UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
For the transition period from to
Commission File No.
| (Exact name of registrant as specified in its charter) |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| |
| (Address of Principal Executive Offices, including zip code) |
| (Registrant’s telephone number, including area code) |
| N/A |
| (Former name, former address and former fiscal year, if changed since last report) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| None. | - | - |
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405
of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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.
| ☐ Large accelerated filer | ☐ Accelerated filer | |
| ☒ | ||
If
an emerging growth company, 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 provided pursuant to Section 13(a) of the Exchange Act.
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No
As of September 8, 2023, the number of shares of
Class A common stock, $0.0001 par value, outstanding was
MAISON SOLUTIONS INC.
FORM 10-Q FOR THE QUARTER ENDED JULY 31, 2023
TABLE OF CONTENTS
i
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MAISON SOLUTIONS INC.
CONSOLIDATED BALANCE SHEETS
| July 31, 2023 (Unaudited) | April 30, 2023 | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash and equivalents | $ | $ | ||||||
| Accounts receivable | ||||||||
| Accounts receivable - related parties | ||||||||
| Inventories, net | ||||||||
| Prepayments | ||||||||
| Other receivables and other current assets | ||||||||
| Other receivable - related parties | ||||||||
| Total Current Assets | ||||||||
| Restricted cash - non-current | ||||||||
| Property and equipment, net | ||||||||
| Intangible assets | ||||||||
| Security deposits | ||||||||
| Investment under cost method – related parties | ||||||||
| Investment under equity method | ||||||||
| Operating lease right-of-use assets, net | ||||||||
| Goodwill | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Accounts payable - related parties | ||||||||
| Note payable | ||||||||
| Current portion of loan payables | ||||||||
| Accrued expenses and other payables | ||||||||
| Contract liabilities | ||||||||
| Other payables - related parties | ||||||||
| Operating lease liabilities - current | ||||||||
| Income taxes payable | ||||||||
| Total Current Liabilities | ||||||||
| Long-term loan payables | ||||||||
| Other long-term payables | ||||||||
| Operating lease liabilities - non-current | ||||||||
| Deferred tax liability, net | ||||||||
| Total Liabilities | ||||||||
| Commitment and contingencies (Note 18) | ||||||||
| Stockholders’ Equity (Deficit) | ||||||||
| Class A Common stock, $ | ||||||||
| Class B Common stock, $ | ||||||||
| Accumulated retained earnings | ||||||||
| Total Maison Solutions, Inc. Stockholders’ Equity | ||||||||
| Noncontrolling interests | ||||||||
| Total Stockholders’ Equity | ||||||||
| Total Liabilities and Stockholders’ Equity | $ | $ | ||||||
The accompanying notes are an integral part of the consolidated financial statements.
1
MAISON SOLUTIONS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
| Three Months Ended July 31, | ||||||||
| 2023 | 2022 | |||||||
| Net Revenues | ||||||||
| Supermarket | $ | $ | ||||||
| Total Revenues, Net | ||||||||
| Cost of Revenues | ||||||||
| Supermarket | ||||||||
| Total Cost of Revenues | ||||||||
| Gross Profit | ||||||||
| Selling Expenses | ||||||||
| General and Administrative Expenses | ||||||||
| Total Operating Expenses | ||||||||
| Loss from Operations | ( | ) | ( | ) | ||||
| Other Income, net | ||||||||
| Investment loss | ( | ) | ||||||
| Interest Expense | ( | ) | ( | ) | ||||
| Total other Income (expenses), net | ( | ) | ||||||
| Income (Loss) Before Income Taxes | ( | ) | ||||||
| Income Tax Provisions | ||||||||
| Net Loss | ( | ) | ( | ) | ||||
| Net Income Attributable to Noncontrolling Interests | ||||||||
| Net Loss Attributable to Maison Solutions Inc. | $ | ( | ) | $ | ( | ) | ||
| Loss per Share Attributable to Maison Solutions, Inc. | ||||||||
| $ | ( | ) | $ | ( | ) | |||
| Weighted Average Number of Common Stock Outstanding | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
2
MAISON SOLUTIONS INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE THREE MONTHS ENDED JULY 21, 2023 AND 2022
(UNAUDITED)
| Class A Common Stock | Class B Common Stock | Additional Paid-in | Retained Earnings (Accumulated | Noncontrolling | Total Stockholders’ | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit) | Interests | Equity | |||||||||||||||||||||||||
| Balance at April 30, 2023 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||
| Net income (loss) | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance at July 31, 2023 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||
