{"url_path":"/sec/pmnt/10-k/2026/item-7","section_key":"item-7","section_title":"Item 7 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**","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":6807,"has_tables":true,"body_markdown":"**ITEM\n7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**\n\n \n\n*The\nfollowing discussion and analysis of our results of operations and financial condition for the fiscal years ended March 31, 2026 and\n2025, should be read in conjunction with our consolidated financial statements and the related notes and the other financial information\nthat are included elsewhere in this Annual Report. This discussion includes forward-looking statements based upon current expectations\nthat involve risks and uncertainties, such as our plans, objectives, expectations, and intentions. Our actual results could differ materially\nfrom those discussed in the forward-looking statements below. Factors that could cause or contribute to those differences in our actual\nresults include, but are not limited to, those discussed below and those discussed elsewhere within this Annual Report, particularly\nin the section entitled “Cautionary Note Regarding Forward-Looking Statements” and the Item entitled “Risk Factors.”\nUnless otherwise indicated, all dollar amounts are in thousands.*\n\n \n\n**Overview** \n\n \n\nPerfect\nMoment is a luxury lifestyle brand offering high-performance skiwear, swimwear and complementary apparel categories that merge technical functionality\nwith fashion-led design. We develop collections for women, men, and children that reflect a combination of technical integrity, elevated\naesthetics, and versatility across seasons and use cases.\n\n \n\nWe\ndesign all products in-house and rely on a network of manufacturing partners across Europe and Asia, including China. Our merchandise\nis sold in over 60 countries through a combination of direct-to-consumer ecommerce, wholesale partnerships with premium retailers, select\nconcession formats, and licensed international wholesalers.\n\n \n\n27\n\n \n\n \n\nWe\nare focused on generating long-term, brand-right growth and improving profitability. During the fiscal year ended March 31, 2026, we\ncontinued to scale our direct-to-consumer business, launched a new spring/summer capsule. We also implemented a tiered pricing architecture across key categories to support value perception and drive\nmargin enhancement.\n\n \n\nWe\nintend to grow our business over time by expanding our digital and retail footprint, diversifying our product portfolio, enhancing international\nreach, and pursuing selective collaborations. Our marketing efforts—both brand-building and performance-driven—are designed\nto increase awareness, strengthen customer engagement, and support customer acquisition and retention.\n\n \n\n**Recent\nDevelopments**\n\n** **\n\n****\n\nOn May 8, 2026,\nthe Company consummated the May 2026 Securities Purchase Agreement\nwith one of the lenders of the Loan under which it issued 6,060,606 shares of its common stock at a purchase price of $0.33 per share\nand warrants to purchase up to 8,276,944 shares of its common stock at an exercise price of $0.40 per share and expiring on August 27,\n2028 for gross proceeds of $2,000. In connection with the May 2026 Securities\nPurchase Agreement, the Company issued warrants to purchase up to 1,864,753 shares of its common stock at an exercise price of $0.46822\nper share and expiring on August 27, 2028 to a related party. \n\n \n\nOn June\n12, 2026, we received a notice (the “Delisting Notice”) from NYSE Regulation informing the Company that NYSE Regulation had\ndetermined to commence proceedings to delist the common stock of Perfect Moment Ltd. (ticker symbol: PMNT) from NYSE American. NYSE Regulation\ndetermined that we are no longer suitable for listing pursuant to Section 1009(a) of the NYSE American Company Guide (the “Company\nGuide”), as we were unable to demonstrate that we had regained compliance with Sections 1003(a)(i) and 1003(a)(ii) of the Company\nGuide by the end of the maximum 18-month compliance plan period, which expired on June 11, 2026. Section 1003(a)(i) applies where a listed\ncompany has stockholders’ equity of less than $2.0 million and has reported losses from continuing operations and/or net losses in two\nof its three most recent fiscal years, and Section 1003(a)(ii) applies where a listed company has stockholders’ equity of less than $4.0\nmillion and has reported losses from continuing operations and/or net losses in three of its four most recent fiscal years.\n\n \n\nNYSE American\nmade a public announcement of this decision on June 12, 2026. NYSE American applied to the U.S. Securities and Exchange Commission\nto delist our common stock upon completion of applicable procedures, including any appeal by us of NYSE Regulation’s decision. Effective June\n18, 2026 our common stock began trading on the OTCQB Venture Market (the “OTCQB”) under the symbol “PMNT.” The OTCQB\nis a significantly more limited market than NYSE American, and trading on the OTCQB may result in a less liquid market for existing and\npotential stockholders of our common stock and could adversely affect the trading price of our common stock.\n\n \n\n**Results\nof Operations**\n\n \n\nThe\nfollowing table sets forth our results of operations for the years ended March 31, 2026 and 2025.