As filed with the Securities and Exchange Commission on October 10, 2023

Registration No. 333-          

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM S-1
REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

307 Canalot Studios

222 Kensal Road

London W10 5BN

United Kingdom

+44 (0)204 558 8849

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

National Registered Agents, Inc.

28 Liberty Street

New York, New York 10005

(800) 717-2810

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box: ☒

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, check indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state or other jurisdiction where the offer or sale is not permitted.

                Shares

Common Stock

Perfect Moment Ltd.

This is an initial public offering of shares of common stock of Perfect Moment Ltd. We are offering            shares of our common stock. Prior to this offering, there has been no public market for our common stock. It is currently estimated that the initial public offering price per share of our common stock will be between $         and $        . 

We have applied to list our common stock on the Nasdaq Capital Market (“Nasdaq”) under the symbol “PMNT.” If our application is not approved or we otherwise determine that we will not be able to secure the listing of our common stock on Nasdaq, we will not complete this offering.   

Investing in our common stock involves a high degree of risk. See “Risk Factors” beginning on page 16 of this prospectus for a discussion of information that should be considered in connection with an investment in our common stock.

Neither the Securities and Exchange Commission (“SEC”) nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

We are an “emerging growth company” as that term is used in the Jumpstart Our Business Startups Act of 2012, and we have elected to comply with certain reduced public company reporting requirements.

We have granted the underwriters an option for a period of 45 days to purchase up to        additional shares of common stock, at the public offering price per share less the underwriting discounts and commissions, to cover over-allotments, if any.

The underwriters expect to deliver the shares of common stock against payment on             , 2023.

Prospectus dated                , 2023

TABLE OF CONTENTS  

Through and including                   , 2023 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.

You should rely only on the information contained in this prospectus or any prospectus supplement or amendment. Neither we, nor the underwriters, have authorized any other person to provide you with information that is different from, or adds to, that contained in this prospectus. If anyone provides you with different or inconsistent information, you should not rely on it. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. We are offering to sell and seeking offers to buy our common stock only in jurisdictions where offers and sales are permitted. You should assume that the information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of our common stock. Our business, financial condition, results of operations and prospects may have changed since that date. We are not making an offer of any securities in any jurisdiction in which such offer is unlawful.

For investors outside the United States: Neither we nor any of the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the shares of our common stock, and the distribution of this prospectus outside the United States.

ABOUT THIS PROSPECTUS

Throughout this prospectus, unless otherwise designated or the context suggests otherwise,

Certain monetary amounts, percentages and other figures included in this prospectus have been subject to rounding adjustments. Accordingly, numerical figures shown as totals in certain tables or charts may not be the arithmetic aggregation of the figures that precede them. In addition, we round certain percentages presented in this prospectus to the nearest whole number. As a result, figures expressed as percentages in the text may not total 100% or, as applicable, when aggregated may not be the arithmetic aggregation of the percentages that precede them.

MARKET AND INDUSTRY DATA

Market data and certain industry data and forecasts used throughout this prospectus were obtained from internal company surveys, market research, consultant surveys, publicly available information, reports of governmental agencies and industry publications, articles and surveys. Industry surveys, publications, consultant surveys and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable, but the accuracy and completeness of such information is not guaranteed. We have not independently verified any of the data from third party sources, nor have we ascertained the underlying economic assumptions relied upon therein. Similarly, internal surveys, industry forecasts and market research, which we believe to be reliable based on our management’s knowledge of the industry, have not been independently verified. Forecasts are particularly likely to be inaccurate, especially over long periods of time. Statements as to our market position are based on the most currently available data. While we are not aware of any misstatements regarding the industry data presented in this prospectus, our estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed under the heading “Risk Factors” in this prospectus. Among other items, certain of the market research included in this prospectus was published prior to the COVID-19 pandemic and did not anticipate the virus or the impact it has caused on our industry. We have utilized this pre-pandemic market research in the absence of updated sources. These and other factors could cause results to differ materially from those expressed in the projections and estimates made by the independent third parties and us. 

References in this prospectus to “Generation Y” refer to those born between 1981 and 1996 (ages 27 to 42 in 2023), references to “Generation Z” refer to those born between 1997 and 2012 (ages 11 to 26 in 2023) and references to “Generation Alpha” refer to those born from 2013 onward.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains “forward-looking statements.” Forward-looking statements reflect the current view about future events. When used in this prospectus, the words “anticipate,” “believe,” “estimate,” “expect,” “future,” “intend,” “plan,” or the negative of these terms and similar expressions, as they relate to us or our management, identify forward-looking statements. Such statements, include, but are not limited to, statements contained in this prospectus relating to our business strategy, our future operating results and liquidity and capital resources outlook. Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by the forward-looking statements. They are neither statements of historical fact nor guarantees of assurance of future performance. We caution you therefore against relying on any of these forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, without limitation:

Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended or planned.

Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

RISK FACTORS

Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with all of the other information contained in this prospectus, including the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes thereto, before making a decision to invest in our common stock. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that affect us. If any of the following risks occur, our business, financial condition, results of operations and prospects could be materially and adversely affected. In that event, the price of our common stock could decline, and you could lose part or all of your investment.

Risks Related to Our Business, Our Brand, Our Products and Our Industry

We have a history of losses, expect to continue to incur losses in the near term and may not achieve or sustain profitability in the future, and as a result, our management has identified and our auditors reported that there is a substantial doubt about our ability to continue as a going concern.

For the fiscal quarters ended June 30, 2023 and 2022, our operating loss was $2.71 million and $6.14 million, respectively, and for the fiscal years ended March 31, 2023 and 2022, our operating loss was $8.63 million and $10.18 million, respectively. We intend to rely on debt and equity financing for working capital until positive cash flows from operations can be achieved, which may never occur. These matters raise substantial doubt about our ability to continue as a going concern. We estimate that the net proceeds from this offering will be approximately $         (or approximately $         if the underwriters’ option to purchase additional shares is exercised in full), based on an assumed public offering price of $         per share (the midpoint of the range set forth on the cover page of this prospectus), and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. Based upon our current operating plan and assumptions, we expect that the net proceeds from this offering and our existing cash balances and expected cash flows from operations, alongside the continuance of our existing financing arrangements, the automatic conversion of the outstanding balance of the Notes will be sufficient to fund our operations for at least the next 18 months. However, our operating plan may change, and our assumptions may prove to be wrong, as a result of many factors currently unknown to us, and we could use our available capital resources sooner than we expect. We may need to seek additional funds sooner than planned, through public or private equity or debt financings or other third-party funding or a combination of these approaches. Even if we believe we have sufficient funds for our current or future operating plans, we may seek additional capital if market conditions are favorable or based upon specific strategic considerations.

Any additional capital raising efforts may divert our management’s attention from the operation of our business. In addition, we cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable to us, if at all. If we are unable to obtain sufficient amounts of additional capital, when and if we require it, we may be required to reduce the scope of our operations, which could harm our business, financial condition and results of operations. Our consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.

The report of our independent registered public accounting firm that accompanies our audited consolidated financial statements for the fiscal years ended March 31, 2023 and March 31, 2022 contains a going concern explanatory paragraph in which such firm stated that there is substantial doubt about our ability to continue as a going concern. Our consolidated financial statements contained in this prospectus do not 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 concern, holders of our securities might lose their entire investment. Although based upon our current operating plan and assumptions, we expect that the net proceeds from this offering and our existing cash balances and expected cash flows from operations, alongside the continuance of our existing financing arrangements, the automatic conversion of the outstanding balance of the Notes will be sufficient to fund our operations for at least the next 18 months, the doubts raised relating to our ability to continue as a going concern may make our shares an unattractive investment for potential investors. These factors, among others, may make it difficult to raise any additional capital and may cause us to be unable to continue to operate our business. 

Our business 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, which would adversely affect our business.

The Perfect Moment name and brand image are integral to the growth of our business, and to the implementation of our strategies for expanding our business. We believe that the brand image we have developed has significantly contributed to the success of our business and is critical to maintaining and expanding our customer base. Maintaining and enhancing our brand will depend largely on the success of our marketing and merchandising efforts and our ability to provide a consistent, high quality product and customer experience. Maintaining and enhancing our brand may require us to make substantial investments in areas such as product design, store openings and operations, marketing, e-commerce, community relations and employee training, and these investments may not be successful. We anticipate that, as our business continues to expand into new markets and new product categories and as the market becomes increasingly competitive, maintaining and enhancing our brand may become difficult and expensive. Conversely, as we penetrate these new markets and our brand becomes more widely available, it could potentially detract from the appeal stemming from the scarcity of our brand. Our brand may also be adversely affected if our public image or reputation is tarnished by negative publicity. In addition, ineffective marketing, product diversion to unauthorized distribution channels, product defects, counterfeit products, unfair labor practices, and failure to protect the intellectual property rights in our brand are some of the potential threats to the strength of our brand, and those and other factors could rapidly and severely diminish consumer confidence in us. Maintaining and enhancing our brand will depend largely on our ability to be a leader in affordable luxury skiwear, outerwear and activewear and to continue to offer a range of high-quality products to our customers, which we may not execute successfully. Any of these factors could harm our sales, profitability or financial condition. A key element of our growth strategy is expansion of our product offerings into new product categories. We may be unsuccessful in designing products that meet our customers’ expectations for our brand or that are attractive to new customers. If we are unable to anticipate customer preferences or industry changes, or if we are unable to modify our products on a timely basis or expand effectively into new product categories, we may lose customers. As we expand into new geographic markets, consumers in these new markets may be less compelled by our brand image and may not be willing to pay a higher price to purchase our products as compared to traditional outerwear. More generally, our results of operations would suffer if our investments and innovations do not anticipate the needs of our customers, are not appropriately timed with market opportunities or are not effectively brought to market.

We continue to focus on our direct-to-consumer channel, which may be costly and could materially harm our sales, profitability and financial condition.

Our business operates on a multi-channel distribution model, which includes distributing products on a wholesale basis for resale by others and online by us. Focusing on our e-commerce platform is essential to our future strategy. This strategy has and will continue to require significant investment in cross-functional operations and management focus, along with investment in supporting technologies. If we are unable to provide a convenient and consistent experience for our customers, our ability to compete and our results of operations could be adversely affected. In addition, if our e-commerce platform does not appeal to our customers, reliably function as designed, or maintain the privacy of customer data, or if we are unable to consistently meet our brand promise to our customers, we may experience a loss of customer confidence or lost sales, or be exposed to fraudulent purchases, which could adversely affect our reputation and results of operations.

A downturn in the global economy will likely affect customer purchases of discretionary items, which could materially impact our sales, profitability and financial condition.

Many factors affect the level of consumer spending for discretionary items including performance luxury outerwear. These factors include general economic conditions, interest and tax rates, the availability of consumer credit, disposable consumer income, unemployment and consumer confidence in future economic conditions. Consumer purchases of discretionary items, such as our performance luxury outerwear, tend to decline during recessionary periods when disposable income is lower. During our history, we have experienced recessionary periods, but we cannot predict the effect of future recessionary periods on our sales and profitability. A downturn in the economy in markets in which we sell our products may materially harm our sales, profitability and financial condition. If periods of decreased consumer spending persist, our sales could decrease, and our financial condition and results of operations could be adversely affected.

We operate in a highly competitive market and the size and resources of some of our competitors may allow them to compete more effectively than we can, resulting in a loss of our market share and a decrease in our revenue and profitability.

The market for premium outerwear is highly fragmented. We compete against a wide range of brands and retailers. Many of our competitors have significant competitive advantages, including larger and broader customer bases, more established relationships with a broader set of suppliers, greater brand recognition, greater financial resources, more established research and development processes, a longer history of store development, greater marketing resources, more established distribution processes, and other resources which we do not have. Our competitors may be able to achieve and maintain brand affinity and market share more quickly and effectively than we can. Many of our competitors have more established and diversified marketing programs, including with respect to promotion of their brands through traditional forms of advertising, such as print media and television commercials, and through celebrity endorsements, and have substantial resources to devote to such efforts. Our competitors may also create and maintain brand affinity using traditional forms of advertising more quickly than we can. Our competitors may also be able to increase sales in their new and existing markets faster than we can by emphasizing different distribution channels than we can, such as catalog sales or an extensive retail network, and many of our competitors have substantial resources to devote toward increasing sales in such ways.

Use of social media and influencers may adversely affect our reputation or subject us to fines or other penalties.

We use third-party social media platforms as, among other things, marketing tools. For example, we maintain Instagram, Facebook (Meta), Pinterest, Twitter and TikTok accounts. We also maintain relationships with thousands of social media influencers and engage in collaborations. As existing e-commerce and social media platforms continue to rapidly evolve and new platforms develop, we must continue to maintain a presence on these platforms and establish presences on new or emerging social media platforms. If we are unable to cost-effectively use social media platforms as marketing tools or if the social media platforms we use change their policies or algorithms, we may not be able to fully optimize such platforms, and our ability to maintain and acquire consumers and our financial condition may suffer. Furthermore, as laws and regulations and public opinion rapidly evolve to govern the use of these platforms and devices, the failure by us, our employees, our network of social media influencers, our sponsors or third parties acting at our direction to abide by applicable laws and regulations in the use of these platforms and devices or otherwise could subject us to regulatory investigations, class action lawsuits, liability, fines or other penalties and have an adverse effect on our business, financial condition, results of operations and prospects.

In addition, an increase in the use of social media influencers for product promotion and marketing may cause an increase in the burden on us to monitor compliance of the content they post, and increase the risk that such content could contain problematic product or marketing claims in violation of applicable laws and regulations. For example, in some cases, the Federal Trade Commission has sought enforcement action where an endorsement has failed to clearly and conspicuously disclose a financial relationship or material connection between an influencer and an advertiser. We do not control the content that our influencers post, and if we were held responsible for any false, misleading or otherwise unlawful content of their posts or their actions, we could be fined or subjected to other monetary liabilities or forced to alter our practices, which could have an adverse impact on our business.

Negative commentary regarding us, our products or influencers and other third parties who are affiliated with us may also be posted on social media platforms and may be adverse to our reputation or business. Influencers with whom we maintain relationships could engage in behavior or use their platforms to communicate directly with our consumers in a manner that reflects poorly on our brand and may be attributed to us or otherwise adversely affect us. It is not possible to prevent such behavior, and the precautions we take to detect this activity may not be effective in all cases. Our target consumers often value readily available information and often act on such information without further investigation and without regard to its accuracy. The harm may be immediate, without affording us an opportunity for redress or correction.

Our current and future products may experience quality problems from time to time that can result in negative publicity, litigation, product recalls and warranty claims, which could result in decreased revenue and operating margin, and harm to our brand.

We have occasionally received, and may in the future receive, shipments of products that fail to comply with our technical specifications or that fail to conform to our quality control standards. We have also received, and may in the future receive, products that are otherwise unacceptable to us or our customers. Under these circumstances, unless we are able to obtain replacement products in a timely manner, we risk the loss of revenue resulting from the inability to sell those products and related increased administrative and shipping costs. Additionally, if the unacceptability of our products is not discovered until after such products are sold, our customers could lose confidence in our products or we could face a product recall and our results of operations could suffer and our business, reputation, and brand could be harmed. There can be no assurance we will be able to detect, prevent, or fix all defects that may affect our products. Failure to detect, prevent, or fix defects, or the occurrence of real or perceived quality, health or safety problems or material defects in our current and future products, could result in a variety of consequences, including a greater number of product returns than expected from customers and our wholesale partners, litigation, product recalls, and credit, warranty or other claims, among others, which could harm our brand, sales, profitability and financial condition. Each Perfect Moment clothing product has a warranty against defects with reasonable use, for the expected lifetime of the product. Because of this comprehensive warranty, quality problems could lead to increased warranty costs, and divert the attention of our manufacturing facilities. Such problems could hurt our luxury brand image, which is critical to maintaining and expanding our business. Any negative publicity or lawsuits filed against us related to the perceived quality and safety of our products could harm our brand and decrease demand for our products.

If we are unable to manage our operations at our current size or to manage any future growth effectively, our growth may be slowed.

We have expanded our operations for many years and plan to continue our expansion efforts. In order to support growth, of which there can be no assurance, we will be required to continue to expand our sales and marketing, product development, manufacturing and distribution functions, to upgrade our management information systems and other processes, and to obtain more space for our expanding administrative support and other personnel. Continued or fluctuating growth could strain our resources, and we could experience operating difficulties, including difficulties in hiring, training and managing an increasing number of employees and manufacturing capacity to produce our products, and delays in production and shipments. These difficulties may result in the erosion of our brand image, divert the attention of management and key employees and impact financial and results of operations. In order to continue to expand our direct-to-consumer channel, we expect to add selling, general and administrative expenses to our cost base. These costs, which include capital assets, lease commitments and headcount, could result in decreased margins if we are unable to drive commensurate direct-to-consumer revenue growth.

Our financial performance is subject to significant seasonality and variability, which could cause the price of our common stock to decline.

Our business is affected by a number of factors common to our industry and by other factors specific to our business model, which drive seasonality and variability. Historically, key metrics, including those related to our growth, profitability and financial condition, have fluctuated significantly across fiscal periods. Consumer purchases of Women, Men and Kids skiwear and outerwear, which are the Perfect Moment core categories, are concentrated in the Fall/Winter season. As a result, a large proportion of our direct-to-consumer revenue is recognized in the third and fourth fiscal quarter. Our wholesale revenue is weighted earlier in the second and third fiscal quarters, when most orders are shipped to wholesale partners. At the consolidated level, our net revenue is concentrated in the third and fourth fiscal quarters, while our operating costs are more evenly distributed throughout the year. In the fiscal year ended March 31, 2023, the third and fourth fiscal quarters represented 86% of total net revenue. Working capital requirements typically increase throughout the first, second and early third quarters as overheads continue to be incurred and inventory builds to support our peak shipping and selling periods in the third and fourth quarter. Cash provided by operating activities is typically highest in the fourth quarter following the significant inflows associated with our peak selling season. Historical results, especially comparisons across fiscal quarters, should not be considered indicative of the results to be expected for any future periods. In addition to the seasonality of demand for our products, our financial performance is influenced by a number of factors which are difficult to predict and variable in nature. These include input cost volatility, the timing of consumer purchases and wholesale deliveries which very often shift between fiscal quarters, demand forecast accuracy, inventory availability and the evolution of our channel mix, as well as external trends in weather and discretionary consumer spending. A number of other factors which are difficult to predict could also affect the seasonality or variability of our financial performance. Therefore, you should not rely on the results of a single fiscal quarter as an indication of our annual results or future performance.

Our sales and profitability may decline as a result of increasing product costs and decreasing selling prices.

Our business is subject to significant pressure on costs and pricing caused by many factors, including intense competition, constrained sourcing capacity and related inflationary pressure, pressure from consumers to reduce the prices we charge for our products, and changes in consumer demand. These factors may cause us to experience increased costs, reduce our prices to consumers or experience reduced sales in response to increased prices, any of which could cause our operating margin to decline if we are unable to offset these factors with reductions in operating costs and could have a material adverse effect on our financial condition, results of operations and cash flows.

Our success depends on our ability to identify and originate product trends as well as to anticipate and react to changing consumer demands in a timely manner.

All of our products are subject to changing consumer preferences that cannot be predicted with certainty. If we are unable to introduce new products or novel technologies in a timely manner or our new products or technologies are not accepted by our customers, our competitors may introduce similar products in a more timely fashion, which could hurt our goal to be viewed as a leader in affordable luxury skiwear and activewear. Our new products may not receive consumer acceptance as consumer preferences could shift rapidly to different types of athletic apparel or away from these types of products altogether, and our future success depends in part on our ability to anticipate and respond to these changes. If we are unable to anticipate consumer preferences and successfully develop and introduce new, innovative, and differentiated products, we may not be able to maintain or increase our sales and profitability. Even if we are successful in anticipating consumer preferences, our ability to adequately react to and address those preferences will in part depend upon our continued ability to develop and introduce innovative, high-quality products. Our failure to effectively introduce new products that are accepted by consumers could result in a decrease in net revenue and excess inventory levels, which could have a material adverse effect on our financial condition.

Our business and results of operations could be materially harmed if we are unable to accurately forecast customer demand for our products.

Our ability to forecast accurately has become increasingly important as we have expanded our direct-to-consumer channel globally and could be affected by many factors outside of our control, including an increase or decrease in consumer demand for our products or for products of our competitors, our failure to accurately forecast consumer acceptance of new products, product introductions by competitors, unanticipated changes in general market conditions and, therefore, consumer spending in the sector and weakening of economic conditions or consumer confidence in future economic conditions. In our wholesale channel, a majority of orders delivered in a given fiscal year are received in the prior fiscal year, enabling us to manufacture inventory relative to a defined order book. In the direct-to-consumer channel, we manufacture according to our forecasts of consumer demand. If we overestimate the demand for our products, we could face inventory levels in excess of demand, which could result in inventory write-downs or write-offs and the sale of excess inventory at discounted prices, which would harm our gross margins and our brand management efforts. The impact of an overestimation is expected to increase as a larger portion of our sales comes through our direct-to-consumer channel, and as we expand our product offerings. If we underestimate the demand for our products, we may not be able to produce products to meet our wholesale partner requirements, and this could result in delays in the shipment of our products and our failure to satisfy demand, as well as damage to our reputation and wholesale partner relationships. Overall, failures to accurately predict the level of demand for our products could harm our profitability and financial condition.

Our plans to improve and expand our product offerings may not be successful, and implementation of these plans may divert our operational, managerial and administrative resources, which could harm our competitive position and reduce our net revenue and profitability.

In addition to our global expansion plans, we are growing our business by expanding our product offerings outside performance luxury outerwear, including an expanded winter and summer collection, knitwear, activewear and accessories. The principal risks to our ability to successfully carry out our plans to expand our product offering include:

We also may fail to create adequate brand awareness around new product offerings. In addition, our ability to successfully carry out our plans to expand our product offerings may be affected by economic and competitive conditions, changes in consumer spending patterns and changes in consumer preferences and styles. These plans could be abandoned, could cost more than anticipated and could divert resources from other areas of our business, any of which could negatively impact our competitive position and reduce our net revenue and profitability.

We currently do not operate Perfect Moment owned physical retail stores. Our plans to open Perfect Moment owned physical retail stores are dependent on a variety of factors, including store locations being available for lease and the stores being economically viable to operate.

One of our growth strategies is to own and operate Perfect Moment owned physical retail stores. Our revenue and profit forecasts beginning with fiscal year ending March 31, 2026 include the opening of directly operated retail stores that will need to be leased, staffed, replenished with inventory and operated profitably. In addition, the stores will need to be furnished with the appropriate fittings. As this will be a new selling channel for Perfect Moment, sourcing locations introduces the risk that leases might not be available or be more expensive than our estimates. The initial capital expenditure and ongoing costs and complexities of operating a store, such as staffing and energy costs, could be higher than our forecasts, leading to lower profitability or losses. Brands often see a halo impact on their other revenue channels (for example, online channels) when operating physical stores. However, there is a risk that new stores will cannibalize sales from these channels, which could harm our future business and results of operations.

Our limited operating experience and limited brand recognition in new international markets may limit our expansion and cause our business and growth to suffer.

Our future growth partially depends on our geographical expansion, starting with establishing a presence in China. We have limited experience with regulatory environments and market practices internationally, and we may not be able to penetrate or successfully operate in any new market. In connection with our expansion efforts we may encounter obstacles we did not face in our current markets, including cultural and linguistic differences, differences in regulatory environments, labor practices and market practices, difficulties in keeping abreast of market, business and technical developments, and foreign customer tastes and preferences. We may also encounter difficulty expanding into new international markets because of limited brand recognition leading to delayed acceptance of our luxury products by customers in these new international markets. Our failure to develop our business in new international markets or disappointing growth outside of existing markets could harm our future business and results of operations.