| Class A Common Stock | Class B Common Stock | Additional Paid-in | Retained Earnings (Accumulated | Noncontrolling | Total Stockholders’ | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit) | Interests | Equity | |||||||||||||||||||||||||
| Balance at April 30, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||
| Net income (loss) | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance at July 31, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
3
MAISON SOLUTIONS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| Three Months ended July 31, | ||||||||
| 2023 | 2022 | |||||||
| Cash flows from operating activities | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
| Depreciation and amortization expenses | ||||||||
| Bad debt reversal | ( | ) | ||||||
| Provision for inventory shrinkage reserve | ( | ) | ||||||
| Loss on equity method investment | ||||||||
| Changes in deferred taxes | ( | ) | ( | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Accounts receivable - related party | ||||||||
| Inventories | ||||||||
| Prepayments | ||||||||
| Other receivables and other current assets | ||||||||
| Accounts payable | ( | ) | ||||||
| Accounts payable - related party | ( | ) | ||||||
| Accrued expenses and other payables | ( | ) | ||||||
| Contract Liabilities | ( | ) | ( | ) | ||||
| Operating lease liabilities | ||||||||
| Taxes payables | ||||||||
| Other long-term payables | ||||||||
| Net cash provided by operating activities | ||||||||
| Cash flows from investing activities | ||||||||
| Payments of equipment purchase | ( | ) | ||||||
| Investment into Good Fortune Arcadia | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ||||||
| Cash flows from financing activities | ||||||||
| Proceeds from loans | ||||||||
| Bank overdraft | ( | ) | ||||||
| Repayments on loan payables | ( | ) | ||||||
| Borrowings from related parties | ||||||||
| Net cash provided by (used in) financing activities | ( | ) | ||||||
| Net changes in cash and restricted cash | ( | ) | ||||||
| Cash and restricted cash at the beginning of the period | ||||||||
| Cash and restricted cash at the end of the period | $ | $ | ||||||
| Supplemental disclosure of cash and restricted cash | ||||||||
| Cash | $ | $ | ||||||
| Restricted cash | ||||||||
| Total cash and restricted cash | $ | $ | ||||||
| Supplemental disclosure of cash flow information | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income taxes | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
4
MAISON SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 2023 (UNAUDITED) AND APRIL 30, 2023
1. Organization
Maison Solutions Inc. (“Maison”, the “Company”, and formerly known as “Maison International Inc.”) was founded on July 24, 2019 as an Illinois corporation with its principal place of business in California. In September 2021, the Company was redomiciled in the State of Delaware as a corporation registered under the laws of the State of Delaware.
Immediately upon formation, the Company acquired three retail Asian supermarkets with two brands (Good Fortune and Hong Kong Supermarkets) in Los Angeles, California and rebranded them as “HK Good Fortune Supermarkets”. Upon completion of these acquisitions, these entities became controlled subsidiaries of the Company (hereafter collectively referred to as “Maison Group”).
| ● | In
July 2019, the Company purchased |
| ● | In
October 2019, the Company purchased |
| ● | On
June 30, 2022, the Company purchased |
The Company, through its four subsidiaries engages in the specialty grocery retailer business. The Company is a fast-growing specialty grocery retailer offering traditional Asian food and merchandise to U.S. consumers, in particular to Asian-American communities.
2. Summary of significant accounting policies
Basis of presentation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities Exchange Commission (“SEC”).
The interim consolidated financial information as of July 31, 2023 and for the three months periods ended July 31, 2023 and 2022 have been prepared without audit, pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures, which are normally included in consolidated financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to such rules and regulations. The interim consolidated financial information should be read in conjunction with the Financial Statements and the notes thereto, included in the Company’s Annual Report on Form 10-K for the fiscal year ended April 30, 2023, previously filed with the SEC on August 1, 2023.
In the opinion of management, all adjustments (which include all significant normal and recurring adjustments) necessary to present a fair statement of the Company’s interim consolidated financial position as of June 30, 2023, its interim consolidated results of operations and cash flows for the three months ended July 31, 2023 and 2022, as applicable, have been made. The interim results of operations are not necessarily indicative of the operating results for the full fiscal year or any future periods.
