| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Going
concern The
accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the
realization of assets and the satisfaction of liabilities and commitments in the ordinary course of business. Through
September 30, 2024, the Company has funded its operations with proceeds from the sale of common stock from the initial public offering,
the issuance of common stock, convertible debt, and preferred stock, alongside existing trade, invoice and shareholder financing arrangements.
The Company has incurred recurring losses, including a net loss of $ 6,132 7,734 55,109 These
factors raise substantial doubt about the Company’s ability to continue as a going concern. In
addition, the Company’s independent registered public accounting firm, in its report on the Company’s consolidated financial
statements for the year ended March 31, 2024, expressed substantial doubt about the Company’s ability to continue as a going concern.
These condensed consolidated financial statements do not include any adjustments that might result from this uncertainty. Management’s
plans to alleviate the conditions that raise substantial doubt include:
● Taking
out short-term loans, purchase order financing and debt factoring to assist with working capital shortfalls
● Exploring
sources of long-term funding in the private markets and additional equity financing
● Closely
monitoring the collection of debts
● Strategies
and plans in place to deliver improved margins in the next financial year The
Company’s ability to continue as a going concern for 12 months from the date of these unaudited condensed Consolidated Financial
Statements were available to be issued is dependent upon its ability to generate sufficient cash flows from operations to meet its obligations,
which it has not been able to accomplish to date, and to obtain additional capital financing. No assurance can be given that the Company
will be successful in these efforts mentioned above. Use
of estimates The
preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and
judgments in applying the Company’s accounting policies that affect the reported amounts and disclosures made in the condensed
consolidated financial statements and accompanying notes. Management continually evaluates the estimates and judgments it uses. These
estimates and judgments have been applied in a manner consistent with prior periods and there are no known trends, commitments, events
or uncertainties that management believe will materially affect the methodology or assumptions utilized in making these estimates and
judgments in these financial statements. Significant estimates inherent in the preparation of the condensed 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; realization of deferred tax assets 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. 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 consist 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. The
Company estimates returns on an ongoing basis to estimate the consideration from the customer that the Company expects to ultimately
receive. Consideration in determining the Company’s estimates for returns may include agreements with customers, the Company’s
return policy and historical and current trends. The Company records the returns as a reduction to net sales in its consolidated statements
of operations and the recognition of a provision for returns within accrued expenses in its consolidated balance sheets and the estimated
value of inventory expected to be returned as an adjustment to inventories, net. As of September 30, 2024 and March 31, 2024, the returns
provision was $ 156 346 Revenue
is comprised of direct-to-consumer ecommerce revenue through the Company’s website and revenue related to wholesalers, and revenue
related to short-term collaborations. The following table details the revenue split: SCHEDULE OF REVENUE SPLIT
September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023
Three Months Ended Six Months Ended
September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023
Wholesale revenues $ 2,678 $ 2,798 $ 2,731 $ 2,829
Ecommerce revenues 1,155 1,066 2,077 2,023
Revenues - subtotal $ 3,833 $ 3,864 $ 4,808 $ 4,852
Collaboration revenues - 2,024 - 2,024
Total $ 3,833 $ 5,888 $ 4,808 $ 6,876 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. 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. Cost
of goods sold 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; -
outbound duties; and -
reserves for inventory. 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. As of September 30, 2024 and March 31, 2024, the Company had $ 570 558 2,458 1,035 Segment
reporting Accounting
Standards Codification (“ASC”) Topic 280, “Disclosures about Segments of an Enterprise and Related Information”
establishes standards for the way that public business enterprises report information about operating segments in annual financial statements
and requires those enterprises to report selected information about operating segments in interim financial reports issued to stockholders.