\n\n \n\n  \n\n**Year Ended**\n\n**March 31, 2026**\n  \n\n**Year Ended**\n\n**March 31, 2025**\n  \nChange \n\nRevenue, net \n$23,603  \n$21,501  \n$2,102 \n\nCost of sales \n 7,644  \n 11,072  \n (3,428)\n\nGross profit \n 15,959  \n 10,429  \n 5,530 \n\nGross margin**(1)** \n 67.6% \n 48.5% \n   \n\nOperating expenses \n    \n    \n   \n\nSelling, general and administrative expenses \n 17,965  \n 20,685  \n (2,720)\n\nMarketing and advertising expenses \n 3,234  \n 3,540  \n (306)\n\nTotal operating expenses \n 21,199  \n 24,225  \n (3,026)\n\nLoss from operations \n (5,240) \n (13,796) \n 8,556 \n\nTotal other expense, net \n (1,891) \n (2,143) \n 252 \n\nNet loss \n$(7,131) \n$(15,939) \n$8,808 \n\nOther comprehensive (loss) gain \n    \n    \n   \n\nForeign currency translation (loss) gain \n (283) \n 62  \n (345)\n\nComprehensive loss \n$(7,414) \n$(15,877) \n$8,463 \n\n \n\n**(1)**\nGross\nmargin is defined as gross profit as a percentage of revenue, net.\n\n \n\n28\n\n \n\n \n\n**Non-GAAP\nMeasures**\n\n \n\nWe\nanalyze operational and financial data to evaluate our business, allocate our resources, and assess our performance. In addition to total\nnet sales, net loss, and other results under GAAP, the following information includes key operating metrics and non-GAAP financial measures\nthat we use to evaluate our business. We believe that these measures are useful for period-to-period comparisons of the Company’s\nperformance. We have included these non-GAAP financial measures in this Annual Report because they are key measures management uses to\nevaluate our operational performance, produce future strategies for our operations, and make strategic decisions, including those relating\nto operating expenses and the allocation of our resources. Accordingly, we believe that these measures provide useful information\nto investors and others in understanding and evaluating our operating results in the same manner as our management and Board of Directors.\n\n \n\n**Adjusted\nEBITDA**  \n\n \n\n  \n\n**For the Year Ended**\n\n**March 31, 2026**\n  \n\n**For the Year Ended**\n\n**March 31, 2025**\n \n\n  \n   \n  \n\nNet loss, as reported \n$(7,131) \n$(15,939)\n\n  \n    \n   \n\nAdjustments: \n    \n   \n\nInterest expense \n 2,280  \n 2,046 \n\nStock compensation expense \n 476  \n 1,334 \n\nAmortization of stock-based marketing services \n 558  \n 910 \n\nDepreciation and amortization \n 323  \n 342 \n\nAdjusted EBITDA \n$(3,494) \n$(11,307)\n\n \n\nAdjusted\nEBITDA is a non-GAAP financial measure that displays our net loss from continuing operations, adjusted to eliminate the effect of certain\nitems as described below. We define Adjusted EBITDA as net loss excluding interest expense, stock-based compensation expense, amortization\nof stock-based marketing services, depreciation and amortization, and income tax benefit (expense), if any. Adjusted EBITDA is a measure\nthat is not defined in US GAAP. We believe that it is useful to exclude these expenses because the amount of such expenses in any specific\nperiod may not directly correlate to the underlying performance of our business operations.\n\n \n\nManagement\nconsiders our core operating performance to be that which our managers can affect in any particular period through their management of\nthe resources that affect our underlying revenue and profit generating operations in that period. We present adjusted EBITDA because\nwe believe it assists investors and analysts in comparing our performance across reporting periods on a consistent basis by excluding\nitems that we do not believe are indicative of our core operating performance. In addition, we use Adjusted EBITDA in developing our\ninternal budgets, forecasts, and strategic plan; in analyzing the effectiveness of our business strategies in evaluating potential acquisitions;\nand in making compensation decisions and in communications with our board of directors concerning our financial performance.\n\n \n\nThe\n$7,813 improvement in Adjusted EBITDA for the year ended March 31, 2026, compared to the same period in 2025, was primarily driven by\na $5,530 increase in gross profit, reflecting higher revenues and an increase in gross margin from 48.5% to 67.6%. The improvement in\ngross margin was attributable to several strategic operational initiatives executed throughout the year, including the opening of our\nnew European warehouse which improved supply chain efficiency and reduced fulfillment costs, enhanced sourcing and vendor management\npractices that drove more favorable input costs through renegotiated supplier terms, disciplined pricing across channels, and a broader\nsupply chain reengineering effort that optimized cost structures across the full product lifecycle. These gains were achieved against\na backdrop of an increasingly complex global duty and tariff environment, which required active management of cross-border cost exposures\nand sourcing flexibility to protect margins.\n\n \n\nRevenue\ngrowth was broad-based across channels, with wholesale revenues reaching $14,393 for the year ended March 31, 2026, compared to $10,111 in\nthe same period in 2025, an increase of $4,282 or 42.3%.  Partnership revenues also grew to $885 for the year ended March 31, 2026, from\n$555 in the same period in 2025, an increase of $330 or 59.5%, alongside a more favorable channel and product mix overall.\n\n \n\nSelling,\ngeneral and administrative (“SG&A”) expenses decreased by $2,720 during the year ended March 31, 2026, compared to the\nsame period in 2025, reflecting continued cost discipline and a broad-based effort to eliminate non-essential expenditures and further\nstreamline operations across the business. The decrease was driven in part by lower stock-based compensation expense following the restructuring\nof our employee equity compensation program and the redundancy plan implemented in the fourth quarter of the prior fiscal year. Partially\noffsetting these savings were higher legal and professional fees associated with ongoing public company compliance and fundraising activities,\nas well as costs to support operational expansion.