Principles of consolidation
The consolidated financial statements include the financial statements of the Company and its subsidiaries and, when applicable, entities for which the Company has a controlling financial interest. All transactions and balances among the Company and its subsidiaries have been eliminated upon consolidation.
5
MAISON SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 2023 (UNAUDITED) AND APRIL 30, 2023
Noncontrolling interests
The Company follows FASB (Financial Accounting Standards Board) ASC (Accounting Standards Codification) Topic 810, “Consolidation,” governing the accounting for and reporting of noncontrolling interests (“NCI”) in partially owned consolidated subsidiaries and the loss of control of subsidiaries. Certain provisions of this standard indicate, among other things, that NCI be treated as a separate component of equity, not as a liability, that increases and decreases in the parent’s ownership interest that leave control intact be treated as equity transactions rather than as step acquisitions or dilution gains or losses, and that losses of a partially-owned consolidated subsidiary be allocated to noncontrolling interests even when such allocation might result in a deficit balance.
The net income attributed to NCI was separately designated in the accompanying statements of operations. Losses attributable to NCI in a subsidiary may exceed a NCI’s interests in the subsidiary’s equity. The excess attributable to NCI is attributed to those interests. NCIs shall continue to be attributed their share of losses even if that attribution results in a deficit NCIs balance.
As of July 31, 2023 and April 30,
2023, the Company had NCIs of $
Liquidity
As reflected in the accompanying
consolidated financial statements, the Company had retained earnings of $
The Company had $
Use of estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the periods presented. Significant accounting estimates are used for, but not limited to, useful lives of property and equipment, commitments and contingencies, inventory reserve, allowance for estimated uncollectable accounts receivable and other receivables, impairment of long-lived assets, contract liabilities and valuation of deferred tax assets. Given the global economic climate and additional or unforeseen effects from the COVID-19 pandemic, these estimates have become more challenging, and actual results could differ materially from these estimates.
Cash and cash equivalents
Cash and equivalents include
cash on hand, demand deposits and short-term cash investments that are highly liquid in nature and have original maturities when
purchased of three months or less. The Company’s cash is maintained at financial institutions in the United States of
America. Deposits in these financial institutions may, from time to time, exceed the Federal Deposit Insurance Corporation (“FDIC”)’s
federally insured limits. The standard insurance amount is $
Cash from operating, investing and financing activities of the consolidated statement of cash flows are net of assets and liabilities acquired of Maison Monterey Park.
6
MAISON SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 2023 (UNAUDITED) AND APRIL 30, 2023
Restricted cash
Restricted cash is an amount
of cash deposited with banks in conjunction with borrowings from banks. Restriction on the use of such cash and the interest earned thereon
is imposed by the banks and remains effective throughout the terms of the bank borrowings and notes payable. Restricted cash is classified
as non-current assets on the Company’s consolidated balance sheets, as all the balances are not expected to be released to
cash within the next 12 months. As of July 31, 2023 and April 30, 2023, the Company had restricted cash of $
Accounts receivable
The Company’s accounts receivable arises from product sales. The Company does not adjust its receivables for the effects of a significant financing component at contract inception if it expects to collect the receivables in one year or less from the time of sale. The Company does not expect to collect receivables greater than one year from the time of sale.
The Company’s policy is to maintain an allowance for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. As of July 31, 2023 and April 30, 2023, there was no allowance for the doubtful accounts.
Accounts receivable — related parties
Accounts receivable consist primarily of receivables from related parties on 30-day credit terms and are presented net of an allowance for estimated uncollectible amounts. The Company periodically assesses its accounts receivable for collectability on a specific identification basis. If collectability of an account becomes unlikely, an allowance is recorded for that doubtful account. Once collection efforts have been exhausted, the accounts receivable is written off against the allowance. As of July 31, 2023 and April 30, 2023, there was no allowance for the doubtful accounts.
Inventories, net
Inventories consisting of products available for sale are primarily accounted for using the first-in, first-out method and are valued at the lower of cost and net realizable value. This valuation requires the Company to make judgments, based on currently available information, about the likely method of disposition, such as through sales to individual customers, returns to product vendors, liquidations, and expected recoverable values of each disposition category. The Company records inventory shrinkage based on the historical data and management’s estimates and provides a reserve for inventory shrinkage for the three months ended July 31, 2023 and 2022.
