanding voting\nstock, unless the merger or combination is approved in a prescribed manner. Although we believe these provisions collectively will provide\nfor an opportunity to receive higher bids by requiring potential acquirers to negotiate with our board of directors, they would apply\neven if the offer may be considered beneficial by some stockholders. In addition, these provisions may frustrate or prevent any attempts\nby our stockholders to replace or remove then-current management by making it more difficult for stockholders to replace members of the\nboard of directors, which is responsible for appointing the members of management.\n\n \n\n**Anti-takeover\nprovisions in our charter documents could discourage, delay or prevent a change in control of us and may affect the trading price of\nour common stock.**\n\n \n\nOur\ncorporate documents and the DGCL contain provisions that may enable our board of directors to resist a change in control of us even if\na change in control were to be considered favorable by our stockholders. These provisions:\n\n \n\n \n●\nrequire\na 66 and 2/3% stockholder vote to remove directors, who may only be removed for cause;\n\n \n \n \n\n \n●\nauthorize\nour board of directors to issue “blank check” preferred stock and to determine the rights and preferences of those shares,\nwhich may be senior to our common stock, without prior stockholder approval;\n\n \n \n \n\n \n●\nestablish\nadvance notice requirements for nominating directors and proposing matters to be voted on by stockholders at stockholders’\nmeetings;\n\n \n\n \n●\nprohibit\nour stockholders from calling a special meeting and prohibit stockholders from acting by written consent;\n\n \n \n \n\n \n●\nrequire\na 66 and 2/3% stockholder vote to effect certain amendments to our certificate of incorporation and bylaws; and\n\n \n \n \n\n \n●\nprohibit\ncumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates.\n\n \n\nThese\nprovisions could discourage, delay or prevent a transaction involving a change in control. These provisions could also discourage proxy\ncontests and make it more difficult for stockholders to elect directors of their choosing and cause us to take other corporate actions\nour stockholders desire.\n\n \n\n**Our\namended and restated certificate of incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive\nforum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’\nability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or agents.**\n\n \n\nOur\namended and restated certificate of incorporation provides that, unless we consent in writing to an alternative forum, the Court of Chancery\nof the State of Delaware will be the sole and exclusive forum for any derivative action or proceeding brought on our behalf, any action\nasserting a claim of breach of a fiduciary duty owed by any of our directors, officers, employees or agents to us or our stockholders,\nany action asserting a claim arising pursuant to any provision of the DGCL, our amended and restated certificate of incorporation or\nour amended and restated bylaws or any action asserting a claim that is governed by the internal affairs doctrine, in each case subject\nto the Court of Chancery having personal jurisdiction over the indispensable parties named as defendants therein and the claim not being\none which is vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery or for which the Court of Chancery\ndoes not have subject matter jurisdiction. Our amended and restated certificate of incorporation provides that state and federal courts\nwill have concurrent jurisdiction for actions arising under the Securities Act of 1933, as amended (the “Securities Act”),\nand the exclusive forum provision will not apply to suits brought to enforce duties and liabilities created by the Exchange Act or any\nother claims for which the federal courts have exclusive jurisdiction. Any person purchasing or otherwise acquiring any interest in any\nshares of our common stock shall be deemed to have notice of and to have consented to this provision of our amended and restated certificate\nof incorporation. This choice of forum provision may limit our stockholders’ ability to bring a claim in a judicial forum that\nit finds favorable for disputes with us or our directors, officers, employees or agents, which may discourage such lawsuits against us\nand our directors, officers, employees and agents even though an action, if successful, might benefit our stockholders. Stockholders\nwho do bring a claim in the Court of Chancery could face additional litigation costs in pursuing any such claim, particularly if they\ndo not reside in or near Delaware. The Court of Chancery may also reach different judgments or results than would other courts, including\ncourts where a stockholder considering an action may be located or would otherwise choose to bring the action, and such judgments or\nresults may be more favorable to us than to our stockholders. Alternatively, if a court were to find this provision of our amended and\nrestated certificate of incorporation inapplicable to, or unenforceable in respect of, one or more of the specified types of actions\nor proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could have a material\nadverse effect on our business, financial condition or results of operations.\n\n \n\n23\n\n \n\n \n\n**Risks\nRelated to Ownership of Our Common Stock**\n\n \n\n**Our\ncommon stock has been delisted from NYSE American and now trades on the OTCQB Venture Market, which may adversely affect the liquidity\nand market price of our common stock and our ability to raise capital.**\n\nOn\nJune 12, 2026, we received notice from NYSE Regulation that it had determined to commence proceedings to delist our common stock from\nNYSE American, having determined that we were unable to regain compliance with Sections 1003(a)(i) and 1003(a)(ii) of the NYSE American\nCompany Guide within the maximum 18-month compliance plan period, which expired on June 11, 2026. Effective June 18, 2026, our common\nstock began trading on the OTCQB Venture Market under the symbol “PMNT.”