\n\n \n\n29\n\n \n\n \n\nMarketing\nand advertising expenses decreased by $306 during the year ended March 31, 2026, compared to the same period in 2025. While the Company\nincurred higher activation and promotional costs to support the AW25 product launch, these increases were offset by lower spending in\nother areas, resulting in a net decrease in marketing and advertising expenses compared to the same period in 2025.\n\n \n\nThe\nimprovement in adjusted EBITDA demonstrates operating leverage on higher revenue and margin despite ongoing investments in infrastructure\nand brand development.\n\n \n\nNon-GAAP\nfinancial measures have limitations, should be considered as supplemental in nature and are not meant as a substitute for the related\nfinancial information prepared in accordance with GAAP. These limitations include the following:\n\n \n\n \n●\nemployee\nstock awards and common stock purchase options expense has been, and will continue to be for the foreseeable future, a significant\nrecurring expense for the Company and an important part of our compensation strategy;\n\n \n●\nthe\nassets being depreciated or amortized may have to be replaced in the future, and the non-GAAP financial measures do not reflect cash\ncapital expenditure requirements for such replacements or for new capital expenditures or other capital commitments;\n\n \n●\nnon\nGAAP measures do not reflect future interest expense, or the cash requirements necessary to service interest or principal payments,\non our debts;\n\n \n●\nnon-GAAP\nmeasures do not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;\n\n \n●\nnon-GAAP\nmeasures do not reflect changes in, or cash requirements for, our working capital needs; and\n\n \n●\nother\ncompanies, including companies in our industry, may calculate their non-GAAP financial measures differently or not at all, which\nreduces their usefulness as comparative measures.\n\n \n\nBecause\nof these limitations, you should consider the non-GAAP financial measures alongside other financial performance measures, including our\nnet loss and our other financial results presented in accordance with GAAP. You are encouraged to evaluate the above adjustments and\nthe reasons we consider them appropriate for supplemental analysis. In evaluating Adjusted EBITDA, you should be aware that in the future\nwe may incur expenses that are the same as or similar to some of the adjustments in this presentation. Our presentation of Adjusted EBITDA\nshould not be construed as an inference that our future results will be unaffected by unusual or non-recurring items.\n\n \n\n**Revenue**\n\n \n\nTotal\nrevenue for the year ended March 31, 2026 was $23,603 compared to $21,501 for the year ended March 31, 2025, an increase of $2,102 or\n9.8%.\n\n \n\nWholesale\nrevenues grew to $14,393 from $10,111 in the prior year, an increase of $4,282 or 42.3%, reflecting a stronger order book and improved\noperational execution that enabled more efficient fulfillment and shipment timing. This channel was the primary driver of overall revenue\ngrowth during the year. Ecommerce revenues were $8,256 compared to $10,060 in the prior year, a decrease of $1,804 or 17.9%. This decline\nreflects the Company’s strategic shift away from year-round promotional discounting, a decision designed to protect brand integrity\nand improve revenue quality. The Company also executed targeted off-price initiatives during the year to clear aged inventory and rationalize\nits balance sheet, which further impacted ecommerce volumes. While this transition weighed on near-term ecommerce revenues, it has laid\na healthier foundation for the channel going forward. Partnership revenues increased to $885 from $555 in the prior year, an increase\nof $330 or 59.5%, reflecting the continued development and contribution of this higher-margin channel. Retail revenues were $69 compared\nto $775 in the prior year, reflecting the Company’s rationalization of its direct retail footprint as part of its broader strategic\nrefocus.\n\n \n\n**Cost\nof sales**\n\n \n\nCost\nof sales for the year ended March 31, 2026 was $7,644 compared to $11,072 for the year ended March 31, 2025, a decrease of $3,428 or\n31.0%. The change in cost of sales is primarily driven by improved supply chain efficiency and disciplined cost management.\n\n \n\nWe\ncontinue to focus on optimizing our supply chain and sourcing practices to support long-term margin expansion.\n\n \n\n**Gross\nprofit and gross margin**\n\n \n\nOur\ngross profit for the year ended March 31, 2026 was $15,959 compared to $10,429 for the year ended March 31, 2025, an increase of $5,530\nor 53.0%. Our gross margins were 67.6% compared to 48.5% achieved in the prior year.\n\n \n\n30\n\n \n\n \n\nThe\nincrease reflects the cumulative impact of several strategic operational improvements executed throughout the year. First, the opening\nof our new European warehouse meaningfully improved supply chain efficiency, reducing fulfillment costs and transit times across key\nmarkets. Second, enhanced sourcing and vendor management practices drove more favorable input costs through renegotiated supplier terms\nand improved procurement processes. Third, our continued focus on disciplined pricing ensured that margin was preserved across channels\nwithout compromising competitive positioning. Finally, a broader supply chain reengineering initiative allowed us to optimize cost structures\nacross the full product lifecycle. The margin expansion demonstrates meaningful progress toward sustained profitability while continuing\nto scale the business — particularly notable given the increasingly complex global duty and tariff environment, which required\nactive management of cross-border cost exposures and sourcing flexibility to protect margins.\n\n \n\n**SG&A\nexpenses**\n\n \n\nSG&A\nexpenses consist of personnel related expenses, stock compensation expense, legal and professional fees, depreciation and amortization\nand other selling, general and administrative expenses, including information technology, property related expenses, travel and product\nsample costs.