If we fail to attract new customers, we may not be able to increase sales.

Our success depends, in part, on our ability to attract new customers. In order to expand our customer base, we must appeal to and attract consumers who identify with our brand and products. We have made significant investments in enhancing our brand and attracting new customers. We expect to continue to make significant investments to promote our current products to new customers and new products to current and new customers, including through our e-commerce platform. Such marketing investments can be expensive and may not result in increased sales. 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 attract new customers, we may not be able to increase our sales.

We partially depend on our wholesale partners to display and present our products to customers in their wholesale channel, and our failure to maintain and further develop our relationships with our wholesale partners could harm our business.

We sell our products in our wholesale channel either directly or indirectly, through distributors and to wholesale partners. Our wholesale partners service customers by stocking and displaying our products and explaining our product attributes. Our relationships with these partners are important to the authenticity of our brand and the marketing programs we continue to deploy. Our failure to maintain these relationships with our wholesale partners or financial difficulties experienced by these wholesale partners could harm our business. Our sales depend, in part, on wholesale partners effectively displaying our products, including providing attractive space in their online or physical stores or marketing campaigns, including shop-in-shops, and training their sales personnel to sell our products. If our wholesale partners reduce or terminate those activities, we may experience reduced sales of our products, resulting in lower revenue and gross margins, which would harm our profitability and financial condition. If we lose any of our wholesale partners, or if they reduce their purchases of our existing or new products, or their number of stores or operations are reduced, or they promote products of our competitors over ours, or they suffer financial difficulty or insolvency, our sales would be harmed. The recent decline in the overall retail sector, including ongoing disruptions related to COVID-19, has been challenging for our wholesale partners. Such conditions, among other things, have resulted, and in the future may result, in financial difficulties leading to restructurings, bankruptcies, liquidations and other unfavorable events for our wholesale partners and may cause such partners to reduce or discontinue orders of our products or be unable to pay us for products they have purchased from us. This has caused us to negotiate shortened payment terms and reduce credit limits in certain cases. If the overall retail environment continues to decline or if one or more of our wholesale partners is unable or unwilling to meet our payment terms, our business and results of operations could be harmed.

We rely on payment cards to receive payments and are subject to payment-related risks.

For our direct-to-consumer sales, we accept a variety of payment methods, including credit cards, debit cards and mobile payment methods. Accordingly, we are, and will continue to be, subject to significant and evolving regulations and compliance requirements relating to payment card processing. This includes laws governing the collection, processing and storage of sensitive consumer information, as well as industry requirements such as the Payment Card Industry Data Security Standard (“PCI-DSS”). These laws and obligations may require us to implement enhanced authentication and payment processes that could result in increased costs and liability and reduce the ease of use of certain payment methods. For certain payment methods, including credit and debit cards, we pay interchange and other fees, which may increase over time. We rely on independent service providers for payment processing, including credit and debit cards. If these independent service providers become unwilling or unable to provide these services to us or if the cost of using these providers increases, our business could be harmed. We are also subject to payment card association operating rules and agreements, including PCI-DSS, certification requirements and rules governing electronic funds transfers, which could change or be reinterpreted to make it difficult or impossible for us to comply. If we fail to comply with these rules or requirements, or if our data security systems are breached or compromised, we may be liable for losses incurred by card issuing banks or consumers, subject to fines and higher transaction fees, lose our ability to accept credit or debit card payments from our consumers, or process electronic fund transfers or facilitate other types of payments. Any failure to comply could significantly harm our brand, reputation, business, and results of operations.

Our success is substantially dependent on the service of certain members of our board or directors and senior management.

Our success is substantially dependent on the continued service of certain members of our board of directors and senior management, including Max Gottschalk, who is the Chairman of our board of directors, and Jane Gottschalk, who is our Chief Creative Officer and a member of our board of directors. The loss of the services of our senior management could make it more difficult to successfully operate our business and achieve our business goals. We also may be unable to retain existing management, or technical, sales and client support personnel that are critical to our success, which could result in harm to our customer and employee relationships, loss of key information, expertise or know-how and unanticipated recruitment and training costs. We have not obtained key man life insurance policies on any members of our senior management team. As a result, we would not be protected against the associated financial loss if we were to lose the services of members of our senior management team.

The market forecasts included in this prospectus may prove to be inaccurate, and even if the markets in which we operate achieve growth, we cannot assure you our business will grow at similar rates, if at all.

Growth forecasts are subject to significant uncertainty and are based on assumptions and estimates, which may not prove to be accurate. Forecasts relating to the expected growth in respective markets, including the forecasts or projections referenced in this prospectus, may prove to be inaccurate. Even if the performance luxury outerwear industry experiences the forecasted growth, we may not grow our business at similar rates, or at all. Our growth is subject to many factors, including our success in implementing our business strategy, which is subject to many risks and uncertainties. Accordingly, the forecasts of market growth included in this prospectus should not be taken as indicative of our future growth.

We face various risks related to health epidemics, pandemics and similar outbreaks, which may adversely affect our business.

Our global operations, and those of the third parties upon whom we rely, have been, and could be in the future, adversely affected by health epidemics, pandemics and similar outbreaks, such as the COVID-19 pandemic. Despite our efforts, and the efforts of third parties upon whom we rely, to manage these matters, their ultimate effects also depend on factors beyond our knowledge or control, including the duration, severity and recurrence of any outbreak and actions taken to contain its spread and mitigate its public health effects. Health epidemics, pandemics and similar outbreaks may adversely affect our business, including by resulting in (i) significant volatility in demand for our products and services, (ii) changes in consumer behavior and preferences, (iii) disruptions of our manufacturing and supply chain operations, (iv) limitations on our employees’ ability to work and travel and (v) changes to economic or political conditions in markets in which we operate.

We are subject to many hazards and operational risks that can disrupt our business, some of which may not be insured or fully covered by insurance.

Our operations are subject to many hazards and operational risks inherent to our business, including general business risks, product liability, product recall and damage to third parties. Our insurance coverage may be inadequate to cover our liabilities related to such hazards or operational risks. In addition, we may not be able to maintain adequate insurance in the future at rates we consider reasonable and commercially justifiable, and insurance may not continue to be available on terms as favorable as our current arrangements. The occurrence of a significant uninsured claim, or a claim in excess of the insurance coverage limits maintained by us could harm our business, results of operations and financial condition.

Risks Related to Our Corporate Structure

We may rely on dividends and other distributions on equity paid by our Hong Kong subsidiary to fund any cash and financing requirements we may have. In the future, funds may not be available to fund operations or for other use outside of Hong Kong, due to interventions in, or the imposition of restrictions and limitations on, our ability or our Hong Kong subsidiary by the PRC government to transfer cash. Any limitation on the ability of our Hong Kong subsidiary to make payments to us could have a material adverse effect on our ability to conduct our business and might materially decrease the value of our common stock.

We are a holding company incorporated in Delaware, and we may rely on dividends and other distributions on equity paid by our Hong Kong subsidiary for our cash and financing requirements, including the funds necessary to pay dividends and other cash distributions to our shareholders and service any debt we may incur. If PMA incurs debt on its own behalf in the future, the instruments governing the debt may restrict its ability to pay dividends or make other distributions to us.

Under the current practice of the Inland Revenue Department of Hong Kong, no tax is payable in Hong Kong in respect of dividends paid by us. The PRC laws and regulations do not currently have any material impact on transfers of cash from Perfect Moment to PMA or from PMA to Perfect Moment Ltd., our shareholders and U.S. investors. However, the Chinese government may, in the future, impose restrictions or limitations on our ability to transfer money out of Hong Kong, to distribute earnings and pay dividends to and from the other entities within our organization, or to reinvest in our business outside of Hong Kong. Such restrictions and limitations, if imposed in the future, may delay or hinder the expansion of our business to outside of Hong Kong and may affect our ability to receive funds from our operating subsidiary in Hong Kong. The promulgation of new laws or regulations, or the new interpretation of existing laws and regulations, in each case, that restrict or otherwise unfavorably impact the ability or way we conduct our business, could require us to change certain aspects of our business to ensure compliance, which could decrease demand for our services, reduce revenues, increase costs, require us to obtain more licenses, permits, approvals or certificates, or subject us to additional liabilities. To the extent any new or more stringent measures are required to be implemented, our business, financial condition and results of operations could be adversely affected and such measured could materially decrease the value of our common stock.

Recently, the PRC government initiated a series of regulatory actions and statements to regulate business operations in certain areas in mainland China with little or no advance notice. In the future, we may be subject to PRC laws and regulations related to the current business operations of our operating subsidiary and any changes in such laws and regulations and interpretations may impair its ability to operate profitably, which could result in a material negative impact on its operations and/or the value of the securities we are registering for sale.

Although we have direct ownership of our operating entities in Hong Kong and currently do not have or intend to have any subsidiary or any contractual arrangement to establish a VIE structure with any entity in mainland China, we are still subject to certain legal and operational risks associated with one of our operating subsidiaries, PMA, being based in Hong Kong and having all of its operations to date in Hong Kong. Additionally, the legal and operational risks associated in mainland China may also apply to operations in Hong Kong, and we face the risks and uncertainties associated with the complex and evolving PRC laws and regulations and as to whether and how the recent PRC government statements and regulatory developments. In the event that we or our Hong Kong subsidiary were to become subject to PRC laws and regulations, we could incur material costs to ensure compliance, and we or our Hong Kong subsidiary might be subject to fines, and/or no longer be permitted to continue business operations as presently conducted.

Risks Related to Our Supply Chain

We rely on a limited number of third-party suppliers to provide high quality raw materials.

Our products require high quality raw materials, including down, softshell, wool, neoprene, and cotton. We do not manufacture our products or the raw materials for them and rely instead on suppliers. Many of the specialty fabrics used in our products are technically advanced textile products developed and manufactured by third parties and may be available, in the short-term, from only one or a limited number of sources. We have no long-term contracts with any of our suppliers or manufacturers for the production and supply of our raw materials and products, and we compete with other companies for fabrics, other raw materials, and production.

We work with a group of approximately 11 vendors that manufacture our products, 9 of which produced products in the fiscal year ended March 31, 2023. No purchases of manufactured goods took place during the fiscal quarter ended June 30, 2023. During the fiscal year ended March 31, 2023, the largest single manufacturer, Everich Garments Group Ltd., produced approximately 72% of our products and substantially all of our products were manufactured in China. We work with a group of approximately 3 suppliers to provide the fabrics for our products. In the fiscal quarter ended June 30, 2023 and the fiscal year ended March 31, 2023, the largest single supplier, Toray International Inc., produced approximately 79% and 70% of fabric, respectively. During the fiscal quarter ended June 30, 2023, approximately 79% of our fabrics originated from Japan and 21% from China. During the fiscal year ended March 31, 2023, approximately 51% of our fabrics originated from Japan and 49% from China. We also source other raw materials which are used in our products, including items such as content labels, elastics, buttons, clasps and drawcords from suppliers located predominantly in the Asia Pacific region. 

The price of raw materials depends on a wide variety of factors largely beyond the control of the Company. A shortage, delay or interruption of supply for any reason, including delays caused by the ongoing COVID-19 pandemic, could negatively impact our ability to fulfill orders and have an adverse impact on our financial results. In addition, while our suppliers, in turn, source from a number of sub-suppliers, we rely on a very small number of direct suppliers for certain raw materials. As a result, any disruption to these relationships could have an adverse effect on our business. Events that adversely affect our suppliers could impair our ability to obtain inventory in the quantities and at the quality that we require. Such events include difficulties or problems with our suppliers’ businesses, finances, labor relations, ability to import raw materials, costs, production, insurance and reputation, as well as natural disasters, public health emergencies or other catastrophic occurrences. Our supply of fabrics and raw materials, for example, could be disrupted by the impact of the ongoing COVID-19 pandemic, especially in Asia, and the related government and private sector responsive actions such as border closures, restrictions on product shipments, and travel restrictions. A significant slowdown in the retail industry as a whole may also result in bankruptcies or permanent closures of some of our suppliers and third party vendors. Furthermore, there can be no assurance that our suppliers will continue to provide fabrics and raw materials or provide products that are consistent with our standards. More generally, if we need to replace an existing supplier, additional supplies or additional manufacturing capacity may not be available when required on terms that are acceptable to us, or at all, and any new supplier may not meet our strict quality requirements. In the event we are required to find new sources of supply, we may encounter delays in production, inconsistencies in quality and added costs as a result of the time it takes to train our suppliers and manufacturers in our methods, products and quality control standards. Any delays, interruption or increased costs in the supply of our raw materials could have an adverse effect on our ability to meet customer demand for our products and result in lower revenue and profitability both in the short and long-term.

If our independent manufacturers or our suppliers fail to use ethical business practices and fail to comply with changing laws and regulations or our applicable guidelines, our brand image could be harmed due to negative publicity.

Our core values, which include developing the highest quality products while operating with integrity, are an important component of our brand image, which makes our reputation sensitive to allegations of unethical or improper business practices, whether real or perceived. We do not control our suppliers and manufacturers or their business practices. Accordingly, we cannot guarantee their compliance with our 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 suppliers, which could increase our costs and result in delayed delivery of our products, product shortages or other disruptions of our operations. In addition, many of our products include materials that are heavily regulated in many jurisdictions. Certain jurisdictions in which we sell have various regulations related to manufacturing processes and the chemical content of our products, including their component parts. Monitoring compliance by our manufacturers and suppliers is complicated, and we are reliant on their compliance reporting in order to comply with regulations applicable to our products. This is further complicated by the fact that expectations of ethical business practices continually evolve and may be substantially more demanding than applicable legal requirements. Ethical business practices are also driven in part by legal developments and by diverse groups active in publicizing and organizing public responses to perceived ethical shortcomings. Accordingly, we cannot predict how such regulations or expectations might develop in the future and cannot be certain that our guidelines or current practices would satisfy all parties who are active in monitoring our products or other business practices worldwide.

Labor-related matters, including labor disputes, relating to our suppliers may adversely affect our operations.

Potential labor disputes at independent factories where our goods are produced, shipping ports, or transportation carriers create risks for our business, particularly if a dispute results in work slowdowns, lockouts, strikes or other disruptions during our peak manufacturing, shipping and selling seasons. Any potential labor dispute could materially affect our costs, decrease our sales, harm our reputation or otherwise negatively affect our sales, profitability or financial condition. Further, the risks to our business due to a pandemic or other public health emergency, such as the ongoing COVID-19 pandemic, include risks to worker health and safety, prolonged restrictive measures put in place in order to control the crisis and limitations on travel, which may result in temporary shortages of staff or unavailability of certain workers with key expertise or knowledge of our business and, impact on productivity.

The operations of many of our suppliers are subject to additional risks that are beyond our control.

Almost all of our suppliers are located outside of North America and the United Kingdom, and as a result, we are subject to risks associated with doing business outside of these regions, including:

These and other factors beyond our control could interrupt our suppliers’ production in offshore facilities, influence the ability of our suppliers to export our products cost-effectively or at all and inhibit our suppliers’ ability to procure certain materials, any of which could harm our business, financial condition, and results of operations.

The fluctuating cost of raw materials could increase our cost of goods sold and cause our results of operations and financial condition to suffer.

The fabrics used to make our products include synthetic fabrics whose raw materials include petroleum-based products. Our products also include silver and natural fibers, including cotton. Our costs for raw materials are affected by, among other things, weather, consumer demand, speculation on the commodities market, the relative valuations and fluctuations of the currencies of producer versus consumer countries, and other factors that are generally unpredictable and beyond our control. Increases in the cost of raw materials, including petroleum or 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 sold, results of operations, financial condition, and cash flows.

Additionally, increasing costs of labor, freight and energy could increase our and our suppliers’ cost of goods. If our suppliers are affected by 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, we may not be able to offset them through increases in our pricing, which could adversely affect our results of operations and financial condition.

If we encounter problems with our distribution system, our ability to deliver our products to the market and to meet customer expectations could be harmed.

We rely on our distribution facilities for substantially all of our product distribution. Our distribution facilities include computer controlled and automated equipment, which means their operations may be subject to a number of risks related to security or computer viruses, the proper operation of software and hardware, electronic or power interruptions, or other system failures. In addition, our operations could also be interrupted by labor difficulties, extreme or severe weather conditions or by floods, fires, or other natural disasters near our distribution centers. If we encounter problems with our distribution system, our ability to meet customer expectations, manage inventory, complete sales, and achieve objectives for operating efficiencies could be harmed.

Increasing labor costs and other factors associated with the production of our products in China could increase the costs to produce our products.

Substantially all 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 area could significantly increase our costs to produce our products and could have a negative impact on our operations and earnings. Factors that could negatively affect our business include labor shortages and increases in labor costs, difficulties and additional costs in transporting products manufactured from these countries to our distribution centers and significant revaluation of the currencies used in these countries, which may result in an increase in the cost of producing products. Also, the imposition of trade sanctions or other regulations against products imported by us from, or the loss of “normal trade relations” status with any country in which our products are manufactured, could significantly increase our cost of products and harm our business.

Risks Related to Doing Business in Hong Kong

It may be difficult for overseas shareholders and/or regulators to conduct investigations or collect evidence within the territory of China, including Hong Kong.

Shareholder claims or regulatory investigations that are common in the United States generally are difficult to pursue as a matter of law or practicality in China. For example, in China, there are significant legal and other obstacles to providing information needed for regulatory investigations or litigation initiated outside China. Although the authorities in China may establish a regulatory cooperation mechanism with the securities regulatory authorities of another country or region to implement cross-border supervision and administration, such cooperation with the securities regulatory authorities in the Unities States may not be efficient in the absence of mutual and practical cooperation mechanism. Furthermore, according to Article 177 of the PRC Securities Law, or Article 177, which became effective in March 2020, no overseas securities regulator is allowed to directly conduct investigations or evidence collection activities within the territory of the mainland China. While detailed interpretation of or implementation rules under Article 177 have yet to be promulgated, the inability for an overseas securities regulator to directly conduct investigations or evidence collection activities within mainland China may further increase difficulties faced by you in protecting your interests.

The PRC laws and regulations and the enforcement of such that apply or are to be applied to Hong Kong can change quickly with little or no advance notice. As a result, the Hong Kong legal system embodies uncertainties which could limit the availability of legal protections, which could result in a material change in PMA’s operations and/or the value of the securities we are registering for sale.

As one of the conditions for the handover of the sovereignty of Hong Kong to China, China accepted conditions such as Hong Kong’s Basic Law. The Basic Law ensured Hong Kong will retain its own currency (the Hong Kong Dollar), legal system, parliamentary system and people’s rights and freedom for fifty years from 1997. This agreement has given Hong Kong the freedom to function with a high degree of autonomy. The Special Administrative Region of Hong Kong is responsible for its own domestic affairs including, but not limited to, the judiciary and courts of last resort, immigration and customs, public finance, currencies and extradition. Hong Kong continues using the English common law system.

However, if the PRC attempts to alter its agreement to allow Hong Kong to function autonomously, this could potentially impact Hong Kong’s common law legal system and may in turn bring about uncertainty in, for example, the enforcement of our contractual rights. This could, in turn, materially and adversely affect our operating subsidiary’s business and operations. Additionally, intellectual property rights and confidentiality protections in Hong Kong may not be as effective as in the United States or other countries. Accordingly, we cannot predict the effect of future developments in the Hong Kong legal system, including the promulgation of new laws, changes to existing laws or the interpretation or enforcement thereof, or the preemption of local regulations by national laws. These uncertainties could limit the legal protections available to us, including the ability to enforce agreements with the customers.

There are some political risks associated with conducting business in Hong Kong.

Any adverse economic, social and/or political conditions, material social unrest, strike, riot, civil disturbance or disobedience, as well as significant natural disasters, may affect the market and may adversely affect the business operations of PMA. Hong Kong is a special administrative region of the PRC and the basic policies of the PRC regarding Hong Kong are reflected in the Basic Law, namely, Hong Kong’s constitutional document, which provides Hong Kong with a high degree of autonomy and executive, legislative and independent judicial powers, including that of final adjudication under the principle of “one country, two systems”. However, there is no assurance that there will not be any changes in the economic, political and legal environment in Hong Kong in the future. Any change of such political arrangements may pose an immediate threat to the stability of the economy in Hong Kong, thereby directly and adversely affecting our results of operations and financial positions.

Under the Basic Law of the Hong Kong Special Administrative Region of the People’s Republic of China, Hong Kong is exclusively in charge of its internal affairs and external relations, while the government of the PRC is responsible for its foreign affairs and defense. As a separate customs territory, Hong Kong maintains and develops relations with foreign states and regions. Based on certain recent development including the Law of the People’s Republic of China on Safeguarding National Security in the Hong Kong Special Administrative Region issued by the Standing Committee of the PRC National People’s Congress in June 2020, the U.S. State Department has indicated that the United States no longer considers Hong Kong to have significant autonomy from China and President Trump signed an executive order and Hong Kong Autonomy Act, or HKAA, to remove Hong Kong’s preferential trade status and to authorize the U.S. administration to impose blocking sanctions against individuals and entities who are determined to have materially contributed to the erosion of Hong Kong’s autonomy. The United States may impose the same tariffs and other trade restrictions on exports from Hong Kong that it places on goods from mainland China. These and other recent actions may represent an escalation in political and trade tensions involving the U.S, China and Hong Kong, which could potentially harm our business.

Our revenue is susceptible to the ongoing incidents or factors which affect the stability of the social, economic and political conditions in Hong Kong. Any drastic events may adversely affect our operating subsidiary’s business operations. Such adverse events may include changes in economic conditions and regulatory environment, social and/or political conditions, civil disturbance or disobedience, as well as significant natural disasters. Given the relatively small geographical size of Hong Kong, any of such incidents may have a widespread effect on our operating subsidiary’s business operations, which could in turn adversely and materially affect our business, results of operations and financial condition. It is difficult to predict the full impact of the HKAA on Hong Kong and companies with operations in Hong Kong like us. Furthermore, legislative or administrative actions in respect of China-U.S. relations could cause investor uncertainty for affected issuers, including us, and the market price of our common stock could be adversely affected.

Risks Related to Information Security and Technology

Our marketing programs, e-commerce initiatives and use of customer information are governed by an evolving set of laws and enforcement trends and unfavorable changes in those laws or trends, or our failure to comply with existing or future laws, could substantially harm our business and results of operations.