\n\n \n\nThe OTCQB is a substantially\nmore limited trading market than NYSE American. As a result of this delisting, we may experience the following consequences, among others:\n\n \n\n●reduced\nliquidity and trading volume in our common stock;\n\n●greater\nvolatility in the trading price of our common stock;\n\n●reduced\nanalyst coverage and investor interest;\n\n●impaired\nability to raise capital through the sale of equity securities; and\n\n●potential\nrestrictions on the ability of certain institutional investors, including mutual funds and\npension funds, to hold or purchase our common stock.\n\n \n\nThere can be no assurance that\nan active or liquid trading market for our common stock will develop or be maintained on the OTCQB. The delisting of our common stock\nfrom NYSE American and the commencement of trading on the OTCQB could materially and adversely affect our business, financial condition,\nand results of operations.\n\n \n\n**We\nare an emerging growth company and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies\nwill make our common stock less attractive to investors.**\n\n \n\nFor\nas long as we continue to be an emerging growth company, we intend to take advantage of certain exemptions from various reporting requirements\nthat are applicable to other public companies including, but not limited to, reduced disclosure obligations regarding executive compensation\nin our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive\ncompensation and stockholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find\nour common stock less attractive because we will rely on these exemptions. If some investors find our common stock less attractive as\na result, there may be a less active trading market for our common stock and our stock price may be more volatile.\n\n \n\nWe\nwill remain an emerging growth company until the earliest of (i) the end of the fiscal year in which the market value of our common stock\nthat is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter\nafter we have been a reporting company in the United States for at least 12 months, (ii) the end of the fiscal year in which we have\ntotal annual gross revenue of $1.07 billion or more during such fiscal year, (iii) the date on which we issue more than $1 billion in\nnon-convertible debt in a three-year period or (iv) February 7, 2029.\n\n \n\n**If\nwe are unable to implement and maintain effective internal control over financial reporting, investors may lose confidence in the accuracy\nand completeness of our financial reports and the market price of our common stock may be negatively affected.**\n\n \n\nAs\na public company, we will be required to maintain internal control over financial reporting for the year ending March 31, 2026, and to\nreport any material weaknesses in such internal control. Section 404 of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley Act”)\nrequires that we evaluate and determine the effectiveness of our internal control over financial reporting and, beginning with our annual\nreport for the fiscal year ending March 31, 2026, provide a management report on the internal controls over financial reporting, which\nmust be attested to by our independent registered public accounting firm to the extent we decide not to avail ourselves of the exemption\nprovided to an emerging growth company, as defined by the Jumpstart Our Business Startups Act. If we have a material weakness in our\ninternal control over financial reporting, we may not detect errors on a timely basis and our consolidated financial statements may be\nmaterially misstated. If we identify material weaknesses in our internal control over financial reporting, if we are unable to comply\nwith the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner, if we are unable to assert that our internal control\nover financial reporting are effective, or if our independent registered public accounting firm is unable to express an opinion as to\nthe effectiveness of our internal control over financial reporting, if and when required, investors may lose confidence in the accuracy\nand completeness of our financial reports and the market price of our common stock could be negatively affected, and we could become\nsubject to investigations by the stock exchange on which our securities are listed, the SEC, or other regulatory authorities, which could\nrequire additional financial and management resources.\n\n \n\n**Because\nwe do not anticipate paying any cash dividends on our common stock in the foreseeable future, capital appreciation of our common stock,\nif any, will be your sole source of gain.**\n\n \n\nWe\nhave never declared or paid cash dividends on our common stock. We currently intend to retain all of our future earnings, if any, to\nfinance the growth and development of our business. In addition, the terms of any future financing agreements may preclude us from paying\ndividends. As a result, capital appreciation, if any, of our common stock will be an investor’s sole source of gain for the foreseeable\nfuture.\n\n \n\n24\n\n \n\n \n\n**We\nmay require additional capital to support business growth, and this capital might not be available on acceptable terms, if at all.**\n\n \n\nOn\nFebruary 12, 2024, we consummated the initial public offering of our common stock for aggregate approximate net proceeds of $6,009, after\ndeducting underwriting discounts and commissions and estimated offering expenses. Based upon our current operating plan and assumptions,\nwe expect that the net proceeds from the initial public offering and our existing cash balances and expected cash flows from operations,\nalongside the continuance of our existing financing arrangements, and the automatic conversion of the outstanding balance of the Notes\nupon the closing of the initial public offering will be sufficient to fund our operations for at least the next 12 months, excluding\nfinancing to support production (i.e. timing of working capital). However, our operating plan may change, and our assumptions may prove\nto be wrong, as a result of many factors currently unknown to us, and we could use our available capital resources sooner than we expect.