\n\n \n\nSG&A\nexpenses for the year ended March 31, 2026 were $17,965 compared to $20,685 for the year ended March 31, 2025, a decrease of $2,720\nor 13.1%. The decrease primarily reflects continued cost discipline and reduced discretionary spending, including lower stock-based\ncompensation following the restructuring of our employee equity program and redundancy plan implemented in the fourth quarter of the\nprior fiscal year. Beyond compensation, management undertook a broad review of the cost base, eliminating non-essential expenditures\nand further streamlining operations across the business to generate additional savings and improve overall efficiency. These savings\nwere partially offset by higher legal and professional fees related to public company compliance and fundraising activities, as well\nas operational costs to support expansion initiatives. The Company also incurred targeted increases across technology, compliance,\nand insurance to strengthen its operating infrastructure and scalability.\n\n \n\n Overall,\nSG&A expenses decreased as a percentage of revenue—improving to 76.1% from 96.2%—reflecting enhanced operating leverage,\nimproved cost efficiency, and the early benefits of management’s ongoing efforts to align the cost base with revenue growth.\n\n \n\n**Marketing\nand advertising expense**\n\n \n\nMarketing\nand advertising expense consist of agency, contractor and consulting expense, content production, promotional operating expense, and\nadvertising costs. Marketing is an important driver of growth and we intend to continue to make significant investments in our marketing\norganization.\n\n \n\nMarketing\nand advertising expenses for the year ended March 31, 2026 were $3,234 compared to $3,540 for the year ended March 31, 2025, a decrease\nof $306 or 8.6%. The decrease primarily reflects the implementation of permanent cost-saving measures through optimized agency support,\nimproved event planning, and a greater focus on in-house capabilities, resulting in a more efficient allocation of marketing resources.\n\n \n\n**Seasonality\nand Quarterly Trends**\n\n \n\nOur\nbusiness is seasonal with revenue concentrated in northern hemisphere countries. Revenue is elevated in the quarters ending September\n30, December 31 and March 31 driven by sales of ski and outerwear through the fall and winter months. In the quarter ending June 30 sales\nare driven by swimwear and activewear. Our growth rate fluctuates quarter-on-quarter as a result of the seasonality of our business.\nWe expect this fluctuation to continue. In addition to seasonality, quarter-on-quarter results are expected to be impacted by the timing\nof goods production and delivery, promotional activities and the addition of new products and geographies as the business grows. The\nbusiness is also subject to the impact of economic cycles that influence retail apparel trends.\n\n \n\n**Liquidity\nand Capital Resources **\n\n** **\n\nThrough\nMarch 31, 2026, we have funded our operations with proceeds from the sale of common stock from equity financings, including the sale\nof common stock and preferred stock, alongside existing trade, invoice and shareholder financing arrangements. We have incurred\nrecurring losses, including a net loss of $7,131 for year ended March 31, 2026 and used cash in operations of $8,998 during that\nperiod. As of March 31, 2026, the Company had an accumulated deficit of $72,047 and a stockholders’ deficit of $686. These factors raise substantial doubt about our\nability to continue as a going concern for at least twelve months from the date these consolidated financial statements were\navailable to be issued. Our ability to continue as a going concern is dependent upon management of its expenses and its ability to\nobtain necessary financing to meet its obligations and pay its liabilities arising from normal business operations when they come\ndue, and upon profitable operations.\n\n \n\n31\n\n \n\n \n\nAs\nof March 31, 2026, we had cash and cash equivalents of $1,151 and an accumulated deficit of $72,047. Historically, we have generated\nnegative cash flows from operations and have primarily financed our operations through private sales of equity securities, debt and working\ncapital finance facilities.\n\n \n\nWe\nexpect operating losses and negative cash flows from operations to continue into the foreseeable future as we continue to invest in growing\nour business and expanding our infrastructure. Our primary uses of cash include personnel and marketing expenditures, inventory, capital\ninvestment and expenditures in technology and incremental expenses arising from distribution center operating costs to support our operations\nand our growth.\n\n \n\nAs\na result of the seasonality of our business, we typically draw down on our trade finance facilities during summer, fall and early winter\nto meet a large proportion of the cost of goods associated with the manufacture of our fall/winter collection. Trade finance and debt\nfactoring facilities support our working capital cycle through to the late fall/winter season when wholesale receivables are paid and\necommerce revenues increase.