Prepayments
Prepayments and deposits are mainly comprised of cash deposited and advanced to suppliers for future inventory purchases and services to be performed. This amount is refundable and bears no interest. For any prepayments that management determines will not be in receipts of inventories, services, or refundable, the Company recognizes an allowance account to reserve such balances. Management reviews its prepayments on a regular basis to determine if the allowance is adequate and adjusts the allowance when necessary. Delinquent account balances are written-off against allowance for doubtful accounts after management has determined that the likelihood of collection is not probable. As of July 31, 2023 and April 30, 2023, the Company had made prepayment to its vendors. The Company’s management continues to evaluate the reasonableness of the allowance policy and update it if necessary.
Other receivables and other current assets
Other receivables and other current assets primarily include non-interest-bearing loans of the other business entities. Management regularly reviews the aging of receivables and changes in payment trends and records allowances when management believes collection of amounts due are at risk. Accounts considered uncollectable are written off against allowances after exhaustive efforts at collection are made. As of July 31, 2023 and April 30, 2023, the Company did not have any bad debt allowance for other receivables.
7
MAISON SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 2023 (UNAUDITED) AND APRIL 30, 2023
Property and equipment
Property and equipment are stated at cost less accumulated depreciation. Depreciation expense is computed using the straight-line method over the estimated useful lives of the individual assets.
| Furniture & fixtures | ||
| Leasehold improvements | Shorter of the lease term or estimated useful life of the assets | |
| Equipment | ||
| Automobiles |
The cost and related accumulated depreciation of assets sold or otherwise retired are eliminated from the accounts and any gain or loss is included in the consolidated statements of operations. Expenditures for maintenance and repairs are charged to earnings as incurred, while additions, renewals and betterments, which are expected to extend the useful life of assets, are capitalized. The Company also re-evaluates the periods of depreciation to determine whether subsequent events and circumstances warrant revised estimates of useful lives.
Impairment of long-lived assets
Long-lived assets, which include property, plant and equipment, intangible assets with finite lives, and operating lease right-of-use assets, are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable.
Recoverability of long-lived assets to be held and used is measured by comparing the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the assets. Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable.
The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the asset’s carrying amount may not be recoverable. The Company conducts its long-lived asset impairment analyses in accordance with ASC 360-10-15, “Impairment or Disposal of Long-Lived Assets.” ASC 360-10-15 requires the Company to group assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities and evaluate the asset group against the sum of the undiscounted future cash flows. If the undiscounted cash flows do not indicate the carrying amount of the asset is recoverable, an impairment charge is measured as the amount by which the carrying amount of the asset group asset group exceeds its fair value based on discounted cash flow analysis or appraisals. There was no impairment of long-lived assets for the three months ended July 31, 2023 and 2022.
Security deposits
Security deposits primarily include deposits made to the Company’s landlord for its supermarkets and office facilities. These deposits are refundable upon expiration of the lease.
Long-term investment
The Company accounts for investments
with less than
8
MAISON SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 2023 (UNAUDITED) AND APRIL 30, 2023
In May 2021, the Company purchased
a
In December 2021, the Company
purchased a
On June 27, 2023, the Company invested
$
Investment in equity securities is evaluated for impairment when facts or circumstances indicate that the fair value of the long-term investments is less than its carrying value. An impairment is recognized when a decline in fair value is determined to be other-than-temporary. The Company reviews several factors to determine whether a loss is other-than-temporary. These factors include, but are not limited to, the: (i) nature of the investment; (ii) cause and duration of the impairment; (iii) extent to which fair value is less than cost; (iv) financial condition and near-term prospects of the investments; and (v) ability to hold the security for a period sufficient to allow for any anticipated recovery in fair value. No event had occurred and indicated that other-than-temporary impairment existed and therefore the Company did not record any impairment charges for its investments for the three months ended July 31, 2023.
Goodwill
Goodwill is the excess of purchase price and related costs over the value assigned to the net tangible and identifiable intangible assets of businesses acquired. In accordance with ASC Topic 350, “Intangibles-Goodwill and Other,” goodwill is not amortized but is tested for impairment, annually or more frequently when circumstances indicate a possible impairment may exist. Impairment testing is performed at a reporting unit level.
Generally, the Company first performs a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If factors indicate that this is the case, the Company then estimates the fair value of the related reporting unit determined using discounted cash flow (“DCF”) analysis. A number of significant assumptions and estimates are involved in the application of the DCF analysis to forecast operating cash flows, including the discount rate, the internal rate of return and projections of realizations and costs to produce. Management considers historical experience and all available information at the time the fair values of its reporting units are estimated.