We collect, process, maintain and use data, including sensitive information on individuals, available to us through online activities and other customer interactions in our business. Our current and future marketing programs may depend on our ability to collect, maintain and use this information, and our ability to do so is subject to evolving and increasingly demanding international, U.S., U.K., European and other laws and enforcement trends. We are subject to laws and regulations such as the European Union’s General Data Privacy Regulation (“GDPR”), the United Kingdom’s General Data Privacy Regulation (“UK-GDPR”) and the California Consumer Privacy Act (“CCPA”). These regulations require companies to satisfy new requirements regarding the handling of personal and sensitive data, including its use, protection, and the ability of persons whose data is stored to correct or delete such data about themselves. Failure to comply with GDPR and UK-GDPR requirements could result in penalties of up to four percent of worldwide revenue. The GDPR, UK-GDPR, CCPA, and other similar laws and regulations, as well as any associated inquiries or investigations or any other government actions, may be costly to comply with, increase our operating costs, require significant management time and attention, and subject us to remedies that may harm our business, including fines, negative publicity, or demands or orders that we modify or cease existing business practices. We strive to comply with all applicable laws and other legal obligations relating to privacy, data protection and customer protection, including those relating to the use of data for marketing purposes. It is possible, however, that these requirements may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another, may conflict with other rules, may conflict with our practices or fail to be observed by our employees or business partners. If so, we may suffer damage to our reputation and be subject to proceedings or actions against us by governmental entities or others. Any such proceeding or action could hurt our reputation, force us to spend significant amounts to defend our practices, distract our management or otherwise have an adverse effect on our business. Certain of our marketing practices rely upon e-mail to communicate with consumers on our behalf. We may face risk if our use of e-mail is found to violate the applicable law. We post our privacy policy and practices concerning the use and disclosure of user data on our websites. Any failure by us to comply with our posted privacy policy or other privacy-related laws and regulations could result in proceedings which could potentially harm our business. In addition, as data privacy and marketing laws change, we may incur additional costs to ensure we remain in compliance. If applicable data privacy and marketing laws become more restrictive at the international, federal or state levels, our compliance costs may increase, our ability to effectively engage customers via personalized marketing may decrease, our investment in our e-commerce platform may not be fully realized, our opportunities for growth may be curtailed by our compliance burden and our potential reputational harm or liability for security breaches may increase.

Disruption of our information technology systems or unexpected network interruption could disrupt our business.

Many of our customers shop with us through our e-commerce website. Increasingly, customers are using tablets and smart phones to shop online with us and with our competitors and to do comparison shopping. We are increasingly using social media and proprietary mobile apps to interact with our customers and as a means to enhance their shopping experience. Any failure on our part to provide attractive, effective, reliable, user-friendly e-commerce platforms that offer a wide assortment of merchandise with rapid delivery options and that continually meet the changing expectations of online shoppers could place us at a competitive disadvantage, result in the loss of e-commerce and other sales, harm our reputation with customers, have a material adverse impact on the growth of our e-commerce business globally and could have a material adverse impact on our business and results of operations.

We are increasingly dependent on information technology systems and third-parties to operate our e-commerce websites, process transactions, process and handle inventory, producing, selling and shipping goods on a timely basis and maintain cost-efficient operations. We rely on a number of third parties to help us effectively manage these systems. The failure of our information technology systems to operate properly or effectively, problems with transitioning to upgraded or replacement systems, or difficulty in integrating new systems, could adversely affect our business. In addition, we have a global e-commerce website, with the ability to localize content internationally. Our information technology systems, website and operations of third parties on whom we rely may encounter damage or disruption or slowdown caused by a failure to successfully upgrade systems, system failures, viruses, computer “hackers”, natural disasters or other causes. These could cause information, including data related to customer orders, to be lost or delayed which could, especially if the disruption or slowdown occurred during the holiday season, result in delays in the delivery of products to our customers or lost sales, which could reduce demand for our products and cause our sales to decline. For example, we implemented a work-from-home policy due to the COVID-19 pandemic for our workforce. This increase in working remotely could increase our cyber security risk, create data accessibility concerns, and make us more susceptible to communication disruptions, any of which could adversely impact our business operations. In addition, if changes in technology cause our information systems to become obsolete, or if our information systems are inadequate to handle our growth, we could lose customers. We have limited back-up systems and redundancies, and our information technology systems and websites have experienced system failures and electrical outages in the past which have disrupted our operations. Any significant disruption in our information technology systems or websites could harm our reputation and credibility and could have a material adverse effect on our business, financial condition and results of operations. 

Data security breaches and other cyber security events could result in disruption to our operations or financial losses and could negatively affect our reputation, credibility and business.

As with other companies, we are subject to risks associated with data security breaches and other cyber security events. We collect, process, maintain and use personal information relating to our customers, employees and job-applicants and rely on third parties for the operation of our e-commerce site and for the various social media tools and websites we use as part of our marketing strategy. Any attempted or actual unauthorized disclosure of personally identifiable information regarding our employees, customers or website visitors could harm our reputation and credibility, reduce our e-commerce sales, impair our ability to attract website visitors, reduce our ability to attract and retain customers and could result in litigation against us or the imposition of significant fines or penalties. Attacks may be targeted at us, our vendors or customers, or others who have entrusted us with information. Our on-line activities, including our e-commerce websites, also may be subject to denial of service or other forms of cyber-attacks. While we have taken measures we believe are reasonable to protect against those types of attacks, those measures may not adequately protect our on-line activities from such attacks. If a denial-of-service attack or other cyber event were to affect our e-commerce sites or other information technology systems, our business could be disrupted, we may lose sales or valuable data, and our reputation may be adversely affected. Additionally, new and evolving data protection legislation such as the GDPR impose new requirements such as shorter notification timeframes that could increase the risks associated with data security breaches. We have procedures and technology in place designed to safeguard our customers’ debit and credit cards and our customers’ and employees’ other personal information, and we continue to devote significant resources to network security, backup and disaster recovery, and other security measures. Nevertheless, these security measures cannot provide absolute security or guarantee that we will be successful in preventing or responding to every such breach or disruption. Recently, data security breaches suffered by well-known companies and institutions have attracted a substantial amount of media attention, prompting new foreign, federal, provincial and state laws and legislative proposals addressing data privacy and security, as well as increased data protection obligations imposed on merchants by credit card issuers. As a result, we may become subject to more extensive requirements to protect the customer information that we process in connection with the purchase of our products, resulting in increased compliance costs. Actual or anticipated attacks may cause us to incur increasing costs including costs to deploy additional personnel and protection technologies, train employees and engage third party experts and consultants. Advances in computer capabilities, new technological discoveries or other developments may result in the technology used by us to protect transaction or other data being breached or compromised. Measures we implement to protect against cyber-attacks may also have the potential to impact our customers’ shopping experience or decrease activity on our websites by making them more difficult to use. Data and security breaches can also occur as a result of non-technical issues including intentional or inadvertent breach by employees or persons with whom we have commercial relationships that result in the unauthorized release of personal or confidential information. Any compromise or breach of our security could result in a violation of applicable privacy and other laws, significant legal and financial exposure and damage to our brand and reputation or other harm to our business.

Risks Related to Environmental, Social and Governance Issues

Climate change, and related legislative and regulatory responses to climate change, may adversely impact our business.

There is increasing concern that a gradual rise in global average temperatures due to increased concentration of carbon dioxide and other greenhouse gases in the atmosphere will cause significant changes in weather patterns around the globe, an increase in the frequency, severity and duration of extreme weather conditions and natural disasters, and water scarcity and poor water quality. A significant portion of our business is highly dependent on cold-weather seasons and patterns to generate consumer demand for our products. Consumer demand for our products may be negatively affected to the extent global weather patterns trend warmer, reducing typical patterns of cold-weather events or increasing weather volatility, which could have an adverse effect on our financial condition, results of operations or cash flows.

These events could also adversely impact the cultivation of cotton, which is a key resource in the production of our products, disrupt the operation of our supply chain and the productivity of our contract manufacturers, increase our production costs, impose capacity restraints and impact the types of apparel products that consumers purchase. These events could also compound adverse economic conditions and impact consumer confidence and discretionary spending. As a result, the effects of climate change could have a long-term adverse impact on our business and results of operations. In many countries, governmental bodies are enacting new or additional legislation and regulations to reduce or mitigate the potential impacts of climate change. If we, our suppliers or our contract manufacturers are required to comply with these laws and regulations, or if we choose to take voluntary steps to reduce or mitigate our impact on climate change, we may experience increases in energy, production, transportation and raw material costs, capital expenditures or insurance premiums and deductibles, which could adversely impact our operations. Inconsistency of legislation and regulations among jurisdictions may also affect the costs of compliance with such laws and regulations. Any assessment of the potential impact of future climate change legislation, regulations or industry standards, as well as any international treaties and accords, is uncertain given the wide scope of potential regulatory change in the countries in which we operate.

Increased scrutiny from investors and others regarding our environmental, social, governance or sustainability responsibilities could result in additional costs or risks and adversely impact our reputation, employee retention and willingness of customers and suppliers to do business with us.

Investor advocacy groups, certain institutional investors, investment funds, other market participants, stockholders and customers have focused increasingly on the environmental, social and governance (“ESG”) or “sustainability” practices of companies. These parties have placed increased importance on the implications of the social cost of their investments. If our ESG practices do not meet investor or other industry stakeholder expectations and standards, which continue to evolve, our brand, reputation and employee retention may be negatively impacted based on an assessment of our ESG practices. Any sustainability report that we publish or other sustainability disclosure we make may include our policies and practices on a variety of social and ethical matters, including corporate governance, environmental compliance, employee health and safety practices, human capital management, product quality, supply chain management and workforce inclusion and diversity. It is possible that stakeholders may not be satisfied with our ESG practices or the speed of their adoption. We could also incur additional costs and require additional resources to monitor, report and comply with various ESG practices. Also, our failure, or perceived failure, to meet the standards included in any sustainability disclosure could negatively impact our reputation, employee retention and the willingness of our customers and suppliers to do business with us.

Risks Related to Global Economic, Political and Regulatory Conditions

An economic recession, depression, downturn or economic or political uncertainty in our key markets may adversely affect consumer discretionary spending and demand for our products.

Many of our products may be considered discretionary items for consumers. Uncertain or challenging global economic and political conditions could impact our performance, including our ability to successfully expand internationally. Some of the factors that may influence consumer spending on discretionary items include general economic conditions (particularly those in North America), high levels of unemployment, health pandemics (such as the impact of the current COVID-19 pandemic, including reduced store traffic and widespread temporary closures of retail locations), higher consumer debt levels, reductions in net worth based on market declines and uncertainty, home foreclosures and reductions in home values, fluctuating interest and foreign currency rates and credit availability, government austerity measures, fluctuating fuel and other energy costs, fluctuating commodity prices, tax rates and general uncertainty regarding the overall future economic environment. To date, COVID-19 and related restrictions and mitigation measures have negatively impacted the global economy and created significant volatility and disruption of financial markets. Political unrest could also negatively impact our customers and employees, reduce consumer spending and adversely impact our business and results of operations. As global economic conditions continue to be volatile or economic uncertainty remains, trends in consumer discretionary spending also remain unpredictable and subject to reductions due to credit constraints and uncertainties about the future. Unfavorable economic conditions may lead consumers to delay or reduce purchases of our products. Consumer demand for our products may not reach our targets, or may decline, when there is an economic downturn or economic uncertainty in our key markets, particularly in North America. China is a target growth market for us, although consumer demand for our products there may also be impacted by unfavorable economic conditions in China. Our sensitivity to economic cycles and any related fluctuation in consumer demand may have a material adverse effect on our financial condition.

We may be unable to source and sell our merchandise profitably or at all if new trade restrictions are imposed or existing restrictions become more burdensome.

The countries in which our products are produced or sold have imposed and may impose additional quotas, duties, tariffs or other restrictions or regulations, or may adversely adjust prevailing quota, duty or tariff levels. The results of any audits or related disputes regarding these restrictions or regulations could have an adverse effect on our consolidated financial statements for the period or periods for which the applicable final determinations are made. Countries impose, modify and remove tariffs and other trade restrictions in response to a diverse array of factors, including global and national economic and political conditions, which make it impossible for us to predict future developments regarding tariffs and other trade restrictions. Trade restrictions, including tariffs, quotas, embargoes, safeguards and customs restrictions, could increase the cost or reduce the supply of products available to us, could increase shipping times or may require us to modify our supply chain organization or other current business practices, any of which could harm our business, financial condition and results of operations.

We are dependent on international trade agreements and regulations. Adverse changes in, or withdrawal from, trade agreements or political relationships between the United States and the PRC, Canada or other countries where we sell or source our products, could negatively impact our results of operations or cash flows. Any tariffs imposed between the United States and the PRC could increase the costs of our products. General geopolitical instability and the responses to it, such as the possibility of sanctions, trade restrictions and changes in tariffs, including recent sanctions against the PRC, tariffs imposed by the United States and the PRC and the possibility of additional tariffs or other trade restrictions between the United States and Mexico, could adversely impact our business. It is possible that further tariffs may be introduced or increased. Such changes could adversely impact our business and could increase the costs of sourcing our products from the PRC or could require us to source more of our products from other countries. 

There could be changes in economic conditions in the United Kingdom or European Union (“EU”), including due to the United Kingdom’s withdrawal from the EU, foreign exchange rates and consumer markets. Our business could be adversely affected by these changes, including by additional duties on the importation of our products into the United Kingdom from the EU and as a result of shipping delays or congestion.

Changes in tax laws or unanticipated tax liabilities could adversely affect our effective income tax rate and profitability.

We are subject to the income tax laws of the United States, the United Kingdom and several other foreign jurisdictions. Our effective income tax rates could be unfavorably impacted by a number of factors, including changes in the mix of earnings amongst countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, changes in tax laws, new tax interpretations and guidance, the outcome of income tax audits in various jurisdictions around the world and any repatriation of unremitted earnings for which we have not previously accrued applicable U.S. income taxes and foreign withholding taxes.

We and our subsidiaries engage in a number of intercompany transactions across multiple tax jurisdictions and the profit allocation and transfer pricing terms and conditions may be scrutinized by local tax authorities during an audit and any resulting changes may impact our mix of earnings in countries with differing statutory tax rates.

Current economic and political conditions make tax rules in any jurisdiction, including the United States and the United Kingdom, subject to significant change. Changes in applicable U.S., U.K. or other foreign tax laws and regulations, or their interpretation and application, including the possibility of retroactive effect, could affect our income tax expense and profitability. 

Our failure to comply with trade and other regulations could lead to investigations or actions by government regulators and negative publicity.

The labeling, distribution, importation, marketing and sale of our products are subject to extensive regulation by various federal agencies, including the Federal Trade Commission, Consumer Product Safety Commission and state attorneys general in the United States, as well as by various other federal, state, local and international regulatory authorities in the countries in which our products are distributed or sold. If we fail to comply with any of these regulations, we could become subject to enforcement actions or the imposition of significant penalties or claims, which could harm our results of operations or our ability to conduct our business. In addition, any audits and inspections by governmental agencies related to these matters could result in significant settlement amounts, damages, fines or other penalties, divert financial and management resources and result in significant legal fees. An unfavorable outcome of any particular proceeding could have an adverse impact on our business, financial condition and results of operations. In addition, the adoption of new regulations or changes in the interpretation of existing regulations may result in significant compliance costs or discontinuation of product sales and could impair the marketing of our products, resulting in significant loss of net revenue.

Our international operations are also subject to compliance with the U.S. Foreign Corrupt Practices Act, or FCPA, and other anti-bribery laws applicable to our operations. In many countries, particularly in those with developing economies, it may be a local custom that businesses operating in such countries engage in business practices that are prohibited by the FCPA or other U.S. and international laws and regulations applicable to us. Although we have implemented procedures designed to ensure compliance with the FCPA and similar laws, some of our employees, agents or other partners, as well as those companies to which we outsource certain of our business operations, could take actions in violation of our policies. Any such violation could have a material and adverse effect on our business.

Because a significant portion of our net revenue and expenses are generated in countries other than the United States, fluctuations in foreign currency exchange rates have affected our results of operations and may continue to do so in the future.

The functional currency of our foreign subsidiaries is generally the applicable local currency. Our consolidated financial statements are presented in U.S. dollars. Therefore, the net revenue, expenses, assets and liabilities of our foreign subsidiaries are translated from their functional currencies into U.S. dollars. Fluctuations in the value of the U.S. dollar affect the reported amounts of net revenue, expenses, assets and liabilities. Foreign exchange differences which arise on translation of our foreign subsidiaries’ balance sheets into U.S. dollars are recorded as a foreign currency translation adjustment in accumulated other comprehensive income or loss within stockholders’ equity. We also have exposure to changes in foreign exchange rates associated with transactions which are undertaken by our subsidiaries in currencies other than their functional currency. Such transactions include intercompany transactions and inventory purchases denominated in currencies other than the functional currency of the purchasing entity. As a result, we have been impacted by changes in exchange rates and may be impacted for the foreseeable future. The potential impact of currency fluctuation increases as our international expansion increases. We are exposed to credit-related losses in the event of nonperformance by the counterparties to forward currency contracts used in our hedging strategies.

Risks Related to Intellectual Property

Our fabrics and manufacturing technology generally are not patented and can be imitated by our competitors. If our competitors sell products similar to ours at lower prices, our net revenue and profitability could suffer.

The intellectual property rights in the technology, fabrics and processes used to manufacture our products generally are owned or controlled by our suppliers and are generally not unique to us. Our ability to obtain intellectual property protection for our products is therefore limited and we do not generally own patents or hold exclusive intellectual property rights in the technology, fabrics or processes underlying our products. As a result, our current and future competitors are able to manufacture and sell products with performance characteristics, fabrics and styling similar to our products. Because many of our competitors have significantly greater financial, distribution, marketing and other resources than we do, they may be able to manufacture and sell products based on our fabrics and manufacturing technology at lower prices than we can. If our competitors sell products similar to ours at lower prices, our net revenue and profitability could suffer.

If we are unable to establish and protect our trademarks and other intellectual property rights, counterfeiters may produce copies of our products and such counterfeit products could damage our brand image.

We currently rely on a combination of copyright, trademark, trade dress and unfair competition laws, as well as confidentiality procedures and licensing arrangements, to establish and protect our intellectual property rights. The steps we take to protect our intellectual property rights may not be adequate to prevent infringement of these rights by others, including imitation of our products and misappropriation of our brand. In addition, intellectual property protection may be unavailable or limited in some foreign countries where laws or law enforcement practices may not protect our intellectual property rights as fully as in the United States, and it may be more difficult for us to successfully challenge the use of our intellectual property rights by other parties in these countries. We expect that there is a high likelihood that counterfeit products or other products infringing on our intellectual property rights will continue to emerge, seeking to benefit from the consumer demand for Perfect Moment products. These counterfeit products do not provide the functionality of our products and we believe they are of substantially lower quality, and if customers are not able to differentiate between our products and counterfeit products, this could damage our brand image. In order to protect our brand, we devote significant resources to the registration and protection of our trademarks and to anti-counterfeiting efforts worldwide. We actively pursue entities involved in the trafficking and sale of counterfeit merchandise through legal action or other appropriate measures. In spite of our efforts, counterfeiting still occurs and, if we are unsuccessful in challenging a third-party’s rights related to trademark, copyright or other intellectual property rights, this could adversely affect our future sales, financial condition and results of operations. We cannot guarantee that the actions we have taken to curb counterfeiting and protect our intellectual property will be adequate to protect the brand and prevent counterfeiting in the future or that we will be able to identify and pursue all counterfeiters who may seek to benefit from our brand.

Our trademarks and other proprietary rights could potentially conflict with the rights of others and we may be prevented from selling some of our products.

Our success depends in large part on our brand image. We believe that our trademarks and other proprietary rights have significant value and are important to identifying and differentiating our products from those of our competitors and creating and sustaining demand for our products. We have applied for and obtained some United States, United Kingdom and foreign trademark registrations, and will continue to evaluate the registration of additional trademarks as appropriate. However, some or all of these pending trademark applications may not be approved by the applicable governmental authorities. Moreover, even if the applications are approved, third parties may seek to oppose or otherwise challenge these registrations. Additionally, we may face obstacles as we expand our product line and the geographic scope of our sales and marketing. Third parties may assert intellectual property claims against us, particularly as we expand our business and the number of products we offer. Our defense of any claim, regardless of its merit, could be expensive and time consuming and could divert management resources. Successful infringement claims against us could result in significant monetary liability or prevent us from selling some of our products. In addition, resolution of claims may require us to redesign our products, license rights from third parties, or cease using those rights altogether. Any of these events could harm our business and cause our results of operations, liquidity and financial condition to suffer.

Risks Related to Legal and Governance Matters

We are subject to periodic claims, litigation, legal proceedings and audits that could result in unexpected expenses and could ultimately be resolved against us.

Our business requires compliance with many laws and regulations, including labor and employment, sales and other taxes, customs and consumer protection laws and ordinances that regulate retailers generally and/or govern the importation, promotion and sale of merchandise, and the operation of stores and warehouse facilities. Failure to comply with these laws and regulations could subject us to lawsuits and other proceedings, and could also lead to damage awards, fines and penalties. The outcome of some of these legal proceedings, audits and other contingencies could require us to take, or refrain from taking, actions that could harm our operations or require us to pay substantial amounts of money, harming our financial condition.

In addition, from time to time, we are involved in litigation and other proceedings, including matters related to product liability claims, stockholder class action and derivative claims, commercial disputes and intellectual property, as well as trade, regulatory, employment and other claims related to our business.

We have in the past and may become involved in legal proceedings or audits, including government and agency investigations, and consumer, employment, tort and other litigation. Any of these proceedings could result in significant settlement amounts, damages, fines or other penalties, divert financial and management resources and result in significant legal fees. An unfavorable outcome of any particular proceeding could exceed the limits of our insurance policies or the carriers may decline to fund such final settlements and/or judgments and could have an adverse impact on our business, financial condition and results of operations. In addition, any proceeding could negatively impact our reputation among our customers and our brand image.

Our business could be negatively affected as a result of actions of activist stockholders or others.

We may be subject to actions or proposals from stockholders or others that may not align with our business strategies or the interests of our other stockholders. Responding to such actions can be costly and time-consuming, disrupt our business and operations and divert the attention of our board of directors, management and employees from the pursuit of our business strategies. Such activities could interfere with our ability to execute our strategic plan. Activist stockholders or others may create perceived uncertainties as to the future direction of our business or strategy which may be exploited by our competitors and may make it more difficult to attract and retain qualified personnel and potential customers, and may affect our relationships with current customers, vendors, investors and other third parties. In addition, a proxy contest for the election of directors at our annual meeting would require us to incur significant legal fees and proxy solicitation expenses and require significant time and attention by management and our board of directors. The perceived uncertainties as to our future direction also could affect the market price and volatility of our securities.

Anti-takeover provisions in our charter documents and under the General Corporation Law of the State of Delaware could make an acquisition of us more difficult and may prevent attempts by our stockholders to replace or remove our management.

Provisions in our amended and restated certificate of incorporation and our bylaws may delay or prevent an acquisition of us or a change in our management. These provisions impact the ability of the board of directors to issue preferred stock without stockholder approval. In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, or the DGCL, which prohibits stockholders owning in excess of 15% of the outstanding combined organization voting stock from merging or combining with the combined organization. Although we believe these provisions collectively will provide for an opportunity to receive higher bids by requiring potential acquirers to negotiate with our board of directors, they would apply even if the offer may be considered beneficial by some stockholders. In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove then-current management by making it more difficult for stockholders to replace members of the board of directors, which is responsible for appointing the members of management.

Anti-takeover provisions in our charter documents could discourage, delay or prevent a change in control of us and may affect the trading price of our common stock.

Our corporate documents and the DGCL contain provisions that may enable our board of directors to resist a change in control of us even if a change in control were to be considered favorable by our stockholders. These provisions:

These provisions could discourage, delay or prevent a transaction involving a change in control. These provisions could also discourage proxy contests and make it more difficult for stockholders to elect directors of their choosing and cause us to take other corporate actions our stockholders desire.

Our amended and restated certificate of incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or agents.