\n\n \n\nOur\nability to fund inventory purchases, capital expenditures, and growth will depend on our ability to generate cash in the future. Our\nfuture ability to generate cash from operations is, to a certain extent, subject to general economic, financial, competitive, regulatory\nand other conditions. Based on our current level of operations, we believe our existing cash balances and expected cash flows from operations,\nalongside the continuance of our existing financing arrangements, will be sufficient to meet our operating requirements for at least\nthe next 12 months, excluding financing to support production (i.e. timing of working capital). We may seek additional or alternative\ndebt and equity financing to that set out above. If we raise equity financing, our shareholders may experience significant dilution of\ntheir ownership interests. If we conduct additional debt financing, the terms of such debt financing may be similar or more restrictive\nthan the terms of our current financing arrangements, and we would have additional debt service obligations. In the event that additional\nfinancing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise\nadditional capital when desired, our business, financial condition and results of operations could be harmed. See the sections below\ntitled “Risk Factors – Risks Related to Ownership of Our Common Stock – Future sales and issuances of our common stock\nor rights to purchase common stock, including pursuant to our 2021 Equity Incentive Plan, could result in additional dilution of the\npercentage ownership of our stockholders” and “Risk Factors – Risks Related to Our Business, Our Brand, Our Products\nand Our Industry – We have a history of losses, expect to continue to incur losses in the near term and may not achieve or sustain\nprofitability in the future, and as a result, our management has identified and our auditors reported that there is a substantial doubt\nabout our ability to continue as a going concern.”\n\n \n\n**Cash\nFlow Activities**\n\n \n\nThe\nfollowing table shows summary consolidated cash flow information for the periods presented:\n\n \n\n  \n\n**Year Ended**\n\n**March 31, 2026**\n  \n\n**Year Ended**\n\n**March 31, 2025**\n \n\n  \n   \n  \n\nConsolidated statement of cash flow data: \n    \n   \n\nNet cash used in operating activities \n$(8,998) \n$(9,861)\n\nNet cash used in investing activities \n$(359) \n$(302)\n\nNet cash provided by financing activities \n$3,294  \n$9,692 \n\n \n\n*Cash\nFlows from Operating Activities*\n\n \n\nDuring the year ended March 31, 2026, operating activities used $8,998\nin cash and cash equivalents and restricted cash, primarily resulting from a net loss of $7,131, offset by non-cash adjustments totaling\n$4,210 and a net cash outflow from changes in operating assets and liabilities of $6,077. Net cash used in changes in operating assets\nand liabilities was driven primarily by an increase in inventory of $2,812, an increase in accounts receivable of $1,821, an increase\nin prepaid and other current assets of $670, and a decrease in accrued expenses of $1,469. These outflows were partially offset by an\nincrease in trade payables of $860. The increase in inventory reflects higher stock purchases to support the upcoming winter season and\nexpanded sales channels and also improved inventory planning and purchasing timing, designed to enhance availability and support stronger\nsell-through performance in the second half of the fiscal year. \n\n \n\nDuring\nthe year ended March 31, 2025, operating activities used $9,861 in cash and cash equivalents and restricted cash, primarily resulting\nfrom a net loss of $15,939, offset by non-cash adjustments of $5,955 and a net cash inflow from changes in operating assets and liabilities\nof $123. Net cash used by changes in operating assets and liabilities was driven primarily by an increase in accrued expenses of $1,536,\nan increase in prepaid expenses and other current assets of $1,493, an increase in trade payables of $1,010, an increase in inventories\nof $937. These outflows were partially offset by a decrease in unearned revenue of $155 and a decrease in accounts receivable of $160.\n\n \n\n32\n\n \n\n \n\n*Cash\nFlows from Investing Activities*\n\n \n\nDuring\nthe year ended March 31, 2026, investing activities used $359 in cash and cash equivalents and restricted cash, compared to $302 for\nthe same period in 2025, an increase of $57 or 18.9%. The current period capital expenditures related to the opening of the new pop-up\nstores in Verbier and other locations whereas the prior period capital expenditures related to an investment in our website infrastructure\nto enhance customer experience and support our digital growth initiative. These investments were consistent with the Company’s\nstrategy to enhance brand visibility and expand its retail presence in key markets while maintaining disciplined capital allocation.\n\n \n\n*Cash\nFlows from Financing Activities*\n\n \n\nDuring\nthe year ended March 31, 2026, financing activities provided $3,294 in cash and cash equivalents and restricted cash, primarily attributed\nto $4,050 of net proceeds from the sale of our common stock, $1,330 of net proceeds from short term borrowings, $5,590 of net proceeds\nfrom the issuance of notes payable to related parties, and $5,140 of net proceeds from the issuance of notes payable, offset by a $4,725\nrepayment of short term borrowings, $2,495 repayment of trade finance facility, $5,090 repayment of notes payable to related parties,\nand $506 payment of dividends on our Series AA Convertible Preferred Stock.\n\n \n\nDuring\nthe year ended March 31, 2025, financing activities provided $9,692 in cash and cash equivalents and restricted cash, primarily attributed\nto $5,792 of net proceeds from short term borrowings, $5,148 of net proceeds from issuance of preference shares and warrants, $2,845\nof net proceeds from trade finance facilities, and $2,000 proceeds from a convertible note, offset by a $5,742 repayment of short term\nborrowings and $351 repayment of trade finance facilities.\n\n \n\n**Sources\nof Liquidity**\n\n \n\n*Cash\nand cash equivalents and restricted cash*\n\n* *\n\nAs\nof March 31, 2026, we had cash and cash equivalents of $1,151 compared to cash and cash equivalents of $6,159 and restricted cash of\n$1,350 as of March 31, 2025.