Management has determined that the Company operates in one Geographic
concentration Although
the Company is organized fundamentally as one business segment, the Company’s revenues are primarily split between three geographic
areas: the U.S., Europe and the United Kingdom (the “U.K.”). Customers in these regions are served by our leadership, production
and operations teams in the U.K. and Hong Kong. The
table below reflects total net revenues attributed to Europe (excluding the United Kingdom), United States, United Kingdom, and the rest
of the world: SCHEDULE OF NET REVENUE BY GEOGRAPHIC AREAS
September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023
Three Months Ended Six Months Ended
September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023
Europe (excluding United Kingdom) $ 1,948 51 % $ 1,857 31 % $ 2,124 44 % $ 2,032 30 %
United States 958 25 % 3,140 53 % 1,325 28 % 3,446 50 %
United Kingdom 691 18 % 653 11 % 938 19 % 1,065 15 %
Rest of the World 236 6 % 238 5 % 421 9 % 333 5 %
Total $ 3,833 $ 5,888 $ 4,808 $ 6,876 The
decrease in United States revenues as a percentage of total revenues is primarily attributed to a two-year collaboration with Hugo
Boss totaling $ 2,024 The
Company has not continued with the Hugo Boss collaboration as the relationship required the use of Perfect Moments supply chain, designers,
and took precedence over all other wholesalers. The
table below reflects Ecommerce net revenues attributed to Europe (excluding the United Kingdom), United States, United Kingdom, and the
rest of the world: SCHEDULE OF NET REVENUE BY GEOGRAPHIC AREAS
September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023
Three Months Ended Six Months Ended
September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023
Europe (excluding United Kingdom) $ 229 20 % $ 192 18 % $ 405 19 % $ 351 17 %
United States 406 35 % 379 36 % 721 35 % 673 33 %
United Kingdom 302 26 % 375 35 % 561 26 % 786 39 %
Rest of the World 218 19 % 120 11 % 390 19 % 213 11 %
Total $ 1,155 $ 1,066 $ 2,077 $ 2,023 Long-lived
assets The
long-lived assets of the Company primarily relate to property and equipment, intangible assets and operating lease right-of-use assets
in the U.K. and Hong Kong. Total long-lived assets as of September 30, 2024 were $ 440 74 557 98 Supplier
concentration For
the three months ended September 30, 2024 and 2023, the largest single supplier of manufactured goods produced 45 %
and 57 %,
respectively, of the Company’s products. For the three months ended September 30, 2024 and 2023, the single largest fabric supplier
supplied 44 %
and 45 For
the six months ended September 30, 2024 and 2023, the largest single supplier of manufactured goods produced 45 %
and 57 %,
respectively, of the Company’s products. For the six months ended September 30, 2024 and 2023, the single largest fabric supplier
supplied 46 %
and 63 Customer
concentration For
the three months ended September 30, 2024, we had one major customer, which accounted for approximately 15 580 23 1,089 1,027 71 For
the three and six months ended September 30, 2023, we had two major customers, which accounted for approximately 47 2,786 40 2,786 760 41 Selling,
general and administrative expenses (“SG&A”) SG&A
expenses consist of all operating costs not otherwise included in cost of goods sold or marketing and advertising expenses. The Company’s
selling, general and administrative expenses include personnel costs, sales commissions, the service fees of the Company’s third-party
fulfilment and distribution centers, recruitment fees, legal and professional fees, information technology, accounting, travel and lodging,
occupancy costs and depreciation and amortization. Foreign
currency Foreign
currency transactions denominated in a currency other than an entity’s functional currency are remeasured into the functional currency
using the spot rate at the date of the transaction with any resulting gains and losses recognized in operating expenses except for gains
and losses arising on intercompany foreign currency transactions that are of a long-term investment nature, which are recorded as a foreign
currency translation adjustment in other comprehensive income or loss. The
functional currency for each entity included in these condensed consolidated financial statements that is domiciled outside of the United
States is generally the applicable local currency. Assets and liabilities of each foreign entity are translated into U.S. dollars at
the exchange rate in effect on the balance sheet date. Revenue and expenses are translated on a monthly basis using the average rate
for that month as a close approximation. Unrealized translation gains and losses are recorded as a foreign currency translation adjustment,
which is included in other comprehensive income or loss, which is a component of accumulated other comprehensive income or loss included
in shareholders’ deficit. Stock-based
compensation The
Company accounts for equity-based awards according to 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 up until February 8, 2024. 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 was privately held for a portion of the periods covered by these financial statements and historically did 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
Company listed on NYSE American on February 8, 2024 and now uses the closing price on the day of grant to determine FMV and for the
stock options issued in Q2 2025 the company used the average of a peer group of similar companies based by one or all the following factors
to determine volatility: industry, revenue, market capitalization. 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 Income
/ loss per share of common stock Basic
net income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding
for the period. Diluted earnings per share is computed by dividing the net income applicable to common stockholders by the weighted average
number of shares of common stock outstanding plus the number of additional shares of common stock that would have been outstanding if
all dilutive potential shares of common stock had been issued using the treasury stock method. Potential shares of common stock are excluded