Our amended and restated certificate of incorporation that will be in effect at the closing of this offering provides that, unless we consent in writing to an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for any derivative action or proceeding brought on our behalf, any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, employees or agents to us or our stockholders, any action asserting a claim arising pursuant to any provision of the DGCL, our amended and restated certificate of incorporation or our amended and restated bylaws or any action asserting a claim that is governed by the internal affairs doctrine, in each case subject to the Court of Chancery having personal jurisdiction over the indispensable parties named as defendants therein and the claim not being one 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 does not have subject matter jurisdiction. Our amended and restated certificate of incorporation that will be in effect at the closing of this offering provides that state and federal courts will have concurrent jurisdiction for actions arising under the Securities Act, and the exclusive forum provision will not apply to suits brought to enforce duties and liabilities created by the Exchange Act or any other claims for which the federal courts have exclusive jurisdiction. Any person purchasing or otherwise acquiring any interest in any shares of our common stock shall be deemed to have notice of and to have consented to this provision of our amended and restated certificate of incorporation. This choice of forum provision may limit our stockholders’ ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, employees or agents, which may discourage such lawsuits against us and our directors, officers, employees and agents even though an action, if successful, might benefit our stockholders. Stockholders who do bring a claim in the Court of Chancery could face additional litigation costs in pursuing any such claim, particularly if they do not reside in or near Delaware. The Court of Chancery may also reach different judgments or results than would other courts, including courts where a stockholder considering an action may be located or would otherwise choose to bring the action, and such judgments or results may be more favorable to us than to our stockholders. Alternatively, if a court were to find this provision of our amended and restated certificate of incorporation inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could have a material adverse effect on our business, financial condition or results of operations.

Risks Related to Ownership of Our Common Stock and This Offering

There is presently no trading market for our common stock and no assurance can be given that a trading market will exist in the future,. Accordingly, you may be unable to liquidate your investment.

There is currently no public market for our common stock. We have applied to list our common stock on Nasdaq in connection with this offering. We cannot assure you that our listing application will be approved. We cannot assure you that an active trading market for our common stock will develop on that exchange or elsewhere or, if developed, that any market will be sustained. If an active trading market does not develop or continue, you may have difficulty selling any of our common stock that you purchase. The initial public offering price for the shares was determined by negotiations between us and the underwriters and may not be indicative of prices that will prevail in the open market following this offering. The market price of our common stock may decline below the initial offering price, and you may not be able to sell your shares of our common stock at or above the price you paid in this offering, or at all.

We have granted rights to six holders of our common stock, one of which is an affiliate of an underwriter and joint bookrunner, to be issued additional common stock of the Company if the initial public offering price per share is less than $5.00, as adjusted, which issuance would cause immediate dilution and might affect the price, demand, and liquidity of our common stock. Such rights also create a conflict of interest between an underwriter and joint bookrunner and the Company.

On March 11, 2021, we entered into a consulting agreement with Lucius Partners LLC (“Lucius”). Members and managers and/or officers of Lucius are also principals and/or officers of Laidlaw & Company (UK) Ltd. (“Laidlaw”), an underwriter and joint bookrunner in this offering. Pursuant to the consulting agreement, we have granted to Lucius, and in connection with advisory services provided by our other consultants in connection with the 2021 debt financing we have granted rights to five other holders of our common stock, to be issued additional shares of our common stock if the initial public offering price per share is less than $5.00, as adjusted for any stock split or combination prior to this offering, or if we sell our equity securities before the closing of this offering at the purchase price per share or conversion price per share that is less than $5.00, as adjusted for any stock split or combination prior to this offering, pursuant to which right such holders would be granted              additional shares of common stock in the aggregate, of which              additional shares of common stock would be issued to Lucius, assuming an initial public offering price of $           per share, the mid-point of the price range listed below on the cover page of this prospectus, and assuming no sales of equity securities, stock split or stock combination by the Company before the closing of this offering. See “Certain Relationships and Related Transactions” and “Description of Securities – Share Adjustment Rights.” Such issuance would cause immediate dilution and might affect the price, demand, and liquidity of our common stock.

In addition, such rights granted to Lucius create a conflict of interest between an underwriter and joint bookrunner and the Company with respect to determining the initial offering price for our common stock because such rights create an incentive for Laidlaw, the underwriter affiliated with Lucius, to negotiate a lower offering price than the Company’s valuation and other factors might warrant. Such potential conflicts of interest will be mitigated by the fact that ThinkEquity has been added as joint bookrunner for this offering, and the fact that the Company’s board of directors will make the final determination of the public offering price.

An investment in our common stock is extremely speculative and there can be no assurance of any return on your investment.

An investment in our common stock is extremely speculative and there is no assurance that investors will obtain any return on their investment. Investors will be subject to substantial risks involved in an investment in the company, including the risk of losing their entire investment.

Because the public offering price of our common stock will be substantially higher than the pro forma net tangible book value per share of our outstanding common stock following this offering, new investors will experience immediate and substantial dilution.

The public offering price of our common stock is substantially higher than the pro forma net tangible book value per share of our common stock immediately following this offering based on the total value of our tangible assets less our total liabilities. Therefore, if you purchase our common stock, based on the assumed initial public offering price of $        per share, the midpoint of the price range listed on the cover page of this prospectus, you will experience immediate dilution of $         per share, the difference between the price per share you pay for our common stock and the pro forma net tangible book value per share as of              , 2023, after giving effect to the issuance of our common stock in this offering.

We are an emerging growth company and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.

For as long as we continue to be an emerging growth company, we intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies including, but not limited to, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find our common stock less attractive because we will rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

We will 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 that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter after 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 total 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 non-convertible debt in a three-year period or (iv) five years from the date of this prospectus.

We have not conducted an evaluation of the effectiveness of our internal control over financial reporting and will not be required to do so until the fiscal year ending March 31, 2025. If we are unable to implement and maintain effective internal control over financial reporting investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock may be negatively affected.

As a public company, we will be required to maintain internal control over financial reporting for the year ending March 31, 2025 and to report any material weaknesses in such internal control. Section 404 of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley Act”) requires that we evaluate and determine the effectiveness of our internal control over financial reporting and, beginning with our annual report for the fiscal year ending March 31, 2025, provide a management report on the internal controls over financial reporting, which must be attested to by our independent registered public accounting firm to the extent we decide not to avail ourselves of the exemption provided to an emerging growth company, as defined by the JOBS Act. As we have not conducted an evaluation of the effectiveness of our internal control over financial reporting, we may have undiscovered material weaknesses. If we have a material weakness in our internal control over financial reporting, we may not detect errors on a timely basis and our consolidated financial statements may be materially misstated. We are in the process of designing and implementing the internal control over financial reporting required to comply with this obligation, which process may be time consuming, costly, and complicated. If we identify material weaknesses in our internal control over financial reporting, if we are unable to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner, if we are unable to assert that our internal control over financial reporting are effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, if and when required, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be negatively affected, and we could become subject to investigations by the stock exchange on which our securities are listed, the SEC, or other regulatory authorities, which could require additional financial and management resources.

Because we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital appreciation of our common stock, if any, will be your sole source of gain.

We have never declared or paid cash dividends on our capital stock. We currently intend to retain all of our future earnings, if any, to finance the growth and development of our business. In addition, the terms of any future financing agreements may preclude us from paying dividends. As a result, capital appreciation, if any, of our common stock will be an investor’s sole source of gain for the foreseeable future.

We may require additional capital to support business growth, and this capital might not be available on acceptable terms, if at all.

We estimate that the net proceeds from this offering will be approximately $         (or approximately $         if the underwriters’ option to purchase additional shares is exercised in full), based on an assumed public offering price of $         per share (the midpoint of the range set forth on the cover page of this prospectus), and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. Based upon our current operating plan and assumptions, we expect that the net proceeds from this offering and our existing cash balances and expected cash flows from operations, alongside the continuance of our existing financing arrangements, the automatic conversion of the outstanding balance of the Notes will be sufficient to fund our operations for at least the next 18 months. However, our operating plan may change, and our assumptions may prove to be wrong, as a result of many factors currently unknown to us, and we could use our available capital resources sooner than we expect. We may need to seek additional funds sooner than planned, through public or private equity or debt financings or other third-party funding or a combination of these approaches. Even if we believe we have sufficient funds for our current or future operating plans, we may seek additional capital if market conditions are favorable or based upon specific strategic considerations.

Any additional capital raising efforts may divert our management’s attention from the operation of our business. In addition, we cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable to us, if at all. If we are unable to obtain sufficient amounts of additional capital, when and if we require it, we may be required to reduce the scope of our planned development, which could harm our business, financial condition and results of operations.

If we raise additional capital through further issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock. Any debt financing secured by us in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. If we are unable to obtain adequate financing or financing on terms satisfactory to us, when and if we require it, our ability to continue to support our business growth, and to respond to business challenges could be significantly impaired.

Future sales and issuances of our common stock or rights to purchase common stock, including pursuant to our 2021 Equity Incentive Plan, could result in additional dilution of the percentage ownership of our stockholders.

We expect that significant additional capital will be needed in the future to continue our planned operations. To raise capital, we may sell substantial amounts of common stock or securities convertible into or exchangeable for common stock. These future issuances of common stock or common stock-related securities, together with the exercise of outstanding options and any additional shares issued in connection with acquisitions, if any, may result in material dilution to our investors. Such sales may also result in material dilution to our existing stockholders, and new investors could gain rights, preferences and privileges senior to those of holders of our common stock.

Pursuant to our 2021 Equity Incentive Plan, the plan administrator is authorized to grant equity-based incentive awards to our directors, executive officers and other employees and service providers. As of        , 2023, there were         shares of common stock reserved for issuance in connection with outstanding awards and         shares of common stock were available for future issuance under the plan. Future equity incentive grants and issuances of common stock under awards outstanding under our 2021 Equity Incentive Plan may result in dilution to our stockholders.

We will incur increased costs as a result of being a public company.

Assuming we complete this initial public offering, we will face increased legal, accounting, administrative and other costs and expenses as a public company that we did not incur as a private company. In addition, costs have been incurred in the years ended March 31, 2023 and 2022 in preparation of becoming a public company. The Sarbanes-Oxley Act of 2002, including the requirements of Section 404, as well as new rules and regulations subsequently implemented by the SEC and the Public Company Accounting Oversight Board (the “PCAOB”) impose additional reporting and other obligations on public companies. We expect that compliance with these public company requirements will increase our costs and make some activities more time-consuming. A number of those requirements will require us to carry out activities we have not done previously. For example, we will adopt new internal controls and disclosure controls and procedures. In addition, we will incur additional expense associated with our SEC reporting requirements. Furthermore, if we identify an issue in complying with those requirements (for example, if we or our accountants identify a material weakness or significant deficiency in our internal control over financial reporting), we could incur additional costs rectifying those issues, and the existence of those issues could adversely affect us, our reputation or investor perceptions of us. We also expect that it will be difficult and expensive to obtain director officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and train qualified persons to serve on our board of directors or as executive officers. Advocacy efforts by stockholders and third parties may also prompt even more changes in corporate governance and reporting requirements. We expect that the additional reporting and other obligations imposed on us by these rules and regulations will increase our legal and financial compliance costs and administrative fees significantly. These increased costs will require us to divert a significant amount of money that we could otherwise use to expand our business and achieve our strategic objectives.

We have filed an application to have our common stock listed on Nasdaq. We can provide no assurance that our common stock will be listed, and if listed, that our common stock will continue to meet Nasdaq listing requirements. If we fail to comply with the continuing listing standards of Nasdaq, our common stock could be delisted.

We have applied to list our common stock on Nasdaq under the symbol “PMNT.” We anticipate that our common stock will be eligible to be listed on Nasdaq, subject to actions which may be required to meet the exchange’s listing requirements. However, we can provide no assurance that our application will receive approval, and, if approved, that an active trading market for our common stock will develop and continue. As a result, you may find it more difficult to purchase and dispose of our common stock and to obtain accurate quotations as to the value of our common stock. For our common stock to be listed on Nasdaq, we must meet the current Nasdaq initial and continued listing requirements. If we were unable to meet these requirements, our common stock could be delisted from Nasdaq. Any such delisting of our common stock could have an adverse effect on the market price of, and the efficiency of the trading market for, our common stock, not only in terms of the number of shares that can be bought and sold at a given price, but also through delays in the timing of transactions and less coverage of us by securities analysts, if any. Also, if in the future we were to determine that we need to seek additional equity capital, it could have an adverse effect on our ability to raise capital in the public or private equity markets.

If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they change their recommendations regarding our common stock adversely, the price and trading volume of our common stock could decline.

The trading market for our common stock is influenced by the research and reports that industry or securities analysts publish about us, our business, our market or our competitors. If any of the analysts who cover us or may cover us in the future change their recommendation regarding our common stock adversely, or provide more favorable relative recommendations about our competitors, the price of our common stock 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 to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause the price or trading volume of our common stock to decline.

USE OF PROCEEDS

We estimate that we will receive net proceeds of approximately $         (or approximately $         if the underwriters’ option to purchase additional shares is exercised in full) from the sale of the common stock offered by us in this offering, based on an assumed public offering price of $         per share (the midpoint of the range set forth on the cover page of this prospectus), and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

A $1.00 increase or decrease in the assumed public offering price of $         per share (the midpoint of the range set forth on the cover page of this prospectus), would increase or decrease the net proceeds to us from this offering by $         , assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. An increase or decrease of 100,000 shares of common stock offered by us, as set forth on the cover page of this prospectus, would increase or decrease net proceeds to us from this offering by $         , assuming no change in the assumed public offering price of $         per share (the midpoint of the range set forth on the cover page of this prospectus), and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

The principal purposes of this offering are to increase our capitalization and financial flexibility, increase our visibility in the marketplace and create a public market for our common stock. As of the date of this prospectus, we cannot specify with certainty all of the particular uses for the net proceeds to us from this offering. However, we currently intend to use the net proceeds to us from this offering for general corporate purposes, including working capital, sales and marketing activities and general and administrative matters. We may also use a portion of the net proceeds for the acquisition of, or investment in, technologies, solutions or businesses that complement our business, although we have no present commitments or agreements to enter into any acquisitions or investments.

We will retain broad discretion in the allocation of the net proceeds from this offering and could utilize the proceeds in ways that do not necessarily improve our results of operations or enhance the value of our common stock. Pending these uses, we intend to invest the net proceeds of this offering in a money market or other interest-bearing account.

DIVIDEND POLICY

We have never declared or paid any dividends on our common stock and do not anticipate that we will pay any dividends to holders of our common stock in the foreseeable future. Instead, we currently plan to retain any earnings to finance the growth of our business. Any future determination relating to dividend policy will be made at the discretion of our board of directors and will depend on our financial condition, results of operations and capital requirements as well as other factors deemed relevant by our board of directors.

Subject to any applicable U.S. laws, our amended and restated certificate of incorporation and our bylaws, our board of directors may authorize and declare a dividend to shareholders at such time and of such an amount as they think fit if they are satisfied, on reasonable grounds, that immediately following the dividend the value of our assets will exceed our liabilities and we will be able to pay our debts as they become due. There are no further U.S. or Hong Kong statutory restrictions on the amount of funds which may be distributed by us by dividend.

Cash dividends, if any, on our common stock will be paid in U.S. dollars.

CAPITALIZATION

The following table sets forth our cash and cash equivalents and capitalization, as of June 30, 2023 on:

You should read the following table in conjunction with “Use of Proceeds,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included in this prospectus.

Each $1.00 increase (decrease) in the assumed initial public offering price of $       per share, the midpoint of the estimated price range set forth on the cover page of this prospectus, would increase (decrease) each of our pro forma as adjusted cash and cash equivalents, additional paid-in capital, total shareholders’ (deficit) equity and total capitalization by approximately $        , assuming the number of shares of common stock offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, each increase (decrease) of          shares in the number of shares of common stock offered by us would increase (decrease) each of our pro forma as adjusted cash and cash equivalents, additional paid-in capital, total shareholders’ (deficit) equity and total capitalization by approximately $        , assuming the assumed initial public offering price of $       per share remains the same, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

The actual, pro forma and pro forma as adjusted information set forth in the table excludes:

DILUTION

If you invest in our common stock in this offering, your ownership interest will be diluted immediately to the extent of the difference between the initial public offering price per share of our common stock and the pro forma as adjusted net tangible book value per share of our common stock immediately after this offering.

Our historical net tangible book deficit as of June 30, 2023 was $(6.38) million, or $(1.28) per share of our common stock. Our historical net tangible book deficit is the amount of our total tangible assets less our total liabilities. Historical net tangible book value per share represents historical net tangible book deficit divided by the number of shares of our common stock issued as of June 30, 2023. This data is solely based on the historical amounts as shown in our balance sheet as of June 30, 2023.

Our pro forma net tangible book deficit as of June 30, 2023 was $        , or $         per share of our common stock. Pro forma net tangible book deficit represents the amount of our total assets less our total liabilities, after giving effect to (i) the automatic conversion of all outstanding shares of our Series A convertible preferred stock into an aggregate of 5,323,782 shares of common stock in connection with the closing of this offering, (ii) the automatic conversion of all outstanding shares of our Series B convertible preferred stock into 1,189,998 shares of common stock in connection with the closing of this offering, (iii) the automatic conversion of $10,001,967 in principal amount of plus accrued interest in the amount of $1,860,003 (which accrued interest would be $           assuming conversion on           , 2023) under the Notes into an aggregate of         shares of common stock upon the closing of this offering, at 80% of the initial public offering price, calculated assuming conversion at maturity and an initial public offering price of $           per share, the mid-point of the price range listed below on this cover page of this prospectus, (iv) the issuance of 75,333 shares of common stock in July 2023 for which the Company received advance funds of $0.45 million in June 2023 for common stock subscriptions, (v) the issuance of 179,531 shares of common stock during July 2023 to August 2023 for net proceeds of $0.91 million and (vi) the issuance of             shares of common stock in the aggregate issued pursuant to rights granted to six holders of our common stock, one of which is an affiliate of an underwriter and joint bookrunner, to be issued additional shares of our common stock if the initial public offering price per share is less than $5.00, as adjusted for any stock split or combination prior to this offering, or if we sell our equity securities before the closing of this offering at the purchase price per share or conversion price per share that is less than $5.00, as adjusted for any stock split or combination prior to this offering, assuming an initial public offering price of $           per share, the mid-point of the price range listed below on the cover page of this prospectus, and assuming no sales of equity securities, stock split or stock combination by the Company before the closing of this offering.

After giving further effect to our sale of shares of common stock in this offering at an assumed initial public offering price of $         per share, the midpoint of the price range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma as adjusted net tangible book deficit as of June 30, 2023 would have been approximately $         , or approximately $         per share. This represents an immediate increase in pro forma as adjusted net tangible book value per share of $         to our existing stockholders and an immediate dilution in pro forma as adjusted net tangible book value per share of approximately $         to new investors purchasing common stock in this offering. Dilution per share to new investors purchasing common stock in this offering is determined by subtracting pro forma as adjusted net tangible book value per share after this offering from the assumed initial public offering price per share paid by new investors. The following table illustrates this dilution on a per share basis:

A $1.00 increase (decrease) in the assumed initial public offering price of $         per share would increase (decrease) our pro forma as-adjusted net tangible book value by $         , the pro forma as-adjusted net tangible book value per share after this offering by $         and the dilution per share to new investors by $         , assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, each increase (decrease) of 100,000 shares in the number of shares offered by us would increase (decrease) our pro forma as-adjusted net tangible book value by $         , the pro forma as-adjusted net tangible book value per share after this offering by $         and the dilution per share to new investors by $         , assuming the assumed public offering price remains the same and after deducting the estimated underwriting discounts and commissions and estimated expenses payable by us.

If the underwriters exercise their option to purchase additional shares of common stock in this offering in full at the assumed initial public offering price of $         per share, the midpoint of the price range set forth on the cover of this prospectus and assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us, the pro forma as adjusted net tangible book value per share after this offering would be $         per share, and the dilution in pro forma as adjusted net tangible book value per share to new investors purchasing common stock in this offering would be $         per share.

The following table summarizes, on a pro forma as adjusted basis, as of June 30, 2023, the number of shares of common stock purchased from us on an as converted to common stock basis, the total consideration paid, or to be paid, and the average price per share paid, or to be paid, by existing stockholders and by new investors in this offering at an assumed initial public offering price of $         per share, the midpoint of the price range set forth on the cover page of this prospectus, before deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

The table above assumes no exercise of the underwriters’ option to purchase additional shares in this offering. If the underwriters’ option to purchase additional shares is exercised in full, the number of shares of our common stock held by existing stockholders would be reduced to    % of the total number of shares of our common stock outstanding after this offering, and the number of shares of common stock held by new investors participating in this offering would be increased to     % of the total number of shares outstanding after this offering.

A $1.00 increase (decrease) in the assumed initial public offering price of $      per share, the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) the total consideration paid by new investors by $      and, in the case of an increase, would increase the percentage of total consideration paid by new investors by      percentage points and, in the case of a decrease, would decrease the percentage of total consideration paid by new investors by       percentage points.

The tables above do not include:

To the extent that outstanding warrants are exercised or new options are issued under our 2021 Equity Incentive Plan, you will experience further dilution. In addition, we may choose to raise additional capital due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent that additional capital is raised through the sale of equity or convertible debt securities, the issuance of these securities may result in further dilution to our stockholders.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the related notes and other financial information included elsewhere in this prospectus. Some of the information contained in this discussion and analysis or set forth elsewhere in this prospectus, including information with respect to our plans and strategy for our business, include forward-looking statements that involve risks and uncertainties. You should review “Risk Factors” for a discussion of important factors that could cause our actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Overview

Perfect Moment is a luxury lifestyle brand that combines fashion and technical performance across its ranges of skiwear, outerwear, swimwear and activewear. Our products serve the modern fashion-conscious consumer looking for statement designs tailored for an active and healthy lifestyle. The story of the Perfect Moment brand began in Chamonix in 1984 when the professional skier and extreme sports filmmaker Thierry Donard began making apparel characterized by quality style and performance for his team of free-ride skiers and surfers. In 2012, inspired by Thierry Donard’s vision, Max and Jane Gottschalk relaunched the brand, creating a global fashion brand.

During the quarter ended June 30, 2023, Perfect Moment generated $0.99 million of revenues. This is a 28% increase from the revenues of $0.77 million generated in the quarter ended June 30, 2022. The first quarter of the fiscal year is impacted by the timing of goods production and delivery, with minimal wholesale revenues during the first quarter. During the year ended March 31, 2023, Perfect Moment generated $23.44 million of revenues. This was a 43% increase from the prior year revenues of $16.45 million. The increase in revenue is attributable to the growth in brand awareness across our main geographical markets (United States, United Kingdom and Europe) resulting in stronger sales with our wholesale accounts; through our collaboration with Hugo Boss; and strong performance within e-commerce. Overall, across all revenue channels, Perfect Moment distributes to over 60 countries. We design our products in-house and work with a variety of suppliers to manufacture materials and finished goods. Our collections are worn by an evolving list of celebrities and influencers whose perfect moments are captured across a range of social media platforms. During the quarter ended June 30, 2023, our total followers across all social media platforms increased 25% relative to the quarter ended June 30, 2022. During the year ended March 31, 2023, our total followers across all social media platforms increased 23% relative to the year ended March 30, 2022.

From the quarter ended June 30, 2022 to the quarter ended June 30, 2023:

From the year ended March 31, 2022 to the year ended March 31, 2023:

Adjusted EBITDA is a measure that is not defined in US GAAP. For further information about how we calculate Adjusted EBITDA, the limitations of its use and a reconciliations to the most comparable US GAAP measure, see “Key Financial Measures” below.