\n\n \n\n*Revolver*\n\n \n\nAs\nof March 31, 2026, we has an available secured, committed revolving line of credit, which provides for borrowings up to $10,000. We were\nin compliance with all associated covenants and there was an outstanding balance of $5,140 under the revolved as of March 31, 2026 which\nwas due on March 30, 2028. Refer to Note 9 in Part II, Item 8 of this Form 10-K for further information regarding our revolver.\n\n* *\n\n**Capital\nRequirements**\n\n \n\nOur\nexpected short-term and long-term cash needs are primarily for working capital, including deposits with our suppliers. We expect to meet\nthese short-term and long-term cash needs primarily with cash flows from operations and, if needed, borrowings from our existing revolver.\nAs of March 31, 2026, we have $7,934 of minimum purchase obligations with our suppliers for our product lines that will be sold during\nthe year ended March 31, 2027.\n\n** **\n\n**Off-Balance\nSheet Arrangements**\n\n \n\nWe\ndid not have during the periods presented, and we do not currently have, any off-balance sheet financing arrangements or any relationships\nwith unconsolidated entities or financial partnerships, including entities sometimes referred to as structured finance or special purpose\nentities, that were established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited\npurposes.\n\n \n\n**Critical\nAccounting Policies and Estimates**\n\n \n\nThe\npreparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make\nestimates and assumptions. Predicting future events is inherently an imprecise activity and, as such, requires the use of significant\njudgment. Actual results may vary from our estimates in amounts that may be material to the financial statements. An accounting policy\nis deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain\nat the time the estimate is made, and if different estimates that reasonably could have been used or changes in the accounting estimates\nthat are reasonably likely to occur periodically, could materially impact our consolidated financial statements.\n\n \n\n33\n\n \n\n \n\nOur\ncritical accounting policies, estimates, and judgements are as follows, and see Note 2. Summary of Significant Accounting Policies included\nin Item 8 of Part II for additional information:\n\n** **\n\n**Revenue\nreserves**\n\n** **\n\nThe\namount of consideration we receive and recognize as revenue, net across both wholesale and DTC channels varies with changes in sales\nreturns and other accommodations and incentives we offer to our customers. When we give our customers the right to return products or\nprovide other accommodations such as chargebacks and markdowns, we estimate the expected sales returns and miscellaneous claims from\ncustomers and record sales reserves to reduce revenue, net.\n\n \n\nAs\nof March 31, 2026, our sales-related reserves were $0.3 million compared to $0.6 million as of March 31, 2025. The most significant variable\naffecting these reserve balances is sales levels. As a percentage of Net sales, the sales reserves balances were 1.4% as of March 31,\n2026 compared to 2.8% as of March 31, 2025. The reserve for returns from customers is the component of our sales-related reserves most\nsusceptible to estimation uncertainty. These estimates are based on 1) historical rates of product returns and claims; and 2) events\nand circumstances that indicate changes to such historical rates are warranted, such as our customers’ inventory positions and\ntheir anticipated sell-through rates. However, actual returns and claims in any future period are inherently uncertain and thus may differ\nfrom our estimates. As a result, we adjust our estimates of revenue at the earlier of when the most likely amount of consideration we\nexpect to receive changes or when the amount of consideration becomes fixed. If actual or expected future returns and claims are significantly\ndifferent than the sales reserves established, we record an adjustment to Net sales in the period in which such determination was made.\n\n \n\n**Accounts\nReceivable and Credit Losses**\n\n** **\n\nWe\nmake ongoing estimates relating to the collectability of accounts receivable and maintain an allowance for estimated losses resulting\nfrom the inability of our customers to make required payments. In determining the amount of the reserve, we consider historical levels\nof credit losses and significant economic developments within the retail environment that could impact the ability of our customers to\npay outstanding balances and make judgments about the creditworthiness of significant customers based on ongoing credit evaluations.\nBecause we cannot predict future changes in the financial stability of our customers, actual future losses from uncollectible accounts\nmay differ from estimates. If the financial condition of customers were to deteriorate, resulting in their inability to make payments,\na larger reserve might be required. In the event we determine a smaller or larger reserve is appropriate, we would record a benefit or\ncharge to selling, general and administrative expenses in the period in which such a determination was made.\n\n \n\n**Inventory\nReserves**\n\n \n\nThe\nCompany periodically reviews its inventory for potential excess, obsolescence, or slow-moving items and records reserves as necessary\nto reflect inventory at the lower of cost or net realizable value. This assessment is inherently judgmental and considers multiple factors\nincluding current inventory levels, historical and projected sales trends, seasonality, planned markdowns, and liquidation history. Management\nplaces particular focus on unsold units from prior seasons and styles that have been carried forward, taking into account their performance\nover time and expected sell-through.