from the computation when their effect is antidilutive. The dilutive effect of potentially dilutive securities is reflected in diluted
net income per share if the exercise prices were lower than the average fair market value of common stock during the reporting period. Potentially
dilutive stock options and securities as presented in the table below were excluded from the computation of diluted net income (loss)
per share, because the effect would be anti-dilutive. As the Company incurred losses for the three and six months ended September 30,
2024 and 2023, basic and diluted weighted-average shares are the same in the loss per share calculation, in accordance with ASC 260-10-45-20. SCHEDULE OF ANTIDILUTIVE SECURITIES EXCLUDED FROM COMPUTATION OF DILUTED NET INCOME (LOSS) PER SHARE
September 30, September 30,
Options to acquire common stock 1,796,550 299,957
Restricted stock units to acquire common stock 225,000 -
Warrants to acquire common stock 66,700 -
Series A convertible preferred stock - 5,323,782
Series B convertible preferred stock - 1,189,998
Convertible debt financing - 2,242,679
Antidilutive securities 2,088,250 9,056,416 On
February 12, 2024, all outstanding shares of our Series A and Series B convertible preferred stock were automatically converted into
5,323,782 1,189,998 10,002 1,985 2,497,267 Fair
Value of Financial Instruments The
Company follows the guidance of ASC 820 and ASC 825 for disclosure and measurement of the fair value of its financial instruments. ASC
820 establishes a framework for measuring fair value under U.S. GAAP and expands disclosures about fair value measurements. To increase
consistency and comparability in fair value measurements and related disclosures, ASC 820 establishes a fair value hierarchy which prioritizes
the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest
priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable
inputs. The
three (3) levels of fair value hierarchy defined by ASC 820 are described below:
Level
1: Quoted
market prices available in active markets for identical assets or liabilities as of the reporting date.
Level
2: Pricing
inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the
reporting date.
Level
3: Pricing
inputs that are generally observable inputs and not corroborated by market data. The
carrying amount of the Company’s financial assets and liabilities, such as cash and cash equivalents, prepaid expenses, accounts
payable and accrued expenses approximate their fair value due to their short-term nature. The carrying values of capital lease obligations
and debt obligations approximate their fair values due to the fact that the interest rates on these obligations are based on prevailing
market interest rates. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest
or credit risks arising from these financial instruments. Reclassifications The
Company has reclassified certain costs totaling $ 614 991 Recently
issued accounting pronouncements In
September 2022, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) No. 2022-04, “Disclosure
of Supplier Finance Program Obligations” (“ASU 2022-04”). ASU 2022-04 requires entities to disclose the key terms of
supplier finance programs they use in connection with the purchase of goods and services, along with the amount of obligations outstanding
at the end of each period and an annual roll forward of such obligations. This standard does not affect the recognition, measurement,
or financial statement presentation of supplier finance program obligations. ASU 2022-04 is effective for the Company for the year ended
March 31, 2024 and is to be applied retrospectively to all periods in which a balance sheet is presented. The annual roll forward disclosure
is not required to be made until the year ending March 31, 2025 and is to be applied prospectively. The Company doesn’t believe
the adoption will have a material effect on the financial statements. Other than the new disclosure requirements, ASU 2022-04 will not
have an impact on the Company’s consolidated financial statements. In
March 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2024-01 to amend the guidance in Accounting Standards
Codification (“ASC”) 718 Compensation—Stock Compensation (Topic 718). Some entities compensate employees or other service
providers by granting profits interest awards, which generally give the grantee an opportunity to participate in future profits and/or
equity appreciation of the entity but do not give them rights to existing net assets of the entity. ASU 2024-01 adds an example showing
how to apply the scope guidance in ASC 718 to determine whether profits interests and similar awards should be accounted for as share-based
payment arrangements. The ASU is effective for annual periods beginning after December 15, 2024, with early adoption permitted. The Company
does not currently anticipate that the guidance will have a material impact on its financial statements. In
November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosure, which is intended
to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expense categories
that are regularly provided to the chief operating decision maker and included in each reported measure of a segment’s profit or
loss. The update also requires all annual disclosures about a reportable segment’s profit or loss and assets to be provided in
interim periods and for entities with a single reportable segment to provide all the disclosures required by ASC 280, Segment Reporting,
including the significant segment expense disclosures. This standard will be effective for the Company on January 1, 2024 and interim
periods beginning in fiscal year 2025, with early adoption permitted. The updates required by this standard should be applied retrospectively
to all periods presented in the financial statements. The Company does not expect this standard to have a material impact on its results
of operations, financial position or cash flows. ASUs
recently issued but not listed above were assessed and determined to be either not applicable or are expected to have minimal impact
on the consolidated financial position or results of operations. |