Our model

Our business model is centered around creating a desirable brand and selling luxury products. The financial focus is growing revenues and expanding margins as we gain market share from a valuable customer segment through multi-channel commerce.

Key pillars of our model:

Segment Reporting

The Company applies ASC Topic 280, Segment Reporting, in determining reportable segments for its financial statement disclosure. The Chief Operating Decision Maker has been identified as the Chief Executive Officer.  The Company reports segments based on the financial information it uses in assessing performance and deciding how to allocate resources. Management has determined that the Company operates in one business segment, product sales. Key financial measures including but not limited to gross profit, Adjusted EBITDA and net loss are not reported at a disaggregated level for wholesale and ecommerce and resource allocation decisions to the business strategy are not made based solely on our key financial measures.  

Geographic Concentration

Although we are organized fundamentally as one business segment, our revenue is primarily split between three geographic areas: the United States, Europe and the United Kingdom. Customers in these regions are served by our leadership and operations teams in the United Kingdom and our production team in Hong Kong. 

In the quarters ended June 30, 2023 and 2022, total net revenues attributable to the United States totaled $0.31 million and $0.28 million, respectively; total net revenues attributable to Europe, excluding the United Kingdom, totaled $0.18 million and $0.19 million, respectively; and total net revenues attributable to the United Kingdom totaled $0.41 million and $0.20 million, respectively. The remaining net revenue of $0.09 million and $0.10 million, respectively, is attributable to revenues from Canada and countries in the Middle East, Asia Pacific and South America.

In the years ended March 31, 2023 and 2022, total net revenues attributable to the United States totaled $10.77 million and $6.98 million, respectively; total net revenues attributable to Europe, excluding the United Kingdom, totaled $7.29 million and $4.67 million, respectively; and total net revenues attributable to the United Kingdom totaled $3.85 million and $2.87 million, respectively. The remaining net revenue of $1.53 million and $1.93 million, respectively, is attributable to revenues from Canada and countries in the Middle East, Asia Pacific and South America.

The long-lived assets of the Company primarily relate to property and equipment, intangible assets and operating lease right-of-use assets in the United Kingdom and Hong Kong. Total long-lived assets as of June 30, 2023 were $0.04 million and $0.94 million in Hong Kong and the United Kingdom, respectively. As of June 30, 2022, total long-lived assets were $0.10 million in Hong Kong and $1.15 million in the United Kingdom. Total long-lived assets as of March 31, 2023 were $0.00 million and $1.09 million in Hong Kong and the UK, respectively. As of March 31, 2022, total long-lived assets were $0.11 million in Hong Kong and $1.20 million in the United Kingdom.

Supplier Concentration

In the quarter ended June 30, 2023, there were no purchases of manufactured goods. In the quarter ended June 30, 2022, the largest single supplier of manufactured goods, Claire Fashion Limited, produced 92% of the Company’s products. In the quarters ended June 30, 2023 and 2022, the largest fabric supplier, Toray International Inc., supplied 79% and 40%, respectively, of the fabric used to manufacture the Company’s products.

In the years ended March 31, 2023 and 2022, the largest single supplier of manufactured goods, Everich Garments Group Ltd., produced 72% and 45%, respectively, of the Company’s products. In the years ended March 31, 2023 and 2022, the largest fabric supplier, Toray International Inc., supplied 70% and 68%, respectively, of the fabric used to manufacture the Company’s products.

Key Financial Measures

We use the following US GAAP and non-US GAAP financial measures to assess the progress of our business, make decisions on where to allocate time and investment and assess then near-term and longer term performance of our business:

Revenue, gross profit, loss from operations and net loss

Revenue, gross profit, loss from operations and net loss are defined as per US GAAP. Revenue is equivalent to net revenue, Net revenue is defined as per US GAAP requirements. It is the sum of revenues earned from sales of skiwear, outerwear, swimwear, surfwear and activewear through our ecommerce and wholesale channels, as well as shipping revenue and delivery duties paid when applicable, net of promotional discounts and returns. Gross Profit is earned from revenue less the cost of goods sold. Gross profit as a percentage is the gross profit divided by net revenue. Loss from operations is the sum of gross profit, selling, general and administrative expenses and marketing and advertising expenses. Net loss is the sum of the loss from operations, interest expense, foreign currency transaction gains (losses) and income tax benefit (expense). Further information on these measures can be found below in “Components of Results of Operations”. These measures are used by management to evaluate our performance, including the growth and demand for our products and the appropriateness of our product pricing and cost of operations.

Wholesale revenue and ecommerce revenue

Wholesale revenue represents the amount of revenue attributable to wholesale business customers including high-end department stores or luxury online retailers. Ecommerce revenue represents the revenue attributable to sales of product direct to consumer through perfectmoment.com and sales through online marketplace providers and ecommerce partnerships. Wholesale and ecommerce revenues are separately monitored to evaluate the performance of our ecommerce channel relative to our wholesale channel.

EBITDA

EBITDA is one of our primary non-US GAAP financial measures. EBITDA is calculated as net loss excluding interest expense, income tax benefit (expense), depreciation and amortization.

Adjusted EBITDA

Adjusted EBITDA is one of our primary non-US GAAP financial measures. Adjusted EBITDA is calculated as EBITDA excluding stock-based compensation expense. Adjusted EBITDA is an important measure that provides visibility to the underlying continuing operating performance of the company by excluding the impact of certain expenses that management does not believe are representative of our core earnings.

Operating expenses

Operating expenses is defined as per US GAAP and is the sum of selling, general and administrative expenses and marketing and advertising expenses.

Adjusted operating expenses

Adjusted operating expenses is a non-US GAAP measure and we define it as operating expenses excluding stock-based compensation expense.

Adjusted EBITDA may not be comparable to similarly titled measures used by other companies and should not be considered in isolation, or as a substitute for analysis of our operating results as reported under US GAAP. Additionally, we do not consider our non-US GAAP financial measures as superior to, or a substitute for, the equivalent measures calculated and presented in accordance with US GAAP. While EBITDA and Adjusted EBITDA are measures we use to track our core earnings, it is not a complete representation of the performance of the business. EBITDA and Adjusted EBITDA are not liquidity measures and should not be considered as discretionary cash available to us to reinvest in the growth of our business or to distribute to stockholders or as a measure of cash that will be available to us to meet our obligations.

The following table presents a reconciliation of Adjusted EBITDA from net loss for the quarters ended June 30, 2023 and 2022, and the years ended March 31, 2023 and 2022:

The following table presents a reconciliation of adjusted operating expenses from operating expenses for the quarters ended June 30, 2023 and 2022, and the years ended March 31, 2023 and 2022:

Key Factors Affecting our Performance

Our results and financial condition have been, and will continue to be, affected by a number of factors that present significant opportunities for us but also pose risks and challenges, including those discussed below and in the section of this prospectus titled “Risk Factors”.

Economic trends

The overall economic environment and related changes in consumer behavior impact our business. Though it is generally more muted in customer cohorts buying premium products versus a broader demographic, positive conditions in the broader economy promote spending on discretionary items including performance luxury outerwear and travel. Weaker economic conditions in the markets in which we sell our products, however, may have a negative impact on customer spending and global travel. This could result in a reduction in direct-to-consumer sales through perfectmoment.com alongside a reduction in demand from wholesale customers. Wholesale performance and customer creditworthiness may also be impacted, reducing wholesale revenue and increasing the risk of bad debts. Changes in more general macroeconomic factors may also impact the broader operations including the costs of goods sold and the selling, general and administrative costs of the business including the cost of personnel. These factors include but are not limited to, employment rates, the availability of credit, interest rates and inflation. Incrementally, Perfect Moment is exposed to foreign exchange risk as a consequence of a mismatch between the currencies that revenue is generated in and the underlying currency of the Company’s cost of goods, overheads and financing costs. Material movements in foreign exchange markets may therefore impact the performance of the business.

International trade and legislation

Our net revenue is primarily generated through sales in the United States, Europe and the United Kingdom. Our products are manufactured and shipped from Asia to multiple locations globally and our operations span across the United Kingdom and Hong Kong. Our financial performance and competitiveness is subject to changes in international trade rules insofar as they restrict or change the costs and procedures to be followed in the operation of our overseas operations and the import and export of our goods to existing or new markets. Such changes, as recently experienced through the United Kingdom’s recent exit from the European Union, could impact our costs of goods and impact our operations, resulting in increased overheads for the business, the possibility of reduced pricing competitiveness and an overall reduction in our financial performance.

Brand

We will continue to invest in brand marketing activities to expand brand awareness. As we build our customer base, we will launch additional brand marketing campaigns, host events and develop in-house product content to attract new customers to our platform. If we fail to cost-effectively promote our brand or convert impressions into new customers, our net sales growth and profitability may be adversely affected.

E-commerce customer acquisition, orders and order size

Our ecommerce channel generated 97% and 91% of our total net revenue in the quarters ended June 30, 2023 and 2022, respectively, and 36% and 49% of our total net revenue in the years ended March 31, 2023 and 2022, respectively. The percentage of our total net revenue that was generated through perfectmoment.com was 82% and 90% for the quarters ended June 30, 2023 and 2022, respectively, and 30% and 38% for the years ended March 31, 2023 and 2022, respectively. A large proportion of our financial performance depends on the expenses we incur to attract and retain consumers as well as maintaining the number and size of their orders. To continue to grow our business profitably, we need to acquire and retain customers in an efficient manner. Incrementally we need to maintain and grow the combination of total orders and average order value. Alongside the monitoring of traffic, conversion rate and average order value we monitor customer acquisition costs to monitor the effectiveness of our marketing spend.

Wholesale partners

Our wholesale channel generated 3% and 9% of our total net revenue in the quarters ended June 30, 2023 and 2022, respectively. Our wholesale revenue is weighted earlier in the second and third fiscal quarters, when the majority of our orders are shipped to wholesale partners. Our wholesale channel generated 64% and 51% of our total net revenue in the years ended March 31, 2023 and 2022, respectively. Our wholesale partners service customers by stocking and displaying our products and explaining our product attributes. They are often high-end department stores or luxury online retailers with access to our target customer profile across global footprints and therefore form a key component of net revenue and merchandising and marketing strategy. If we fail to maintain and develop our wholesale partnerships, our brand reach may be adversely impacted in addition to our net revenue and profitability. As of March 31, 2023, 57% of our wholesale revenue were concentrated across our top 10 customers. Whilst this offers an opportunity to optimize the overhead costs of servicing our wholesale clients, it also makes our financial performance highly dependent on the creditworthiness of our largest wholesale clients. To help mitigate this risk, we have the ability to utilize debt factoring across several of our largest counterparties in addition to the close monitoring of receivables to minimize aged debt and the risk of provisions and write-offs.

Growth of operating platform investment

We have expanded our operations over recent years and plan to continue our expansion efforts. Our success expanding our net revenue and operating platform will be dependent upon our ability to anticipate and adapt to new consumer trends, continue to successfully develop new products, successfully navigate new geographical markets and to grow and enter existing and new revenue channels. We will incur expenses and capital expenditure to ensure our operating platform develops in-line with our planned growth. We will invest capital in inventory, fulfilment and logistics capabilities, finance and operating systems, the development of our ecommerce platform and incremental personnel to support growth. If we fail to correctly launch or navigate expansion efforts, our financial performance will be placed at risk. Wherever feasible, we retain flexibility in our investment activity and apply a risk adjusted approach to testing new markets to minimize the capital investment placed at risk in the execution of our growth strategies.

Supply chain management

The majority of our products are currently manufactured in China using raw materials sourced primarily from Japan and China. In order to maintain close proximity to our key suppliers our production team is located in Hong Kong. Our logistics team is split between the United Kingdom and Hong Kong in order to ensure close proximity to our fulfilment centers in Hong Kong and the United Kingdom. Any disruptions to supplier relationships or the jurisdictions they operate in, or any delay, shortage or interruption to the supply of raw materials or finished goods may impact our ability to fulfil wholesale orders and meet perfectmoment.com revenue targets. A lengthening of delivery timelines can also place pressure on our working capital cycle by causing delays to revenue. Close monitoring of raw materials availability and the production and logistics timetable is maintained at the inception of product design through to the point of shipment to Perfect Moment and our customers in order to anticipate and mitigate potential delays. As the business expands, the scale of our production will provide opportunities to optimize our inventory, production management and sourcing from other countries. To the extent that we are unable maintain our existing processes or capture opportunities to improve it, the growth of our business and its financial performance could be limited.

Inventory management

Our production team works closely with our ecommerce and sales teams, leveraging customer data and feedback from wholesale and online customers, to help predict demand for our products. Our process assesses the breadth and depth of collection designed and ordered to optimize our production schedules for timely delivery and maximized sell through. If our process to determine our inventory needs fails, there is a risk of reduced sell through and increased inventory provisions. We manage the balance of our collection between popular carry over and new styles to actively manage the risk of stock obsolescence and the missed revenue opportunities associated with inaccuracies in demand projections.

Capital, funding and liquidity

Our primary uses of cash include personnel, marketing, inventory, logistics and shipping costs, and capital investment in technology to support our operations and our growth. Financing of our inventory and receivables is significantly impacted by the seasonality of our fall/winter collection and the production timeline of our products. We currently utilize trade finance, debt factoring and revenue-based financing to support our working capital needs. Until positive cash flows from operations can be achieved, we intend to rely on new debt and equity financing to support the working capital and investment required to grow the business. An inability to maintain existing financing arrangements, generate new debt and equity finance and/or an inability to renew or raise funding without significant increases in financing costs, will impact our ability to maintain and grow revenue and may place us at risk of being able meet our liabilities and obligations as they fall due.

Seasonality 

We experience seasonal fluctuations in our net revenue and operating results and we historically have realized a significant portion of our net revenue and earnings in the quarters ending December 31 and March 31. In the years ended March 31, 2023 and 2022, we generated 89% and 87% of our total net revenue, respectively, in the fall/winter period. Working capital requirements typically increase throughout the first, second and early third quarters as overheads are incurred and inventory levels grow to support our peak shipping and selling periods in the third and fourth fall/winter quarters. Cash provided by operating activities is typically highest in the quarter ending March 31 following the inflows associated with our peak selling season. Our budgeting and planning process is used to establish projected performance and the resultant cash flows and funding needs. Historic performance across the ecommerce channel combined with early insight into wholesale revenue through the seasonal sell-in process, provides data that can be used to help estimate the impact of seasonality on our business. If we do not accurately estimate the seasonality of revenue it may place our performance and cash flow at risk.

Components of Results of Operations

Revenue

Consists of revenue earned from sales of skiwear, outerwear, swimwear, surfwear and activewear through our ecommerce and wholesale channels, as well as shipping revenue, where applicable, net of promotional discounts and returns. Revenue is generally recognized upon transfer of ownership to the customer. For ecommerce customers, this is upon delivery to the customer and for wholesale customers it is either upon delivery by Perfect Moment or at the point that inventory is collected by the customer from the distribution center. Changes in net revenue from wholesale customers are typically driven by increased unit sales and new wholesale customers. Changes in net revenue from ecommerce is driven by changes in perfectmoment.com revenue resulting from a mix of change in customer numbers, orders shipped and average order values.

Cost of goods sold

Includes the cost of purchased merchandise, which includes acquisition and production costs including raw material and labor as applicable; the cost incurred to deliver inventory to the Company’s third-party distribution centers including freight, non-refundable taxes, duty, and other landing costs; the management fees of the Company’s third-party distribution centers; and inventory provision expense. Cost of goods sold is impacted when underlying costs to manufacture and bring goods to market changes. Cost of goods also fluctuates in line with changes in revenue and inventory provisions.

Selling, general and administrative expenses

Selling, general and administrative expenses consist of all operating expenses not otherwise included in cost of goods sold and marketing and advertising expenses. The Company’s selling, general and administrative expenses include the personnel costs, stock-based compensation expense for consultants and employees, legal and professional fees, information technology expense, accounting, depreciation and amortization expenses and corporate facility and occupancy costs. Through time these expenses are expected to decrease as a percentage of net revenue as we benefit from economies of scale.

Marketing and advertising expenses

Marketing and advertising expenses includes digital marketing, photoshoots, public relations and branding costs including stock-based compensation expense for marketing services. Marketing and advertising expense is expected to increase as we continue to invest in brand marketing activities to expand brand awareness. As we build our customer base, we will launch additional brand marketing campaigns, host events and develop in-house product content to attract new customers to our platform.

Interest expense

Interest expense relates to the costs incurred in relation to our convertible debt obligation including both accrued interest charges and the amortization of debt issuance costs, trade finance costs for letters of credit, debt factoring facilities provided in relation to wholesale receivables and interest expense on shareholder loans.

Foreign currency transactions gains (losses)

Foreign currency transactions gains (losses) represents realized gains and losses incurred in relation to transactions denominated in a currency other than the functional currency of Perfect Moment Ltd and its subsidiaries. Foreign currency transactions gains and losses will move in line with the changes to the currencies in which we earn revenue and incur expenses as well as changes in foreign currency exchange rates.

Results of Operations

The following table sets forth our results of operations for the periods presented. The period-to-period comparison of financial results is not necessarily indicative of future results.

The following table sets forth each line item within the Statements of Operations as a percentage of net sales for each of the periods presented.

Revenue

Revenue for the quarter ended June 30, 2023 increased by 28%, an increase of $0.22 million, to $0.99 million from $0.77 million for the quarter ended June 30, 2022. Ecommerce revenue increased by 36%, an increase of $0.26 million, in 2023 driven by an increase in our ecommerce partner revenues and revenue generated through our direct-to-consumer channel, perfectmoment.com. Wholesale revenue decreased by 54%, a decrease of $0.04 million, largely driven by timing of out-of-season wholesale orders and returns.

Revenue for the year ended March 31, 2023 increased by 43%, an increase of $6.99 million, to $23.44 million from $16.45 million for the year ended March 31, 2022. Wholesale revenue increased by 76%, an increase of $6.43 million, largely driven by an increase in our fall/winter wholesale revenue which saw an increase of 45% in 2023. Ecommerce revenue increased by 7%, an increase of $0.57 million, in 2023 driven by a 13% increase in revenue generated through our direct-to-consumer channel, perfectmoment.com.

Cost of goods sold

Cost of goods sold for the quarter ended June 30, 2023 increased by $0.2 million, an increase of 29%, compared to the quarter ended June 30, 2022. The change in cost of goods sold was relative to revenue resulting in a consistent gross margin of 11% for both the quarter ended June 30, 2023 and the quarter ended June 30, 2022.

Cost of goods sold for the year ended March 31, 2023 increased by $3.87 million, an increase of 34%, compared to the year ended March 31, 2022. Overall, the change in cost of goods sold relative to revenue resulted in a favorable change in gross profit to 34% for the year ended March 31, 2023 compared to 30% for the year ended March 31, 2022. The improvement in margin was primarily due to increases in selling prices.

Selling, general and administrative expenses

Selling, general and administrative expenses consist of personnel related expenses, stock compensation expense, legal and professional fees, depreciation and amortization and other selling, general and administrative expenses, including IT, property related expenses, travel and product sample costs. Selling, general and administrative expenses for the quarter ended June 30, 2023 decreased by $3.22 million, a decrease of 61%, compared to the quarter ended June 30, 2022. Selling, general and administrative expenses for the year ended March 31, 2023 increased by $0.80 million, an increase of 7%, compared to the year ended March 31, 2022.

Quarter ended June 30, 2023 compared to the quarter ended June 30, 2022

Personnel costs increased by $0.13 million, from $0.98 million for the quarter ended June 30, 2022 to $1.11 million for the quarter ended June 30, 2023, primarily as a result of an increase in headcount.

Stock-based compensation expense decreased by $3.87 million, from $3.88 million for the quarter ended June 30, 2022 to $0.01 million for the quarter ended June 30, 2023. The decrease in stock-based compensation expense is mainly attributable to the shares issued to consultants for advisory and consulting services related to the 2021 share exchange and bridge loan financing, as well as a reduction in stock-based compensation expenses for employees due to leavers.

Legal and professional fees decreased by $0.03 million, from $0.07 million for the quarter ended June 30, 2022 to $0.04 million for the quarter ended June 30, 2023. The overall decrease in legal and professional fees is attributable to general lower professional fees.

Depreciation and amortization increased by $0.01 million, from $0.13 million for the quarter ended June 30, 2022 to $0.14 million during the quarter ended June 30, 2023, driven mainly by the depreciation expense associated with the increase of software and website development capital expenditure.

Other selling, general and administrative expenses increased by $0.54 million, from $0.26 million for the quarter ended June 30, 2022 to $0.80 million during the quarter ended June 30, 2023. The overall increase in costs in 2023 is attributed to higher property related costs, greater website maintenance and support costs, an increase in doubtful debt provisions and auditor’s fees related to the IPO.

Year ended March 31, 2023 compared to the year ended March 31, 2022

Personnel costs increased by $0.50 million, from $3.84 million for the year ended March 31, 2022 compared to $4.34 million for the year ended March 31, 2023, primarily as a result of severance payments during the year.

Stock-based compensation expense increased by $0.85 million, from $3.18 million for the year ended March 31, 2022 to $4.04 million for the year ended March 31, 2023. The increase in stock-based compensation expense is attributable to the shares issued to consultants for advisory and consulting services related to the 2021 share exchange and bridge loan financing, offset by a reduction in stock-based compensation expenses for employees due to leavers.

Legal and professional fees decreased by $0.61 million, from $1.05 million for the year ended March 31, 2022 to $0.44 million for the year ended March 31, 2023. The overall decrease in legal and professional fees is primarily attributable to lower professional fees associated with the preparation for the IPO and conversion to US GAAP.

Depreciation and amortization increased by $0.17 million, from $0.37 million for the year ended March 31, 2022 to $0.55 million during the year ended March 31, 2023, driven mainly by the depreciation expense associated with the increase of software and website development capital expenditure.

Other selling, general and administrative expenses decreased by $0.12 million, from $2.43 million for the year ended March 31, 2022 to $2.31 million during the year ended March 31, 2023. The overall reduction in costs in 2023 includes efficiencies achieved on product samples and lower auditor’s fees, offset to a lesser extent, by higher property related costs and website maintenance costs.

Marketing and advertising expense

Marketing and advertising costs decreased by $0.19 million, from $0.90 million for the quarter ended June 30, 2022 to $0.71 million for the quarter ended June 30, 2023. The overall decrease is attributable to a decrease in stock-based compensation costs for marketing services.

Marketing and advertising costs increased by $0.76 million, from $4.25 million for the year ended March 31, 2022 to $5.01 million for the year ended March 31, 2023. The overall increase is largely attributable to an increase in public relations and brand marketing costs.

Foreign currency transactions gains (losses)

Foreign currency transactions gains (losses) increased favorably by $1.26 million; a loss of $0.85 million in the quarter ended June 30, 2022 to a gain of $0.41 million during the quarter ended June 30, 2023, mainly driven by fluctuations in the US dollar to the UK pound sterling exchange rate.

Foreign currency transactions gains (losses) increased favorably by $0.64 million; a loss of $0.60 million in the year ended March 31, 2022 to a gain of $0.04 million during the year ended March 31, 2023, mainly driven by fluctuations in the US dollar to the UK pound sterling exchange rate.

Seasonality and Quarterly Trends

Our business is seasonal with revenue concentrated in northern hemisphere countries. Revenue is elevated in the quarters ending December 31 and March 31 owing to sales of ski and outerwear through the fall and winter months. In the quarters ending June 30 and September 30 sales are driven by swimwear and activewear. Our growth rate fluctuates quarter-on-quarter as a result of the seasonality of our business. We expect this fluctuation to continue. In addition to seasonality, quarter-on-quarter results are expected to be impacted owing to the timing of goods production and delivery, promotional activities and the addition of new products and geographies as the business grows. The business is also subject to the impact of economic cycles that influence retail apparel trends.