\n\n \n\nInventory\nis tracked at the SKU level, and the Company’s provision methodology involves a cross-functional process with the merchandising\nand planning teams to identify items at risk of non-recovery. This includes analysis of aged inventory by collection season, unit sales\nvelocity, and margin erosion. Provisions are updated quarterly and recorded in the period in which such assessments are made.\n\n \n\n**Warrants**\n\n \n\nWe\naccount for warrants as either equity- classified or liability classified instruments based on an assessment of the warrant’s specific\nterms and applicable authoritative guidance in ASC 480, *Distinguishing liabilities from equity* (“ASC 480”), and ASC\n815, *Derivatives and Hedging* (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of\na liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including\nwhether the warrants are indexed to our own common shares and whether the warrant holders could potentially require “net cash settlement”\nin a circumstance outside of our control, among other conditions for equity classification. This assessment, which requires the use of\nprofessional judgment, is conducted at the time of warrant issuance, modification, and as of each subsequent quarterly period end date\nwhile the warrants are outstanding.\n\n \n\n34\n\n \n\n \n\nFor\nissued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component\nof additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification,\nthe warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter.\nChanges in the estimated fair value of the liability-classified warrants are recognized as a non-cash gain or loss on the accompanying\nconsolidated statements of operations and comprehensive loss. We assess the classification of our warrants at each reporting date to\ndetermine whether a change in classification between equity and liability is required.\n\n \n\n**Stock-based\ncompensation**\n\n \n\nWe\naccount for share-based payments that involve the issuance of shares of our common stock to employees and non-employees and meet the\ncriteria for share-based awards as stock-based compensation expense based on the grant-date fair value of the award. We estimate forfeitures\nand apply that to the stock-based compensation expense to be recognized over the period an award vests. We recognize compensation expense\nfor awards with only service conditions on a straight-line basis over the requisite service period for the entire award.\n\n \n\nIf\nfactors change, and we utilize different assumptions including the probability of achieving performance conditions, share-based compensation\ncost on future award grants may differ significantly from share-based compensation cost recognized on past award grants. If there are\nany modifications or cancellations of the underlying unvested securities, we may be required to accelerate any remaining unearned share-based\ncompensation cost or incur incremental cost. Share-based compensation cost affects our compensation and benefits expenses. In addition\nto the below, see Note 11  – Stock Based Compensation to our audited consolidated financial statements for additional detail.\n\n \n\nFor\nperiods prior to the IPO, we issued stock option awards and restricted stock units to employees and non-employees under the 2021 Equity\nIncentive Plan (the “2021 Plan”).\n\n \n\nThe\nfair value of the stock awards issued to employees and nonemployees under the 2021 Plan are estimated at each grant\ndate using the Black-Scholes model which requires the input of the following subjective assumptions: (a) length of time grantees will\nretain their vested stock options before exercising them for employees and the contractual term of the option for nonemployees (“expected\nterm”), (b) The volatility of our common stock price over the expected term, (c) expected dividends, (d) risk-free interest rate\nover the option’s expected term, and estimated forfeiture rate. A summary of our significant assumptions for the pre-IPO stock\nawards is as follows:\n\n* *\n\n●\n*Expected term:*For employees, the expected term is determined using the “simplified” method, as prescribed by the\nSEC’s Staff Accounting Bulletin No. 107, Share-Based Payment, to estimate on a formula basis the expected term of the Company’s\nemployee stock options, which are considered to have “plain vanilla” characteristics. For nonemployees, the expected term\nrepresents the contractual term of the option.\n\n \n\n●\n*Expected volatility:*The expected volatility was determined by examining the historical volatilities of a group of industry peers,\nas the Company did not have any trading history for our common stock prior to the IPO.\n\n \n\n●\n*Expected dividend yield:*The expected dividend yield was based on our history and management’s current expectation regarding\nfuture dividends.\n\n \n\n●\n*Risk-free interest rate:*The risk-free interest rate was based upon quoted market yields for the United States Treasury instruments\nwith terms that were consistent with the expected term of the stock options.\n\n \n\n●\n*Estimated forfeiture rate:* The expected forfeiture rate was based on our history and management’s expectation regarding\nfuture forfeitures.\n\n \n\nIf\nfactors change, and we utilize different assumptions, share-based compensation cost on future award grants may differ significantly from\nshare-based compensation cost recognized on past award grants. Higher volatility and longer expected terms result in an increase to share-based\ncompensation determined at the date of grant. Future share-based compensation cost will increase to the extent that we grant additional\nshare-based awards to employees and non-employees. If there are any modifications or cancellations of the underlying unvested securities,\nwe may be required to accelerate any remaining unearned share-based compensation cost or incur incremental cost. Share-based compensation\ncost affects our selling, general and administrative expenses.