\nWe may need to seek additional funds sooner than planned, through public or private equity or debt financings or other third-party funding\nor a combination of these approaches. Even if we believe we have sufficient funds for our current or future operating plans, we may seek\nadditional capital if market conditions are favorable or based upon specific strategic considerations.\n\n \n\nAny\nadditional capital-raising efforts may divert our management’s attention from the operation of our business. In addition, we cannot\nguarantee that future financing will be available in sufficient amounts or on terms acceptable to us, if at all. If we are unable to\nobtain sufficient amounts of additional capital, when and if we require it, we may be required to reduce the scope of our planned development,\nwhich could harm our business, financial condition and results of operations.\n\n \n\nIf\nwe raise additional capital through further issuances of equity or convertible debt securities, our existing stockholders could suffer\nsignificant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders\nof our common stock. Any debt financing secured by us in the future could involve restrictive covenants relating to our capital raising\nactivities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue\nbusiness opportunities, including potential acquisitions. If we are unable to obtain adequate financing or financing on terms satisfactory\nto us, when and if we require it, our ability to continue to support our business growth, and to respond to business challenges could\nbe significantly impaired.\n\n \n\n**Future\nsales and issuances of our common stock or rights to purchase common stock, including pursuant to our 2021 Equity Incentive Plan, could\nresult in additional dilution of the percentage ownership of our stockholders.**\n\n \n\nWe\nexpect that significant additional capital will be needed in the future to continue our planned operations. To raise capital, we may\nsell substantial amounts of common stock or securities convertible into or exchangeable for common stock. These future issuances of common\nstock or common stock-related securities, together with the exercise of outstanding options and any additional shares issued in connection\nwith acquisitions, if any, may result in material dilution to our investors. Such sales may also result in material dilution to our existing\nstockholders, and new investors could gain rights, preferences and privileges senior to those of holders of our common stock.\n\n \n\nPursuant\nto the 2021 Plan, the plan administrator is authorized to grant equity-based incentive awards to our directors, executive officers and\nother employees and service providers. As of June 26, 2026, there were 31,083,694 shares of common stock reserved for issuance in connection\nwith outstanding awards granted under the 2021 Plan and 2,527,944 shares of common stock were available for future issuance under the\n2021 Plan. Future equity incentive grants and issuances of common stock under awards outstanding under the 2021 Plan may result in dilution\nto our stockholders.\n\n \n\n**As\na public company, we incur significant compliance and reporting costs.**\n\n \n\nWe face increased legal, accounting, administrative and other costs and expenses as a public company that we did not incur as a private\ncompany. The Sarbanes-Oxley Act, including the requirements of Section 404, as well as new rules and regulations subsequently implemented\nby the SEC and the Public Company Accounting Oversight Board impose additional reporting and other obligations on public companies. We\nexpect that compliance with these public company requirements will increase our costs and make some activities more time-consuming. A\nnumber of those requirements will require us to carry out activities we have not done previously. For example, we will adopt new internal\ncontrols and disclosure controls and procedures. In addition, we will incur additional expense associated with our SEC reporting requirements.\nFurthermore, if we identify an issue in complying with those requirements (for example, if we or our accountants identify a material\nweakness or significant deficiency in our internal control over financial reporting), we could incur additional costs rectifying those\nissues, and the existence of those issues could adversely affect us, our reputation or investor perceptions of us. We also expect that\nit will be difficult and expensive to obtain director and officer liability insurance, and we may be required to accept reduced policy\nlimits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult\nfor us to attract and train qualified people to serve on our board of directors or as executive officers. Advocacy efforts by stockholders\nand third parties may also prompt even more changes in corporate governance and reporting requirements. We expect that the additional\nreporting and other obligations imposed on us by these rules and regulations will increase our legal and financial compliance costs and\nadministrative fees significantly. These increased costs will require us to divert a significant amount of money that we could otherwise\nuse to expand our business and achieve our strategic objectives.\n\n \n\n25\n\n \n\n \n\n**If\nsecurities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they\nchange their recommendations regarding our common stock adversely, the price and trading volume of our common stock could decline.**\n\n \n\nThe\ntrading market for our common stock is influenced by the research and reports that industry or securities analysts publish about us,\nour business, our market or our competitors. If any of the analysts who cover us or may cover us in the future change their recommendation\nregarding our common stock adversely, or provide more favorable relative recommendations about our competitors, the price of our common\nstock would likely decline. If any analyst who covers us or may cover us in the future were to cease coverage of our company or fail\nto regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause the price or trading\nvolume of our common stock to decline."}