Liquidity and Capital Resources

As of June 30, 2023, we had cash and cash equivalents of $1.15 million, restricted cash of $4.06 million and an accumulated deficit of $42.93 million. Historically, Perfect Moment has generated negative cash flows from operations and has primarily financed its operations through private sales of equity securities, debt and working capital finance.

Overall, cash and cash equivalents and restricted cash, in aggregate, increased by $0.50 million, from $4.71 million as of March 31, 2023 to $5.21 million as of June 30, 2023. The increase includes net proceeds of $1.27 million for shares of common stock.

The Company has a trade finance facility extended on goods for which letters of credit are issued to the Company’s suppliers by HSBC. As of June 30, 2023 and March 31, 2023, the outstanding balance under the trade finance facility was zero and $0.03 million, respectively, and the Company had an available trade finance facility of $5.00 million. As of June 30, 2023, there were five pledged letters of credit by HSBC amounting to $4.87 million, however, the trade finance facility does not become the Company’s responsibility until the Company receives the manufactured clothing goods from suppliers. Once drawn, the company has 120 days credit on the loan before repayment is due. For drawings in Hong Kong dollars, the interest rate equals HIBOR plus 3%, and for drawings in U.S. dollars, the interest rate equals SOFR plus 3.3%. The trade finance facility was secured by a standby documentary credit for $1.00 million from UBS Switzerland AG and a personal guarantee to the value of $4.00 million from the Chairman of our board of directors, Max Gottschalk. The UBS documentary credit expired on April 30, 2023 and the facility from that date, was subsequently secured by a charge over cash deposits equal to the amount of the facility used at any given moment in time in addition to the aforementioned personal guarantee. On June 26, 2023, the UBS standby documentary credit was reinstated for $1.00 million, secured by a personal guarantee from J. Gottschalk & Associates (“JGA”). The JGA personal guarantee attracts interest of 8% per annum, payable by the Company. The interest charged for the three months ended June 30, 2023 was negligible.

During May 2023 to June 2023, the Company issued and sold 154,186 shares of common stock to accredited investors in an equity financing at a purchase price of $6.00 per share for an aggregate consideration of $0.82 million, net of broker fees and expenses of approximately $0.11 million. In addition, during June 2023, the Company received advance funds of $0.45 million for subscriptions of 75,333 shares of common stock issued in July 2023. During July 2023 to August 2023, the Company issued and sold 179,531 shares of common stock to accredited investors as part of the same equity financing at a purchase price of $6.00 per share for an aggregate consideration of $0.91 million, net of broker fees and expenses of approximately $0.17 million.

The Company has issued an aggregate of 1,189,998 shares of its Series B convertible preferred stock, par value $0.0001 per share (the “Series B preferred stock”), between September 2022 and November 2022, at a purchase price of $5.00 per share, for net proceeds of $5.20 million, net of broker fees of $0.75 million. The Series B preferred stock is subject to mandatory conversion into common stock upon either an initial public offering or by vote or written consent of at least 66 2/3% holders of the outstanding shares of the Series B preferred stock without payment of additional consideration. The conversion rate will be determined by dividing the original issue price by the conversion price in effect at the time of conversion. The initial conversion price is set at $5.00 per share.

On March 15, 2021, the Company entered into a securities purchase agreement with accredited investors pursuant to which it issued 8% Secured Convertible Promissory Notes (also referred to herein as the “2021 Notes”) with an aggregate principal amount of $6.0 million (such financing, the “2021 Debt Financing”). During April to July 2022, further 8% Secured Convertible Promissory Notes (also referred to herein as the “2022 Notes” and, together with the 2021 Notes, the “Notes”), that rank pari passu to the original convertible debt financing, were issued to accredited investors with an aggregate principal amount of $4.00 million (such financing, the “2022 Debt Financing”). The maturity date for the Notes issued in the 2021 Debt Financing and the 2022 Debt Financing is December 15, 2023. The outstanding balance of the Notes will convert automatically upon the closing of a firm commitment underwritten public offering of our common stock with aggregate gross proceeds of at least $8.0 million and simultaneous listing on a national stock exchange (such transaction, a “Qualified IPO”), at a conversion price equal to 80% of the offering price to the public in such Qualified IPO.

We expect operating losses and negative cash flows from operations to continue into the foreseeable future as we continue to invest in growing our business and expanding our infrastructure. Our primary uses of cash include personnel and marketing expenditures, inventory, capital investment and expenditures in technology and incremental expenses arising from distribution center operating costs to support our operations and our growth.

As of June 30, 2023, our cash and cash equivalents and restricted cash are mainly held in US dollar, UK pound sterling, Hong Kong dollar, and euro cash accounts with high credit quality financial institutions. As a result of the seasonality of our business, we typically draw down on our trade finance facilities during summer, fall and early winter to meet a large proportion of the cost of goods associated with the manufacture of our fall/winter collection. Trade finance and debt factoring facilities support our working capital cycle through to the late fall/winter season when wholesale receivables are paid and ecommerce revenues increase.

In connection with our 2021 Debt Financing and 2022 Debt Financing, we have covenants that limit the amount of indebtedness we may incur and the assets we may pledge. As of June 30, 2023, we were in compliance with such covenants.

Our ability to make principal and interest payments on our outstanding debt obligations and fund inventory and capital expenditures will depend on our ability to generate cash in the future. Our future ability to generate cash from operations is, to a certain extent, subject to general economic, financial, competitive, regulatory and other conditions. Based on our current level of operations, we believe our existing cash balances and expected cash flows from operations, alongside the continuance of our existing financing arrangements, the automatic conversion of the outstanding balance of the Notes and the anticipated net proceeds of our initial public offering will be sufficient to meet our operating requirements for at least the next 18 months. We may seek additional or alternative debt and equity financing to that set out above. If we raise equity financing, our shareholders may experience significant dilution of their ownership interests. If we conduct additional debt financing, the terms of such debt financing may be similar or more restrictive that the terms of our current financing arrangements and we would have additional debt service obligations. In the event that additional financing 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 additional capital when desired, our business, financial condition and results of operations could be harmed. See the sections titled “Risk Factors – Risks Related to Ownership of Our Common Stock and This Offering – Future sales and issuances of our common stock or rights to purchase common stock, including pursuant to our 2021 Equity Incentive Plan, could result in additional dilution of the percentage ownership of our stockholders” and “Risk Factors - Risks Related to Our Business, Our Brand, Our Products and Our Industry – We have a history of losses, expect to continue to incur losses in the near term and may not achieve or sustain profitability in the future, and as a result, our management has identified and our auditors reported that there is a substantial doubt about our ability to continue as a going concern.”

The report of our independent registered public accounting firm that accompanies our audited consolidated financial statements contains for the fiscal years ended March 31, 2023 and March 31, 2022 a going concern explanatory paragraph in which such firm expressed that there is substantial doubt about our ability to continue as a going concern. Our consolidated financial statements contained in this prospectus do not 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 concern, holders of our securities might lose their entire investment. As discussed above, although we plan to attempt to raise additional capital through one or more private placements or public offerings, the doubts raised relating to our ability to continue as a going concern may make our shares an unattractive investment for potential investors. These factors, among others, may make it difficult to raise any additional capital and may cause us to be unable to continue to operate our business.

The following table shows summary consolidated cash flow information for the periods presented:

During the quarter ended June 30, 2023, operating activities used $0.80 million in cash and cash equivalents, primarily resulting from a net loss of $2.67 million, an adjustment to add back non-cash charges of $0.41 million and a net cash inflow from changes in operating assets and liabilities of $1.47 million. Net cash used by changes in operating assets and liabilities during the quarter ended June 30, 2023 consisted primarily of an inflow of cash from a $2.26 million increase in unearned revenue, a $0.53 million increase in prepaid and other current assets and a decrease in accounts receivable of $0.35 million, offset by a cash outflow as a result of a $0.30 million decrease in trade payables and a $0.22 million decrease in accrued expenses. The increase in unearned revenue is primarily due to an advance payment of $1.91 million from a wholesale customer and the remaining movements are due to general timing of working capital receipts and payments.

During the quarter ended June 30, 2022, operating activities used $2.35 million in cash and cash equivalents, primarily resulting from a net loss of $7.38 million, an adjustment to add back non-cash charges of $5.48 million and a net cash outflow from changes in operating assets and liabilities of $0.45 million. Net cash used by changes in operating assets and liabilities during the quarter ended June 30, 2022 consisted primarily of an inflow of cash as a result of a $0.54 million decrease in accounts receivables and a decrease of $0.21 million in prepaid and other current assets, offset by an outflow of cash as a result of a $0.67 million decrease in accrued expenses and a $0.25 million decrease in trade payables. The movements being general timing of working capital receipts and payments.

During the year ended March 31, 2023, operating activities used $3.51 million in cash and cash equivalents, primarily resulting from a net loss of $10.31 million, an adjustment to add back non-cash charges of $8.74 million and a net cash outflow from changes in operating assets and liabilities of $1.94 million. Net cash used by changes in operating assets and liabilities during the year ended March 31, 2023 consisted primarily of a $0.81 million increase in inventories, a $0.17 million increase in operating leases, a $0.52 million increase in trade receivables, a $0.52 million decrease in unearned revenue and a $0.76 million decrease in accounts payables, offset by a $0.32 million decrease in prepaid and other current assets, and $0.52 million increase in accrued expenses. The increase in inventories resulted from a larger holding of inventory at year end. The increase in operating leases resulted from new leases during the year. The increase in trade receivables is due to the higher revenues in the year and an increase in aged receivables. The decrease in unearned revenue is due to a significant advance customer receipt as of March 31, 2022 compared to March 31, 2023. The decrease in trade payables is mainly due to lower payables for the UK distribution center and lower IT spend close to the year end. The decrease in prepaid and other receivables and increase in accrued expenses are due to the general timing of payments and invoices.

During the year ended March 31, 2022, operating activities used $3.56 million in cash and cash equivalents, primarily resulting from a net loss of $12.17 million, an adjustment to add back non-cash charges of $6.80 million and a net cash inflow from changes in operating assets and liabilities of $1.81 million. Net cash used by changes in operating assets and liabilities during the year ended March 31, 2022 consisted primarily of a $0.53 million increase in prepaid and other current assets, a $0.50 million increase in accounts receivables, a $0.09 million increase in operating leases, offset by a $1.41 million increase in trade payables, a $0.50 million decrease in inventories, a $0.68 million increase in unearned revenue, and a $0.34 million increase in accrued expenses. The increase in prepaid and other receivables is largely due to an increase in trade deposits and a receivable from an insurance claim for stolen inventory. The increase in trade receivables is due to general timing of invoicing and receipts with one customer accounting for $0.34 million of the increase. The small increase in operating leases is due to lease renewals in the year. The increase in trade payables is mainly due to higher payables for the UK distribution center and IT close to year end. The decrease in inventories is due to lower levels of inventory held at year end. The increase in unearned revenue is due to greater trade deposits received close to year end. The increase in accrued expenses is largely due to the general timing of invoices.  

Investing activities

Cash used in investing activities was $0.03 million in the quarter ended June 30, 2023 and $0.11 million in the quarter ended June 30, 2022, a decrease of $0.08 million, primarily due to a reduction is software and website development capital expenditure.

Cash used in investing activities was $0.25 million in the year ended March 31, 2023 and $0.92 million in the year ended March 31, 2022, an increase of $0.67 million, primarily due to the development of our ecommerce site, perfectmoment.com.

Financing Activities

Net cash obtained from financing activities during the quarter ended June 30, 2023 was $1.24 million mainly attributed to $0.82 million net proceeds from the issuance of common shares and $0.45 million funds received for subscriptions of shares of common stock issued in July 2023. Net cash obtained from financing activities during the quarter ended June 30, 2022 was $2.17 million primarily resulting from $2.24 million net proceeds from debt financing transactions and $0.21 million proceeds from other borrowings, both of which were used to fund inventory purchases, offset by $2.80 million repayment of trade finance facilities.

Net cash obtained from financing activities during the year ended March 31, 2023 was $6.93 million resulting from $2.56 million net proceeds from debt financing transactions and $5.20 million net proceeds from the issuance of Series B preferred stock, offset by $0.24 million from bank loans relating to the repayment of trade finance facilities, $0.02 million repayment of other borrowings and $0.57 million repayment of shareholder loans. Net cash obtained from financing activities during the year ended March 31, 2022 was $0.23 million resulting from $0.31 million net increase in bank loans related to trade finance facilities used to fund inventory purchases, offset by shareholder loan repayments of $0.08 million.

Off-Balance Sheet Arrangements

We did not have during the periods presented, and we do not currently have, any off-balance sheet financing arrangements or any relationships with unconsolidated entities or financial partnerships, including entities sometimes referred to as structured finance or special purpose entities, that were established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Critical Accounting Policies and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with US GAAP. The preparation of those consolidated financial statements requires our management to make judgments and estimates that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported revenue generated, and expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgements about the carrying value of asset and liabilities that are not readily apparent from other sources. Significant estimates inherent in the preparation of the consolidated financial statements include reserves for uncollectible accounts receivables; realizability of inventory; customer returns; useful lives and impairments of long-lived tangible and intangible assets; accounting for income taxes and related uncertain tax positions; and the valuation of stock-based compensation awards. Actual results may differ from these judgements and estimates under different assumptions or conditions and any such differences may be material.

We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgements and estimates.

Revenue recognition

The majority of the Company’s revenue is recognized at a point in time based on the transfer of control. In addition, the majority of the Company’s contracts do not contain variable consideration and contract modifications are minimal. The majority of the Company’s revenue arrangements generally consists of a single performance obligation to transfer promised goods. Revenue is reported net of markdowns, discounts and sales taxes collected from customers on behalf of taxing authorities. Revenue is also presented net of an allowance for expected returns where contracts include the right of return.

We estimate returns on an ongoing basis to estimate the consideration from the customer that we expect to ultimately receive. Consideration in determining our estimates for returns may include agreements with customers, the Company’s return policy and historical and current trends. We record the returns as a reduction to net sales in our consolidated statements of operations and the recognition of a provision for returns within accrued expenses in our consolidated balance sheets and the estimated value of inventory expected to be returned as an adjustment to inventories, net.

Revenue is comprised of direct-to-consumer ecommerce revenue through the Company’s website and revenue related to wholesalers.

Revenue is recognized when performance obligations are satisfied through the transfer of control of promised goods to the Company's customers. Control transfers once a customer has the ability to direct the use of, and obtain substantially all of the benefits from, the product. This includes the transfer of legal title, physical possession, the risks and rewards of ownership, and customer acceptance. For direct-to-consumer ecommerce revenue, the Company receives payment before the customer receives the promised goods. Revenue is only recognized once the goods have been delivered to the customer. Sales to wholesale customers are recognized when the customer has control which will depend on the agreed upon International Commercial Terms (“inco-terms”). For inventories sold on consignment to wholesalers, the Company records revenue when the inventory is sold to the third-party customer by the wholesaler. The Company may issue merchant credits, which are essentially refund credits. The merchant credits are initially deferred and subsequently recognized as revenue when tendered for payment.

The Company's business is significantly affected by the pattern of seasonality common to most retail apparel businesses. Historically, the Company has recognized a significant portion of its revenue in the fourth fiscal quarter of each year as a result of increased net revenue during the ski season.

Accounts receivable

Accounts receivable primarily arise out of sales to wholesale accounts and ecommerce partners. The allowance for doubtful accounts represents management's best estimate of probable credit losses in accounts receivable using the incurred loss methodology. Receivables are written off against the allowance when management believes that it is probable the amount receivable will not be recovered. Additionally, the Company records higher allowances in the first and third quarters following its peak sales seasons after the Company determines it to be probable that it will not collect the related receivables.

Inventories

Inventories, consisting of finished goods, inventories in transit, and raw materials, are initially recognized at cost and subsequently measured at the lower of cost or net realizable value. Cost is determined on a first-in, first-out basis and is comprised of all costs of purchases, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.

The Company periodically reviews its inventories and makes a provision as necessary to appropriately value goods that are obsolete, have quality issues, or are damaged. The amount of the provision is equal to the difference between the cost of the inventory and its net realizable value based upon assumptions about product quality, damages, future demand, selling prices, and market conditions. If changes in market conditions result in reductions in the estimated net realizable value of its inventory below its previous estimate, the Company would increase its provision in the period in which it made such a determination.

In addition, the Company provides for inventory shrinkage based on historical trends from actual physical inventory counts. Inventory shrinkage estimates are made to reduce the inventory value for lost or stolen items. The Company performs a physical inventory at least count once a year and adjusts the shrinkage reserve accordingly.

Stock-based compensation

The Company is authorized to grant options, warrants, and share units to officers and key employees of the Company and its subsidiaries and to non-employees. The equity plans are intended to help the Company attract and retain directors, officers, other key executives and employees and is also intended to provide incentives and rewards relating to the Company’s business plans to encourage such persons to devote themselves to the business of the Company. The Company has historically granted share awards to non-employees in exchange for the provision of services.

The Company accounts for such awards based on ASC 505 and 718, whereby the value of the award is measured on the date of grant and recognized as compensation expense on a straight-line basis over the vesting period. The Company measures fair value as of the grant date for options and warrants using the Black Scholes option pricing model and for common share awards using a weighted average of the Black Scholes method and probability-weighted expected return method (PWERM).

The inputs into the Black Scholes option pricing model are subjective and generally require significant judgment. The fair value of the shares of common and preferred stock has historically been determined by the Company’s management with the assistance of third party specialists as there was no public market for the common stock. The fair value is obtained by considering a number of objective and subjective factors, including the valuation of comparable companies, sales of preferred stock to unrelated third parties, projected operating and financial performance, the lack of liquidity of common and preferred stock and general and industry specific economic outlook, amongst other factors. The expected term represents the period that the Company’s stock options are expected to be outstanding and is determined using the simplified method (based on the mid-point between the vesting date and the end of the contractual term) as the Company’s stock option exercise history does not provide a reasonable basis upon which to estimate expected term. Because the Company is privately held and does not have an active trading market for its common and preferred stock for a sufficient period of time, the expected volatility was estimated based on the average volatility for comparable publicly traded companies, over a period equal to the expected term of the stock option grants. The risk-free rate assumption is based on the U.S. Treasury zero coupon issues in effect at the time of grant for periods corresponding with the expected term of the option. The Company has never paid dividends on its common stock and does not anticipate paying dividends on common stock in the foreseeable future. Therefore, the Company uses an expected dividend yield of zero. 

Recent Accounting Pronouncements

For recent accounting pronouncements, see Note 2 of our unaudited condensed consolidated financial statements included in this prospectus.

Quantitative and Qualitative Disclosures about Market Risk

We are exposed to market risks in the ordinary course of our business. These risk primarily include:

Interest rate risk

The fair value of our cash equivalents, held primarily in cash deposits, have not been significantly impacted by increases or decreases in interest rates to date, due to the short term nature of these instruments. The interest expense associated with our letter of credit trade finance facility and debt factoring facilities are composed of a fixed spread over HIBOR or SOFR. The fee associated with revenue financing is fixed and the interest rate on our convertible bridge loan is accrued at a fixed rate also. We are exposed to interest rate risk where the interest expense associated with our financing arrangements is depending upon HIBOR or SOFR, a floating reference rate, or in the event that the fixed interest rate associated with our financing arrangements is increased upon roll-over of the financing arrangement at its contractual maturity. Fluctuations in interest rates have not been significant to date. We do not expect that interest rates will have a material impact on our results of operations, owing to the size and short term nature of the floating rate financing arrangements and the fixed rate nature of the convertible bridge loan that is expect to convert to equity before its contractual maturity on December 15, 2023.

Inflation risk

We are beginning to observe increases in our costs of goods sold, in particular, transportation costs. If these cost increases are sustained and we become subject to significant inflationary pressures, we may not be able to fully offset such higher costs. Our inability to do so could harm our business, results of operations or financial condition.

Foreign exchange risk

To date, revenue has primarily been generated in US dollar, UK pound sterling and euro. As a result, our revenue may be subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in UK pound sterling and euros relative to the US dollar. Our foreign exchange risk is less pronounced for our cost of sales as to our cost of goods sold being predominantly US dollar denominated. Our selling, general and administrative expenses are primarily made up of US dollar, Hong Kong dollar, UK pound sterling and euro amounts. Although a portion of our non-US dollar costs offset non-US dollar revenue, a currency mismatch arises as to the amount and timing of our different currency cash flows. To date, we have not hedged our foreign currency exposure. We will continue to monitor the impact of foreign exchange risk and review whether to implement a hedging strategy to minimize this risk in future accounting periods. Hedging strategies where implemented are unlikely to completely mitigate this risk. To the extent that foreign exchange risk is not hedged it may result in harm to our business, results of operations and financial condition. 

OUR BUSINESS

Our Mission

Our mission is to become the number one luxury ski brand in the world. We exist to inspire shared perfect moments. We aim to deliver this by creating statement pieces to ski, surf, swim and move in for perfect moments and the people who make them.

Overview

Perfect Moment is a luxury lifestyle brand that combines fashion and technical performance for its ranges of skiwear, outerwear, swimwear and activewear. We create apparel and products that feature what we believe is an unmatched combination of fashion, form, function and fun for women, men and children.

The idea for the Perfect Moment brand was born in Chamonix, France in 1984, when the professional skier and extreme sports filmmaker, Thierry Donard, began making apparel for his team of free-ride skiers and surfers. Donard used his experience to create designs that were characterized by quality, style and performance to enable his athletes to achieve their perfect ski-run or perfect wave-ride: that “perfect moment.” His designs – combining high performance materials with daring prints and colors – were inspired by his team of free-ride skiers and surfers.

In May 2012, Mr. Donard assigned the Perfect Moment trademark to TMS, a then newly incorporated Swiss company, 50% of which was owned by Mr. Donard and 50% of which was owned by Fermain, an entity controlled by Max Gottschalk, who is the Chairman of our board of directors, and Jane Gottschalk, who is our Chief Creative Officer and a member of our board of directors. PMA was also incorporated in May 2012 and PMA entered into a licensing agreement with TMS for the Perfect Moment trademark. The Perfect Moment brand was then relaunched by Max and Jane Gottschalk. PMUK was later incorporated in July 2017 as a wholly owned subsidiary of PMA, for the primary purpose of online sales of finished goods. Between December 2017 and November 2018, PMA acquired 100% of the equity of TMS from Mr. Donard and Fermain. In March 2021, we effected a reorganization, in which all of the equity of PMA was exchanged for newly issued shares of Perfect Moment Ltd. common stock and Series A convertible preferred stock, which preferred stock will be converted to common stock in connection with the closing of this offering. The production team still sits in Hong Kong, while the management team and our board of directors and the sales, marketing, operations and finance teams are located in London. In July 2021, PMA assigned the Perfect Moment trademark to PMUK.

Today, the brand continues to draw on its rich heritage of performance garments and statement designs. Retro-inspired vivid and bold color palates complement technical fabrics to deliver fashion, form, function and fun for women, men and children. Initially known for its on-and-off the slopes skiwear, in 2016 PMA developed a summer range inspired by the island of Ibiza to bring its unique style to swimwear and activewear. We believe our bold fashion and technical proposition resonates with the modern fashion-conscious consumer that sees value in authentic European heritage and statement-design tailored for an active and healthy lifestyle at a compelling quality-to-value price point.