\n\n \n\n35\n\n \n\n \n\nIn\nfuture periods, we expect share-based compensation to increase, due in part to our existing unrecognized share-based compensation and\nas we issue additional share-based awards to continue to attract and retain employees.\n\n \n\n**Income\nTaxes**\n\n** **\n\nWe\nmake assumptions, judgments and estimates to determine our current provision for income taxes, our deferred tax assets and liabilities\nand our uncertain tax positions. Our judgments, assumptions and estimates relative to the current provision for income tax take into\naccount current tax laws, our interpretation of current tax laws and possible outcomes of current and future audits conducted by foreign\nand domestic tax authorities. Changes in tax law or our interpretation of tax laws and the resolution of current and future tax audits\ncould significantly affect our ability to utilize our net operating loss carryforwards.\n\n \n\nOur\nassumptions, judgments and estimates relative to the value of a deferred tax asset take into account predictions of the amount and category\nof future taxable income. Actual operating results and the underlying amount and category of income in future years could cause our current\nassumptions, judgments and estimates of recoverable net deferred tax assets to be inaccurate. Changes in any of the assumptions, judgments\nand estimates mentioned above could cause our actual income tax obligations to differ from our estimates, which could materially affect\nour financial position, results of operations or cash flows.\n\n \n\nOur\nassumptions, judgement and estimates relative to uncertain tax positions take into account whether a tax position is more likely than\nnot to be sustained upon examination by the relevant taxing authority based on the technical merits of the position and the largest benefit\nthat has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant taxing authority. Changes in tax\nlaw or our interpretation of tax laws and the resolution of current and future tax audits could significantly affect our ability to utilize\nour net operating loss carryforwards.\n\n \n\n**Contingencies**\n\n \n\nWe\nare involved in legal proceedings regarding contractual and employment relationships and a variety of other matters. We record contingent\nliabilities when a loss is assessed to be probable and its amount is reasonably estimable. If it is reasonably possible that a material\nloss could occur through ongoing litigation, we provide disclosure in the footnotes to our financial statements. Assessing probability\nof loss and estimating the amount of probable losses requires analysis of multiple factors, including in some cases judgments about the\npotential actions of third-party claimants and courts. Should we experience adverse court judgments or should negotiated outcomes differ\nto our expectations with respect to such ongoing litigation it could have a material adverse effect on our results of operations, financial\nposition, and cash flows.\n\n \n\n**Recent\nAccounting Pronouncements**\n\n \n\nFor\nrecent accounting pronouncements, see Note 2 of our audited consolidated financial statements included in this Annual Report.\n\n \n\n**Quantitative\nand Qualitative Disclosures about Market Risk**\n\n \n\nWe\nare exposed to market risks in the ordinary course of our business. These risks primarily include:\n\n \n\n**Interest\nrate risk**\n\n \n\nThe\nfair value of our cash equivalents, held primarily in cash deposits, have not been significantly impacted by increases or decreases in\ninterest rates to date, due to the short-term nature of these instruments. The interest expense associated with our revolver is a fixed\nrate. We are exposed to interest rate risk where the interest expense associated with our financing arrangements in the event that the\nfixed interest rate associated with our financing arrangements is increased upon roll-over of the financing arrangement at its contractual\nmaturity. Fluctuations in interest rates have not been significant to date. We do not expect that interest rates will have a material\nimpact on our results of operations.\n\n \n\n**Inflation\nrisk**\n\n \n\nWe\nare beginning to observe increases in our costs of goods sold, in particular, transportation costs. If these cost increases are sustained\nand we become subject to significant inflationary pressures, we may not be able to fully offset such higher costs. Our inability to do\nso could harm our business, results of operations or financial condition.\n\n \n\n36\n\n \n\n \n\n**Foreign\nexchange risk**\n\n \n\nTo\ndate, revenue has primarily been generated in U.S. dollar, U.K. pound sterling and euro. As a result, our revenue may be subject to fluctuations\ndue to changes in foreign currency exchange rates, particularly changes in U.K. pound sterling and euros relative to the U.S. dollar.\nOur foreign exchange risk is less pronounced for our cost of sales as to our cost of goods sold being predominantly U.S. dollar denominated.\nOur selling, general and administrative expenses are primarily made up of U.S. dollar, Hong Kong dollar, U.K. pound sterling and euro\namounts. Although a portion of our non-U.S. dollar costs offset non-U.S. dollar revenue, a currency mismatch arises as to the amount\nand timing of our different currency cash flows. To date, we have not hedged our foreign currency exposure. We will continue to monitor\nthe impact of foreign exchange risk and review whether to implement a hedging strategy to minimize this risk in future accounting periods.\nHedging strategies where implemented, are unlikely to completely mitigate this risk. To the extent that foreign exchange risk is not\nhedged it may result in harm to our business, results of operations and financial condition."}