Perfect Moment’s growth plan is predicated on (i) continuing to develop its winter and summer product ranges at improved gross margins, including extensions into more all-year-round lifestyle ranges, (ii) drive more direct sales through its marketing strategies and (iii) test strategic pop-up and physical retail.

The Company has experienced significant growth over recent years with an increase in revenue from $9.74 million in the fiscal year ended March 31, 2021 to $16.45 million in the fiscal year ended March 31, 2022, representing an increase of 69%. For the fiscal year ended March 31, 2023, the Company had revenues of $23.44 million, representing a year-on-year increase of 43%. Gross margin increased year on year from 30% for the fiscal year ended March 31, 2022 to 34% for the fiscal year ended March 31, 2023. For the fiscal quarter ended June 30, 2023, the Company had revenues of $0.99 million compared to revenues of $0.77 million for the fiscal quarter ended June 30, 2022, representing an increase of 28%. Gross margin remained consistent at 11% for both the fiscal quarter ended June 30, 2023 and the fiscal quarter ended June 30, 2022.

However, the Company has incurred recurring losses, including a net loss of $2.67 million and $7.38 million for the fiscal quarters ended June 30, 2023 and June 30, 2022, respectively, and $10.31 million and $12.17 million for the fiscal years ended March 31, 2023 and March 31, 2022, respectively. The Company has incurred operating losses of $2.71 million and $6.14 million in the fiscal quarters ended June 30, 2023 and June 30, 2022, respectively, and $8.63 million and $10.18 million in the fiscal years ended March 31, 2023 and March 31, 2022, respectively. The decrease in operating losses of $3.43 million in the fiscal quarter ended June 30, 2023 is largely attributed to a decrease of stock-based compensation costs of $4.06 million. The decrease in operating losses of $1.55 million in the fiscal year ended March 31, 2023 compared to the fiscal year ended March 31, 2022, is largely attributed to an increase in gross margins. Operating losses includes stock-based compensation costs of $0.20 million and $4.26 million in the fiscal quarters ended June 30, 2023 and June 30, 2022, respectively, and $5.52 million and $4.48 million in the fiscal years ended March 31, 2023 and March 31, 2022, respectively. Operating cashflows saw a net outflow of $0.80 million and $2.35 million during the fiscal quarters ended June 30, 2023 and June 30, 2022, respectively, and $3.51 million and $3.56 million during the fiscal years ended March 31, 2023 and March 31, 2022 respectively. The Company had an accumulated deficit of $42.93 million as at June 30, 2023. These factors raise, and our auditor has expressed, substantial doubt about the Company’s ability to continue as a going concern. 

Corporate and Other Information

Perfect Moment Ltd. was incorporated in the State of Delaware on January 11, 2021. The Company acquired PMA on March 15, 2021 through the 2021 share exchange. PMA was formed and commenced business operations on May 10, 2012. Perfect Moment Ltd. is a holding company and carries out all its operations through its subsidiaries. PMA is a wholly owned subsidiary of the Company, and PMUK and TMS are wholly owned subsidiaries of PMA. PMA is a wholesale business, while PMUK sells to both wholesale and e-commerce customers. Both PMA and PMUK are global businesses and collectively sell to customers across 60 countries. TMS, up until June 30, 2021, held the intellectual property rights, including the trademark, for the Perfect Moment brand, for which it received licensing fees from PMA. On July 1, 2021, TMS assigned such intellectual property rights to PMUK and from that date, TMS has had no operations or income, except for the payment of fees related to accounting and office management. The production team still sits in Hong Kong but the majority of the employees, including the marketing and finance teams, and all senior management and our board of directors are located in the United Kingdom.

In the fiscal quarter ended June 30, 2023, all of our revenue was generated by PMUK’s operations. In the fiscal quarter ended June 30, 2022, PMA’s operations generated 14% of our revenue while PMUK’s operations generated 86% of our revenue. In the fiscal year ended March 31, 2023, PMA’s operations generated 60% of our revenue while PMUK’s operations generated 40% of our revenue. In the fiscal year ended March 31, 2022, PMA’s operations generated 43% of our revenue while PMUK’s operations generated 57% of our revenue. We have direct ownership of our Hong Kong operating entity and currently do not have or intend to have any contractual arrangement to establish a variable interest entity (VIE) structure with any entity in mainland China. While the majority of our products are made in China, using raw materials sourced mainly from the Asia Pacific region, we purchase our finished product from our manufacturers on a purchase order basis and do not have any long-term agreements requiring us to use any supplier or manufacturer. The Company does not have any operations in mainland China. Hong Kong is a special administrative region of the PRC and the basic policies of the PRC regarding Hong Kong are reflected in the Basic Law of the Hong Kong Special Administrative Region of the People’s Republic of China, or the Basic Law, which provides Hong Kong with a high degree of autonomy and executive, legislative and independent judicial powers, including that of final adjudication under the principle of “one country, two systems”. Accordingly, the PRC laws and regulations do not currently have any material impact on our business, financial condition and results of operations. However, in the event that we or our Hong Kong subsidiary were to become subject to PRC laws and regulations that would have a material impact on our business, financial condition or results of operations, we may incur material costs to ensure compliance, and our Hong Kong subsidiary may be subject to fines and/or no longer be permitted to continue business operations as presently conducted. In such event, we expect to be able to relocate the business currently conducted by PMA to a location outside of Hong Kong or China. See “Risk Factors — Risks Related to Our Corporate Structure — Recently, the PRC government initiated a series of regulatory actions and statements to regulate business operations in certain areas in mainland China with little or no advance notice. In the future, we may be subject to PRC laws and regulations related to the current business operations of our operating subsidiary and any changes in such laws and regulations and interpretations may impair its ability to operate profitably, which could result in a material negative impact on its operations and/or the value of the securities we are registering for sale.” on page 23.

The current organization structure of the Company is as follows:

Our principal executive office and mailing address is 307 Canalot Studios, 222 Kensal Rd, London W10 5BN, United Kingdom. Our main telephone number is +44 (0)204 558 8849. Our corporate website address is www.perfectmoment.com. The information contained on, or that can be accessed through, our website is not a part of this prospectus and should not be relied upon with respect to this offering.

Our Industry

We operate at the intersection of luxury fashion and multi-channel commerce. The global luxury industry is large and characterized by specific market dynamics and consumer trends that are shaping the future of the industry, including the following:

Large, Stable and Resilient Addressable Markets

Perfect Moment has an attractive luxury ski apparel market in which it believes is well-positioned and has a large growth runway. According to MarketWatch, the global luxury ski apparel market was valued at $1.6 billion in 2022 and is expected to expand at a Compound Annual Growth Rate (“CAGR”) of 6.49% reaching $2.3 billion by 2028. The luxury ski apparel market has a relatively narrow target demographic and we believe that this demographic is characterized by relatively high affluence and either proximity to a ski area or a location with a traditional interest in skiing as a recreational activity. We believe that due to the relatively high affluence and international nature of the demographic, there has been, and continues to be, significant space for premium and luxury products that deliver both fashion and technical performance.

Perfect Moment has started to make inroads into the adjacent, significantly larger, luxury outerwear market, which we believe is set to continue growing, yet remains somewhat fragmented and localized. The luxury outerwear market, compared to the luxury ski apparel market, is a larger and faster growing market. According to MarketWatch, the luxury outerwear market was valued at $15.9 billion in 2022 and is expected to expand at a CAGR of 6.51% reaching $23.3 billion by 2028. Again, we believe the demographic for this market has relatively high affluence but has a broader geographical spread as it is not linked to the activity of skiing. In the luxury outerwear market, we believe an increasingly large number of consumers are turning to heritage brands with technical credentials for luxury outerwear products that not only serve a technical function but also make a fashion statement.

In addition, Perfect Moment is also targeting the broader leisure markets for swimwear, activewear and lifestyle products. Both the luxury ski apparel market and luxury outerwear market share some key consumer demographics and purchasing behavior with the broader leisure markets.  We believe these markets stretch beyond skiing and winter sports to a range of healthy and athletic pursuits, with products increasingly being worn as part of a broader day-to-day lifestyle statement. We also believe the growth of this market goes hand-in-hand with broader cultural shifts, such as a greater emphasis on health, exercise and well-being, as well as a relaxation in dress codes at work and social occasions. Based on the characteristics of these respective markets, we believe Perfect Moment has the right brand profile, geographic footprint, target demographic, marketing tools and operational expansion plan to gain significant share.

Luxury Channel Shift to Online

According to Bain & Company (“Bain”), online is set to become the leading channel for luxury purchases by 2030. The online share of the global personal luxury goods market in 2017 was 9%, significantly lower than other retail markets, according to Bain, which has been driven by luxury brands’ cautious approach to adopting technology and social platforms; however, online sales accounted for 22% of the luxury goods market in 2021 and online sales are expected to become a larger percentage of the total luxury market, reaching 32% to 34% by 2030.

Transition to Digital

We believe the digital shopping behavior of consumers is evolving at a rapid pace and the shift to digital is affecting how the luxury industry and consumers interact. E-commerce sales have climbed steadily for years, according to Statista, with continuous further growth expected. Statista estimates a growth in global e-commerce market revenue from approximately $2.4 billion in 2017 to approximately $8.1 billion in 2026, and with the COVID-19 pandemic, e-commerce use among consumers has advanced even faster than expected. Since the start of the COVID-19 pandemic in March 2020, according to Statista, there have been a significant number of first-time online shoppers around the world.

On the marketing side, we believe that inspiration and trends have shifted from editorial content on the printed pages of monthly fashion magazines to the real-time social media channels of the world’s leading fashion bloggers, influencers and celebrities.

Generational Demographic Shift

As new generations of global luxury consumers account for a larger share of spending, we believe they are fundamentally changing the way luxury products are purchased. According to Bain, Generation Y and Generation Z accounted for all of the market’s growth in 2022. The spending of Generation Z and the younger Generation Alpha is set to grow three times faster than that of other generations though 2030, making up a third of the market. Generation Y, Generation Z and Generation Alpha are forecast by Bain to become the biggest buyers of luxury by 2030, representing 80% of global purchases.

Emerging Markets and Future Growth

We believe the demand for luxury fashion is truly global. According to Bain, consumers of luxury fashion have traditionally been from Europe and the Americas, but, by 2030, mainland China is forecast to overcome the Americas and Europe to become the biggest global luxury market. Growth of the global luxury goods market is expected to be significantly driven by demand from China and from emerging markets, including India and emerging Southeast Asian and African countries, based on forecasts between 2022 and 2030. Chinese consumers are forecast by Bain to regain their pre-COVID-19 status as the dominant nationality for luxury, growing to represent circa 40% of global purchases by 2030. 

Our Strengths

Our Business Strategy

Perfect Moment sits at the intersection of three large and growing markets (luxury ski apparel, premium outerwear and athleisure and lifestyle). Based on the characteristics of these respective markets, we believe we have the right brand profile, geographic footprint, target demographic, marketing tools and operational expansion plan to gain significant market share. We believe we are also well-positioned to drive sustainable growth and profitability by executing on the following strategies:

Grow Brand Awareness and Attract New Customers

Building brand awareness among potential new customers and strengthening our connections with those who already know us will be a key driver of our growth. While we believe our brand has achieved substantial traction globally and those who have experienced our products demonstrate strong loyalty, our presence is relatively nascent in many of our markets. We believe we have a significant opportunity to grow brand awareness and attract new customers to Perfect Moment through word of mouth, brand marketing and performance marketing.

In the past, Perfect Moment’s strong skiing heritage has been used to engage with a core ski audience for whom we believe the combination of technical performance and retro inspired designs resonate strongly. We believe the nature of skiing as a largely affluent, international pursuit means there is a large opportunity in aspirational, lifestyle-led social media engagement. We believe Perfect Moment has captured this social media opportunity to great effect, combining the style and form of the brand with celebrities, influencers, top-tier editorial, collaborations and luxury locations to create a distinct, fun and engaging aspirational lifestyle narrative. Beyond social media, we believe Perfect Moment has been able to deploy this same core brand proposition and narrative to direct digital marketing and traditional media, elevating brand profile and driving high levels of engagement simultaneously. Perfect Moment has also been able to build an effective online marketing engine driving large volumes of direct, organic search and paid search traffic to our e-commerce website, www.perfectmoment.com.

Perfect Moment expects to continue its approach to social media, building its follower base through a similar and evolving mix of celebrities, influencers, editorials and locations. It also expects to continue to pursue and scale the effective search engine optimization and paid search strategies which have contributed to online sales growth, as well as direct marketing and customer engagement via their successful newsletter. Perfect Moment is developing plans to leverage a new Perfect Moment owned physical store network to deepen its brand identity and profile, as well as drive higher levels of loyalty and engagement at the local level.

Brand marketing and performance marketing also work together to drive millions of visits to our digital platforms. Brand marketing includes differentiated content, our network of ambassadors, and social media, all of which result in what we believe is outsized engagement with our community. Our performance marketing efforts are designed to drive customers from awareness to consideration to conversion. These efforts include retargeting, paid search and product listing advertisements, paid social media advertisements, search engine optimization and personalized email. We believe our highly productive, diversified strategy generates a significant return on brand equity, driving sales and building a growing customer database.

We approach this strategy as a funnel, with brand awareness at the top and customer conversion at the bottom, allocating resources across the top, middle and bottom, and measuring returns on these respective investments.

Accelerate Digital Growth

Having used the wholesale channel to establish our brand globally, we believe we will become less reliant on wholesale partners during the next 5 years by committing more resources to our direct-to-consumer strategy and accelerating our digital growth. We believe technology and partnerships are the key underpinning factors in any e-commerce business and as such we will continue to enhance customer experience, focusing on mobile as the dominant growth channel and leveraging the emerging benefits of social and conversational commerce.

Pursue International Expansion and Enter New Markets

We believe there is an opportunity to increase penetration across our existing markets and selectively enter new regions. Although the Perfect Moment brand is recognized globally, our past investments have been focused on North America, the United Kingdom and the EU and have driven revenue growth in the United States during the past fiscal year.

While we expect the majority of our near-term growth to continue to come from the United States, the United Kingdom and the EU, we believe there is a tremendous opportunity over the long term throughout the rest of the world. In the fiscal year ended March 31, 2023, we increased our outreach in what we believe are the most promising countries in continental Europe. As part of the plan to enter new markets, we will start with China, as we seek to enhance our ability to serve our international customers and further establish Perfect Moment as a global brand.

We believe there is a significant opportunity beyond our existing markets, with China representing the next market opening for Perfect Moment. China is projected to become the largest winter sports market, with people participating expected to reach 50 million by 2025 with 1,000 ski resorts to be open by 2030, according to reports by Daxue Consulting and Capital Mind. We plan to enter the Chinese market directly in 2024 on Tmall, using local partners to operate, with a digital approach to selling. We are forecasting running losses with respect to such activities for two years, then become profitable from the third year of such activities, with China representing less than 10% of our revenue by 2027. We believe the most significant hurdle to overcome with respect to our plan to enter the Chinese market is liquidity to fund the initial operating losses.

In order to offer a more localized experience to customers internationally, we intend to offer market-specific languages, currency and content, as well as strategic international shipping and distribution hubs. We plan to leverage our social media strategy and expand our network of social media ambassadors to grow our brand awareness globally. We expect to appoint a new third party to implement this strategy in the second half of 2023.

Enhance Our Wholesale Network

Although in the next 5 years we will be mainly focused on accelerating digital growth and our direct-to-consumer channel, we still intend to continue broadening customer access and strengthening our global foothold in new and existing markets by strategically expanding our wholesale network and deepening current relationships. In all of our markets, we have an opportunity to increase sales by adding new wholesale partners and increasing volume in existing retailers. Additionally, we are focused on strengthening relationships with our retail partners through broader offerings, exclusive products and shop-in-shop formats, which are dedicated spaces within another company’s retail store on a short term rental basis. We believe our retail partners have a strong incentive to showcase our brand as our products drive customer traffic and consistent full-price sell-through in their stores.

Broaden Our Product Offering

Continuing to enhance and expand our product offering represents a meaningful growth driver for Perfect Moment. We expect that broadening our product line will allow us to strengthen brand loyalty with the existing Perfect Moment customer base, drive higher penetration in our existing markets and expand our appeal across new geographies. We intend to continue developing our offering through the following strategies.

Elevate Fall and Winter. Perfect Moment will continue to focus on quality materials and distinctive designs in order to create luxury products which aim to deliver technical performance and style impact. However, believing that people want to bring the functionality of our ski apparel into their everyday lives, Perfect Moment is broadening the product range beyond the core “on-slope” skiwear to encompass less technical lifestyle products and a wide range of exceptional products for any occasion, including all year round accessories.

Expand Spring and Summer. We intend to continue building our successful Spring and Summer collections in categories such as surfwear, activewear, loungewear and swimwear. We believe offering inspiring new and complementary product categories that are consistent with our values of heritage, functionality and quality and can become part of our core business represents an opportunity to develop a closer relationship with our customers and expand our addressable market.

We believe this strategy will deliver a number of benefits:

During the fiscal year ended March 31, 2023 and the fiscal quarter ended June 30, 2023, we have restructured and invested in our design, product development, merchandizing and production teams to create a pathway to execute on this underpinning strategy. We expect the first products resulting from this investment to launch in the spring of 2024. We plan to then gradually increase our product offering as we evaluate demand, supply and profitability.

Establish Perfect Moment Owned Physical Retail

Perfect Moment has grown to date without a Perfect Moment owned physical stand-alone store presence. Sales growth has been driven by our online offering and wholesale network. As part of our growth strategy, we believe opening directly operated stores in strategically selected major cities and pop-up stores in strategic ski resorts would provide an excellent opportunity to generate sales in key locations, providing a luxury in-store experience, reflecting the character of the brand and providing an experiential contact point for customers.

As our product range expands, we see the potential to further grow our community with a physical presence by opening directly operated stores. We already have physical presence in department stores, operated under wholesale arrangements. Operating Perfect Moment owned stores would provide our community a home for the brand and act as a beacon for new or potential customers, but they also add extra complexity and risk. In order to test our retail model we plan to first establish pop-up locations. We are exploring options in London for an initial pop-up location. We are also in the process of testing a shop-in-shop location in Los Angeles, with an expected opening in the fall/winter of 2023. Shop-in-shop locations are dedicated spaces within another company’s retail store on a short term rental basis. We expect that our experience with such temporary spaces would help us develop our strategy for all-year-round stores, including location, size, capital expenditure need, as well as the financial and operating impact. Operating temporary spaces would also provide our management team experience with opening and operating retail stores. We evaluate each potential store location based on lease availability and projected viability, and plan to open popups in the fiscal year ending March 31, 2025 and year-round stores beginning the fiscal year ending March 31, 2026.

Other Strategies to Improve Margin

We intend to focus on the following other strategies to improve our margin:

Our Brand

Over the last 39 years, the Perfect Moment brand has grown from our predecessor, a small business founded by Thierry Donard, making apparel for his team of free-ride skiers and surfers, into a global brand by building on our strength of creating luxurious, distinctively designed and functional ski outfits. We have leveraged this strength to expand our brand into multiple seasons and new categories beyond skiwear. With the same discipline, we have also expanded our revenue channels beyond distributors to include a select group of luxury multichannel retailers, as well as our own DTC channel.

Our Products

We approach product design with our customer in mind by designing products that solve their unique needs. We are inspired by free spirits as well as free riders – trailblazers who might not come close to a ski run. We are for anyone who is unafraid to stand out – with the fashion they wear and the moments they make. We are still all about that perfect moment. But it could happen on and off the slopes. Our product truths are standout styles for moment makers, flattering silhouettes for living in the moment, comfortable cuts for moving in the moment and high-performing materials that make the moment last. We are constantly challenging ourselves to create the highest quality and most innovative fabrications, styles and product features for our customers. Our apparel is comfortable, durable, functional and stylish, all at an affordable luxury price point.

Our Heritage

The adventure started in the mountains of Chamonix in 1984, with the Perfect Moment brand a vision of famed extreme sports filmmaker and professional skier Thierry Donard, who designed apparel for his team of expert freeride skiers and surfers for his film production company La Nuite de la Glisse. Donard used his personal experience to create designs that were characterized by quality, style and performance, and focused on the ultimate goal of every athlete: to experience the “perfect moment”. Thierry Donard continues to be a stockholder in Perfect Moment and, in the past, we have provided product placement for his films.

Our Evolution

Our product offering has evolved significantly since the days of solely making specialty ski and surfwear for the extreme sports. Today, we continue to draw on our rich heritage of performance garments and statement designs. Retro-inspired vivid and bold color palates complement the industry’s leading technical fabrics to deliver fashion, form, function and fun for women, men and children. Primarily known for our on-and-off the slopes skiwear, in 2016 PMA developed a summer range inspired by the island of Ibiza to bring its unique style to swimwear and activewear.

Beyond Sport

Recognizing our customers want to bring the functionality of our clothing into their everyday lives, we expanded our offering to include products for outdoor enthusiasts, urban explorers and discerning consumers everywhere. The uncompromised craftsmanship and quality of the Perfect Moment brand is preserved in new products and high-performance materials to keep our customers warm and comfortable no matter how low the temperature drops. As we evolved and expanded our winter assortment to suit new uses, climates and geographies, we also refreshed our core offerings with the introduction of our sustainable swimwear collection and enhancing our classic products with a focus on elevated style, luxurious fabrics and refined fits.

Beyond Outerwear

Perfect Moment has launched a refined line of accessories in response to customer demand for products to complement their skiwear, outerwear or swimwear. Our accessories focus on handwear, headwear, neckwear and everything the customer needs for a day of fun and adventure on the mountain, near the sea or in the city; offering unparalleled fit, function and timeless style to our customers, consistent with the heritage of our core products. Beyond accessories, we continue to selectively respond to customer demand for new product categories. Our customers have shown meaningful interest in key new product categories including travel gear, which we may pursue in the future.

As we expand the Perfect Moment brand to serve new uses, wearing occasions, geographies and consumers, we will always stay true to who we are and what the Perfect Moment brand stands for: authentic heritage, uncompromised craftsmanship and quality, exceptional style and superior functionality.

Our Marketing Strategy

Brand Awareness and Engagement

We believe the nature of skiing as a largely affluent, international pursuit means there is a large opportunity in aspirational, lifestyle-led social media engagement. We have utilized social media to publicize our brand with celebrities, influencers, top-tier editorial, collaborations and luxury locations to create a distinct, fun and engaging aspirational lifestyle narrative. Perfect Moment expects to continue its approach to social media, building its follower base through a similar approach with an evolving mix of celebrities, influencers, editorials and locations. Beyond social media, we believe Perfect Moment has been able to deploy the same core brand proposition and narrative to direct digital marketing and traditional media, elevating brand profile and driving high levels of engagement simultaneously.

Consumer Acquisition

We principally acquire consumers through online channels, including paid and organic search, metasearch, affiliate partnerships, display advertising and social media channels. We have access to channel experts who work with dedicated analysts, data scientists and engineers and have invested resources to optimize paid search, developing programs and algorithms to maximize our return on paid search.

Retention and Loyalty

We focus on building continuous dialogue with our consumers given their levels of engagement with luxury shopping. We do this by creating content and developing tailored product recommendations, which we distribute via email, social media, display advertising and directly on our platform. We believe our strategy generates a significant return on new customer acquisition investments resulting from high average order value, strong product margins and attractive repeat purchase behavior.

Investing for the Future

Moving forward, our marketing focus is on continuing to tell our stories in unique, creative and authentic ways that engage customers. As our distribution model has shifted from pure wholesale to multi-channel, our business needs have evolved. We have supported this shift through a blend of brand and performance marketing that reaches a global audience while maintaining a consistent and authentic brand experience. We will continue to strategically invest in reaching new audiences across platforms in developing audiences, markets and boosting affinity around the world.

Product Development and Innovation

Uncompromised craftsmanship begins with sourcing the right raw materials. We use premium fabrics and finishings for performance, comfort and longevity. Our blends of down and fabrics enable us to create warmer, lighter and more durable products across seasons and applications.

Our insulated products are made with down because it is recognized as the world’s best natural insulator, providing approximately three times the warmth per ounce as synthetic alternatives. We are committed to the sustainable and ethical sourcing of our raw materials. We only use down that is a by-product of the poultry industry and we only purchase down and fur from suppliers who adhere to our stringent standards regarding fair practices and humane treatment of animals.

Our Global End-To-End Operations

Our core operations areas are supply chain management, fulfilment and premium customer service.

Supply Change Management

We have built a supply chain that is scalable for our business and through which we control the design and development of our products.

Design, Innovation and Manufacturing

We have a diversified and flexible supply chain that leverages third-party suppliers and manufacturers to produce our raw materials and finished products. We directly and actively manage every step of our product development and production process. The extent to which we manage production is differentiated from a model of primarily relying on third-party agents to manage production. We believe our approach has enabled us to produce luxury products through greater control of the end-to-end production process.

We purchase our finished product from our manufacturers on a purchase order basis and do not have any long-term agreements requiring us to use any supplier or manufacturer. We have long-standing relationships with our vendors, which are strengthened by the consistency and longevity of our core fabric and core style profile.

We regularly source new suppliers and manufacturers to support our ongoing innovation and growth, and we carefully evaluate all new suppliers and manufacturers to ensure they share our standards for quality of manufacturing, ethical working conditions and social and environmental sustainability practices.

Digital Production

Our content creation process includes styling, photographing, photo-editing and content management and allows us to achieve a luxury product presentation with a consistent look and feel. Our third-party studios are the heart of the process, where teams of professional stylists, models and photographers create product images under the leadership and control of our marketing and creative experts. We also develop original content, including tailored merchandise descriptions, convenient size and fit information and detailed measurements information to provide the best consumer experience, maximize revenue and minimize returns.

Warehouse and Fulfilment

We ship our finished products to our business-to-business (“B2B”) and business-to-consumer (“B2C”) customers globally. We distribute our B2C products from our fulfilment center located in the United Kingdom, where we have created a warehouse-within-a-warehouse model at our third-party logistics provider’s site. We regularly evaluate our distribution infrastructure and capacity to ensure that we are able to meet our anticipated needs and support our continued growth.

Premium Customer Service

We provide high-quality customer service throughout the consumer experience, from purchase to returns offering advice on size and fit, styling recommendations, responding to customer feedback and managing return and exchange requests. We localize aspects of the consumer journey for convenience, such as offering different languages and payment methods through customer care. Our customer service teams operate five days a week and interacting in 5 languages.

Figure 1. Perfect Moment Global End-to-End Operations as of March 31, 2023

Competition

We operate in a competitive industry, and consumers have the option to purchase both online and offline, through our partners. While we believe that we do not have any direct competition, we have indirect competitors in two primary categories:

Skiwear Brands – Perfect Moment’s affordable-luxury products are characterized by quality, style and performance where retro-inspired vivid and bold color palates complement the industry’s leading technical fabrics to deliver fashion, form, function and fun for women, men and children. Most other competitors in skiwear skew to either fashion or pure performance. Additionally, Perfect Moment’s Kids-wear range addresses an overlooked premium segment.

Outerwear Brands – The market for outerwear is highly fragmented. We principally operate in the market for premium outerwear, which is part of the broader apparel industry. We compete directly against other manufacturers, wholesalers and direct retailers of outerwear, premium functional outerwear and luxury outerwear. We compete both with global brands and with regional brands operating only in select markets. Because of the fragmented nature of our marketplace, we also compete with other apparel sellers, including those who do not specialize in outerwear. While we operate in a highly competitive market, we believe there are many factors that differentiate us from other manufacturers, wholesalers and retailers of outerwear, including our brand, our heritage and history, our focus on functionality and craftsmanship and the fact that our core products are cross functional and can be used for different purposes for example on the slope and in the city.

Activewear Brands – Competition in the athletic apparel industry is principally on the basis of brand image and recognition as well as product quality, innovation, style, distribution and price. We believe that we successfully compete on the basis of our luxury brand image, our focus on women and our technical product innovation. We are also differentiated by our range of surfwear which similar to our skiwear are characterized by quality, style and performance while most other competitors in surfwear are mainly focused on performance.

Technology

Technology is at the core of our strategy, powering our operational capabilities and the sustainable scalability of our platform. We believe that continuous investment in our technology has given us a competitive advantage and enabled fast innovation. Our technology platform with MACH architecture is designed to provide Perfect Moment with longer term ease of integration, stability, performance, and scalability based on three main components:

Trademarks and Other Intellectual Property

We protect our intellectual property through a combination of trademarks, domain names, copyrights, design rights / design patents and trade secrets, as well as contractual provisions and restrictions on access to our proprietary technology related to our e-commerce platform. Our principle trademark assets include the trademark “Perfect Moment,” which is registered in the United States and targeted foreign jurisdictions, as our logos and taglines. We have applied to register or registered many of our trademarks in the United States and other jurisdictions in all classes relevant to our business, and we will pursue additional trademark registrations to the extent we believe they would be beneficial and cost-effective. We actively oppose and defend our position on the trade mark registers and subscribe to a trade mark watching service for our key assets. Further we subscribe to an online monitoring system to search for infringements of our IP rights and, in addition, act on any reported to us by customers or employees.

We are the registered holder of multiple domestic and international domain names that include “perfect moment” and similar variations. We also hold domain registrations for many of our product names and other related trade names and slogans. We own or have control over relevant social media handles which contain our key assets. In addition to the protection provided by our intellectual property rights, we enter into confidentiality and proprietary rights agreements with our employees, consultants, contractors and business partners. Where appropriate we enter into relevant license agreements to allow others to use our Intellectual Property or where we need permission to use Intellectual Property of third parties. We further control the use of our proprietary technology and intellectual property through provisions in both our customer terms of use on our website and the terms and conditions governing our agreements with other third parties.

Government Regulation

In the United States and the United Kingdom and in the other jurisdictions in which we operate, we are subject to labor and employment laws, laws governing advertising, privacy and data security laws, safety regulations and other laws, including consumer protection regulations that apply to retailers and/or the promotion and sale of merchandise and the operation of stores and warehouse facilities. Our products sold outside of the United Kingdom are subject to tariffs, treaties and various trade agreements as well as laws affecting the importation of consumer goods. We monitor changes in these laws, regulations, treaties and agreements, and believe that we are in material compliance with applicable laws.

Licenses, Certificates and Approvals

PMA has obtained all licenses, certificates and approvals required for carrying on its business activities during the two fiscal years ended March 31, 2023 and March 31, 2022 and as of the date of this prospectus.

Employees and Human Capital Resources

As of June 30, 2023, we had a total of 31 full-time employees, as well as a limited number of temporary employees and consultants. None of our employees are unionized or covered by collective bargaining agreements, and we consider our current employee relations to be good.

Facilities

Our corporate headquarters is located in London, where we lease office space under a lease that expires in January 2024. In addition to our corporate headquarters, we have an office in Hong Kong, where we lease office space that expires in February 2024.

We believe our facilities are adequate and suitable for our current needs, and that should it be needed, suitable additional or alternative space will be available to accommodate our operations.

Legal Proceedings

We are subject to various legal proceedings and claims that arise in the ordinary course of our business. Although the outcome of these and other claims cannot be predicted with certainty, we do not believe the ultimate resolution of the current matters will have a material adverse effect on our business, financial condition, results of operations or prospects.

MANAGEMENT

Executive Officers and Directors

The following table sets forth the names, ages and positions of our current executive officers and directors:

Directors are elected to serve until the next annual meeting of stockholders and until their successors are elected and qualified. Directors are elected by a plurality of the votes cast at the annual meeting of stockholders and hold office until the expiration of the term for which he or she was elected and until a successor has been elected and qualified.

A majority of the authorized number of directors constitutes a quorum of the board of directors for the transaction of business. The directors must be present at the meeting to constitute a quorum. However, any action required or permitted to be taken by the board of directors may be taken without a meeting if all members of the board of directors individually or collectively consent in writing to the action.

Executive officers are appointed by the board of directors and serve at its pleasure.

Executive Officers

Mark Buckley –Chief Executive Officer and Director

Mr. Buckley has served as our Chief Executive Officer and as a member of our board of directors since November 2022. Mr. Buckley has also been serving as our acting Chief Financial Officer since November 2022, and we expect him to continue to serve in that capacity until we identify a new Chief Financial Officer. Since November 2022, he has also served as the Chief Financial Officer or PMUK, and since January 2023, he has also served as the Chief Financial Officer of PMA. Since August 2022, he has also been serving as a director at 3rd Rock Private Limited, a rock climbing clothing company based in the United Kingdom. From February 2020 to October 2022, Mr. Buckley served as Chief Financial Officer of Rapha Racing Limited, a producer and retailer of cycling clothing, where he served as Finance Director from October 2016 to February 2020 prior to becoming the Chief Financial Officer. From October 2011 to October 2016, Mr. Buckley worked at Burberry Limited, the global luxury brand, where he held various roles before becoming the Director of Financial Planning Analysis in April 2015. Before that, from April 2000 to October 2011 Mr. Buckley worked at Marks and Spencer Group plc, a major British multinational retailer, including a 17-month secondment to Woolworths in South Africa. Mr. Buckley qualified as an accountant in 2004 from the Association of Chartered Certified Accountants. We believe that Mr. Buckley is qualified to serve as a member of our board of directors due to the perspective and experience he brings as our Chief Executive Officer and acting Chief Financial Officer.

Name of Chief Financial Officer

To be provided.

Jane Gottschalk – Chief Creative Officer and Director

Ms. Gottschalk has served as our Chief Creative Officer since September 2022, as a member of our board of directors since March 2021 and as a member of PMA’s board of directors since May 2012. From July 2017 to September 2022, Ms. Gottschalk served as the Creative Director of PMUK, and since September 2022, Ms. Gottschalk has served, and is serving, as the Chief Creative Officer of PMUK. From May 2012 to September 2022, she served as Creative Director of PMA, and since September 2022, she has served, and is serving, as Chief Creative Officer of PMA. Since August 2011, Ms. Gottschalk is also serving as Director of Jing Holdings Limited, a holding company that operates Jax Coco, a leading coconut water brand, and from September 2012 to May 2023 served as Director of Jax Coco UK Limited. Ms. Gottschalk holds a B.A. from University of Kent. Ms. Gottschalk is the wife of Max Gottschalk, the Chairman of our board of directors. We believe that Ms. Gottschalk is qualified to serve as a member of our board of directors due to the perspective and experience she brings as our Chief Creative Officer and her creative, innovative and entrepreneurial attributes that provide valuable insight to our board and are aligned with our unique culture.

Non-Executive Directors

Max Gottschalk – Chairman of the Board of Directors

Mr. Gottschalk has served as the Chairman of our board of directors since March 2021 and as a member of PMA’s board of directors since May 2012 and a member of PMUK’s board of directors since July 2017. Since April 2022, Mr. Gottschalk has been serving as Director at Nurture Brands Limited, a plant based food and beverage business. Since November 2021, Mr. Gottschalk has been serving as Director at various holding entities for investments of the Hycap Fund, an energy transition private equity fund that invests in the hydrogen ecosystem. Since August 2011, Mr. Gottschalk has also been serving as Director of Jing Holdings Limited, a holding company that operated Jax Coco, a leading coconut water brand that was acquired by Nurture Brands Limited in 2022, and from August 2019 to May 2023 served as Director of Jax Coco UK Limited. Mr. Gottschalk is also the Co-Founder of and since December 2020 has been serving as a Partner and Director at Ocean 14 Capital Ltd., a private equity fund investing in emerging companies and technology to help protect and sustain our oceans. Since September 2019, Mr. Gottschalk has been serving as Director at Aeon Investment Limited, a credit-focused investment company, based in London. Mr. Gottschalk is also the Founder of and since December 2015 has been serving as the Chief Executive Officer and Director at Vedra Partners Ltd., a multi-family office with operations in London and Switzerland. In addition, Mr. Gottschalk is the Co-Founder of and from January 2021 to April 2023 served as a Partner and Director at Hydrogen Equity Partners Ltd., an investment management firm with a focus on new hydrogen energy sources. Mr. Gottschalk also co-founded Gottex Fund Management in 1998, a global asset management company that he built and brought to market in 2007 on the Swiss stock exchange. Prior to Gottex, he ran Bear Stearns’s fixed income derivatives hedge fund sales team in New York. Mr. Gottschalk holds a B.A. in Finance from the McIntire School of Commerce at the University of Virginia. We believe that Mr. Gottschalk is qualified to serve as a member of our board of directors due to his extensive leadership and business experience as an entrepreneur and investor, as well as his service on other boards of directors.

Tracy Barwin –Director

Ms. Barwin has served as a member of our board of directors since November 2022. Ms. Barwin has also provided consulting services to the Company as the acting Ecommerce Director, since November 2022. Since November 2022, Ms. Barwin also serves as Founder and Director of Tracy B Ltd., a professional services company. From May 2022 until November 2022, Ms. Barwin was not actively engaged in business activities. Ms. Barwin was Executive Vice President at Hunter Boot Limited from May 2017 until May 2022, overseeing their direct-to-consumer business which included retail, ecommerce, shop-in-shops and pop-up stores. Prior to becoming Executive Vice President at Hunter Boot Limited, Ms. Barwin worked at Uniqlo, a large global SPA clothing retailer, where she held the position of Director of Customer Experience, from September 2010 to April 2017. Ms. Barwin held various roles at Myla, a luxury lingerie company, and Nike, Speedo and Hilton hotels, from 2001 to 2010 across digital, ecommerce and customer experience functions. Ms. Barwin holds a B.A. Honors degree in Modern History and Politics from Manchester University and later enhanced this degree with a post graduate diploma from The Chartered Institute of Marketing. We believe that Ms. Barwin is qualified to serve as a member of our board of directors due to the perspective and experience she brings across the fashion and retail brands she has worked across, specifically her direct-to-consumer experience as well as her experience on other boards of directors.

Involvement in Certain Legal Proceedings

To the best of our knowledge, none of our directors or executive officers have, during the past ten years, been involved in any legal proceedings described in subparagraph (f) of Item 401 of Regulation S-K.

Board of Directors and Corporate Governance

When considering whether directors have the experience, qualifications, attributes and skills to enable the board of directors to satisfy its oversight responsibilities effectively in light of our business and structure, the board of directors focuses primarily on the information discussed in each of the directors’ individual biographies as set forth above.

The board of directors periodically reviews relationships that directors have with our company to determine whether the directors are independent. Directors are considered “independent” as long as they do not accept any consulting, advisory or other compensatory fee (other than director fees) from us, are not an affiliated person of our company or our subsidiaries (e.g., an officer or a greater than 10% stockholder) and are independent within the meaning of applicable United States laws, regulations and the Nasdaq Capital Market listing rules. In this latter regard, the board of directors uses the Nasdaq Listing Rules (specifically, Section 5605(a)(2) of such rules) as a benchmark for determining which, if any, of our directors are independent, solely in order to comply with applicable SEC disclosure rules.

Board Committees 

Our board of directors has established an audit committee, a compensation committee and a nominating and corporate governance committee, each of which will operate pursuant to a charter to be adopted by our board of directors and will be effective upon the effectiveness of the registration statement of which this prospectus is a part. The composition of each committee and its respective charter will be effective upon the listing of our common stock on Nasdaq, and copies of each charter will be posted on the corporate governance section of our website at www.perfectmoment.com. Each committee has the composition and responsibilities described below. Our board of directors may establish other committees from time to time.

Nasdaq permits a phase-in period of up to one year for an issuer registering securities in an initial public offering to meet the audit committee, compensation committee and nominating and corporate governance committee independence requirements. Under the initial public offering phase-in period, only one member of each committee is required to satisfy the heightened independence requirements at the time our registration statement becomes effective, a majority of the members of each committee must satisfy the heightened independence requirements within 90 days following the effectiveness of our registration statement, and all members of each committee must satisfy the heightened independence requirements within one year from the effectiveness of our registration statement.

Audit Committee

               , and                 will serve on the audit committee, which will be chaired by                . Our board of directors has determined that                 is “independent” for audit committee purposes as that term is defined in the rules of the SEC and the applicable Nasdaq rules, and each member has sufficient knowledge in financial and auditing matters to serve on the audit committee. Our board of directors has designated                 as an “audit committee financial expert,” as defined under the applicable rules of the SEC. We intend to comply with the applicable independent requirements for all members of the audit committee within the time periods specified under such rules.

The audit committee’s responsibilities include:

Compensation Committee

                ,                 and                 will serve on the compensation committee, which will be chaired by                . Our board of directors has determined that                 is “independent” as defined in the applicable Nasdaq rules and each member is a “non-employee director” as defined in Rule 16b-3 promulgated under the Exchange Act. We intend to comply with the applicable independent requirements for all members of the compensation committee within the time periods specified under such rules.

The compensation committee’s responsibilities include:

Nominating and Corporate Governance Committee

               ,                 and                 will serve on the nominating and corporate governance committee, which will be chaired by                . Our board of directors has determined that                 is “independent” as defined in the applicable Nasdaq rules. We intend to comply with the applicable independent requirements for all members of the nominating and corporate governance committee within the time periods specified under such rules.

The nominating and corporate governance committee’s responsibilities include:

Code of Business Conduct and Ethics

We have adopted a written code of business conduct and ethics, effective upon the effectiveness of the registration statement of which this prospectus is a part, that applies to our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. Following effectiveness, we will post a copy of our code of ethics, and intend to post amendments to this code, or any waivers of its requirements, on our company website.

Compensation Committee Interlocks and Insider Participation

None of the members of our compensation committee is currently or has been within the past three years one of our officers or an employee. None of our executive officers currently serves, or has served during the last year, as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving as a member of our board of directors or compensation committee.

Corporate Governance Guidelines

We have adopted corporate governance guidelines, effective upon the effectiveness of the registration statement of which this prospectus is a part, that serve as a flexible framework within which our board of directors and its committees operate. These guidelines will cover a number of areas including the size and composition of the board, board membership criteria and director qualifications, director responsibilities, board agenda, meetings of independent directors, committee responsibilities and assignments, board member access to management and independent advisors, director communications with third parties, director compensation, and management succession planning. A copy of our corporate governance guidelines will be available on our website at https://www.investors.perfectmoment.com upon completion of this offering.

Conflicts of Interest

We comply with applicable state law with respect to transactions (including business opportunities) involving potential conflicts. Applicable state corporate law requires that all transactions involving our company and any director or executive officer (or other entities with which they are affiliated) are subject to full disclosure and approval of the majority of the disinterested independent members of our board of directors, approval of the majority of our stockholders or the determination that the contract or transaction is intrinsically fair to us. More particularly, our policy is to have any related party transactions (i.e., transactions involving a director, an officer or an affiliate of our company) be approved solely by a majority of the disinterested independent directors serving on the board of directors.

Family Relationships

Max Gottschalk, our Chairman of our board of directors, and Jane Gottschalk, and our Chief Creative Officer and a member of our board of directors, are husband and wife. There are no other family relationships among any of the directors or executive officers.

Director Compensation

During the fiscal year ended March 31, 2023, we did not pay cash or equity-based compensation to any of our non-employee directors for their service on our board of directors (not including any fees paid to such non-employee directors for other services). We have reimbursed and will continue to reimburse all of our non-employee directors for their reasonable out-of-pocket expenses incurred in attending board of directors and committee meetings.

As of March 31, 2023, Jane Gottschalk holds options to purchase 68,172 shares of our common stock. As of March 31, 2023, none of our other non-employee directors held any outstanding option awards or other stock awards to purchase or to be issued our common stock. Pursuant to his Contract of Employment, Mark Buckley, our Chief Executive Officer and our acting Chief Financial Officer, is entitled to receive, but have not yet been granted, options to purchase 200,000 shares of our common stock (which number was subsequently increased by us to 300,000 shares), vesting over a period of 4 years from the grant date.

Upon completion of this offering, we plan to implement a compensation plan for our non-employee directors, such that non-employee directors will receive an annual cash retainer and/or an annual grant of stock options. Our committee chairpersons may receive certain additional retainer fees. Our directors who are also our employees or officers will not receive any compensation specifically related to their activities as directors, other than reimbursement for expenses incurred in connection with their attendance at meetings.

Board compensation will be reviewed annually, and changes will be recommended by the compensation committee and approved by our board of directors.

Director Compensation Table

The following table discloses the cash fees and stock awards and total compensation earned, paid or awarded to each of our non-employee directors during the fiscal year ended March 31, 2023. Columns disclosing compensation under the headings “Option Awards,” “Non-Equity Incentive Plan Compensation,” and “Change in Pension Value and Nonqualified Deferred Compensation Earnings” are not included because no compensation in these categories was awarded to, earned by or paid to our non-employee directors in the fiscal year ended March 31, 2023. The dollar amounts shown are in U.S. dollars. The amounts originally in British pounds were converted to U.S. dollars for this table using the average of the average exchange rates for each fiscal month during the applicable fiscal year. Applying this formula to the fiscal year ended March 31, 2023, £1.00 was equal to $1.2055.

Consulting Agreements

Max Gottschalk

We, through PMA, are party to a consulting agreement with Max Gottschalk, dated May 15, 2019, which continues until terminated in accordance with its terms, during which Mr. Gottschalk is entitled to receive fees for services rendered amounting to £8,000 per month from April 2021 to November 2022 and £12,000 per month since December 2022. These amounts are in lieu of any other cash payments or equity awards Mr. Gottschalk may otherwise have been entitled to receive as a member of our board of directors.

Jane Gottschalk

We, through PMA, were party to a consulting agreement with Jane Gottschalk, dated April 30, 2018, which continues until terminated in accordance with its terms, during which Ms. Gottschalk was entitled to receive £8,000 per month since April 1, 2019, for services rendered. These amounts are in lieu of any other cash payments or equity awards Ms. Gottschalk may otherwise have been entitled to receive as a member of our board of directors. The consulting agreement was terminated effective September 1, 2022, after which Ms. Gottschalk became an employee of PMUK.

Tracy Barwin

We are party to a consulting agreement with Tracy Barwin, dated November 18, 2022, which continues until terminated in accordance with its terms, during which Ms. Barwin is entitled to receive £1,500 per day for services rendered with a minimum commitment of two days per month. These amounts are in lieu of any other cash payments or equity awards Ms. Barwin may otherwise have been entitled to receive as a member of our board of directors.

Executive Compensation

Named Executive Officers

Our named executive officers for the 2023 fiscal year set forth in this prospectus (the “Named Executive Officers”) are Mark Buckley and Jane Gottschalk.

Summary Compensation Table

The following table summarizes the compensation of our Named Executive Officers during the fiscal years ended March 31, 2023 and March 31, 2022.

The dollar amounts shown are in U.S. dollars. The amounts originally in British pounds were converted to U.S. dollars for this table using the average of the average exchange rates for each fiscal month during the applicable fiscal year. Applying this formula to the fiscal year ended March 31, 2023, £1.00 was equal to $1.2055.