If the fair value is less than the carrying value, the goodwill of the reporting unit is determined to be impaired and the Company will record an impairment equal to the excess of the carrying value over its fair value. The Company did not record any impairment loss during the three Months ended July 31, 2023 and 2022.
9
MAISON SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 2023 (UNAUDITED) AND APRIL 30, 2023
Leases
On May 1, 2020, the Company adopted Accounting Standards Update (“ASU”) 2016-02, Lease (FASB ASC Topic 842). The adoption of Topic 842 resulted in the presentation of operating lease right-of-use (“ROU”) assets and operating lease liabilities on the consolidated balance sheet. See Note 14 — “Leases” for additional information.
The Company determines if an arrangement contains a lease at the inception of a contract under ASC Topic 842. At the commencement of each lease, management determines its classification as an operating or finance lease. For leases that qualify as operating leases, ROU assets and liabilities are recognized at the commencement date based on the present value of any remaining lease payments over the lease term. For this purpose, the Company considers only payments that are fixed and determinable at the time of commencement. As most of its leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The ROU assets include adjustments for accrued lease payments. The ROU asset also includes any lease payments made prior to commencement and is recorded net of any lease incentives received. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that it will exercise such options.
A short-term lease is defined as a lease that, at the commencement date, has a lease term of 12 months or less and does not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise. When determining whether a lease qualifies as a short-term lease, the Company evaluates the lease term and the purchase option. Hence, the Company does not recognize any operating lease ROU assets and operating lease liabilities for short-term leases.
The Company evaluates the carrying value of ROU assets if there are indicators of impairment and review the recoverability of the related asset group. If the carrying value of the asset group is determined to not be recoverable and is in excess of the estimated fair value, the Company will record an impairment loss in other expenses in the consolidated statements of operations.
The Company also subleases certain mini stores that are within the supermarket to other parties. The Company collects security deposits and rent from these sub-lease tenants. The rent income collected from sub-lease tenants recognized as rental income and deducted occupancy cost. Occupancy cost mainly consists of rents and common area maintenance fees.
Fair value measurements
The Company records its financial assets and liabilities in accordance with the framework for measuring fair value in accordance with U.S GAAP. This framework establishes a fair value hierarchy that prioritizes the inputs used to measure fair value:
| Level 1: | Quoted prices for identical instruments in active markets. |
| Level 2: | Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. |
| Level 3: | Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
Fair value measurements of nonfinancial assets and non-financial liabilities are primarily used in the impairment analysis of intangible assets and long-lived assets.
Financial instruments included in current assets and current liabilities are reported in the consolidated balance sheets at cost, which approximate fair value because of the short period of time between the origination of such instruments and their expected realization and their current market rates of interest.
10
MAISON SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 2023 (UNAUDITED) AND APRIL 30, 2023
Revenue recognition
The Company adopted ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), from May 1, 2020, using the modified retrospective transition approach to all contracts that did not have an impact on the beginning retained earnings on May 1, 2020. The Group’s revenue recognition policies effective on the adoption date of ASC 606 are presented as below.
In accordance with ASC Topic 606, the Company’s performance obligation is satisfied upon the transfer of goods to the customer, which occurs at the point of sale. Revenues are recorded net of discounts, sales taxes, and returns and allowances.
The Company sells Company gift
cards to customers. There are no administrative fees on unused gift cards, and the gift cards do not have an expiration date. Gift card
sales are recorded as contract liability when sold and are recognized as revenue when either the gift card is redeemed or the likelihood
of the gift card being redeemed is remote (“gift card breakage”). The Company’s gift card breakage rate is based upon
historical redemption patterns and it recognizes breakage revenue utilizing the redemption recognition method. The Company also offers
discounts on the gift cards sold to its customers. The discounts are recorded as sales discount when gift card been redeemed. The Company’s
contract liability related to gift cards was $
| Three Months ended July 31, | ||||||||
| 2023 | 2022 | |||||||
| Perishables | $ | $ | ||||||
| Non-perishables | ||||||||
| Total revenues | $ | $ | ||||||
Cost of sales
Cost of sales includes the rental expense, depreciation, the direct costs of purchased merchandise, shrinkage costs, store supplies, and inbound shipping costs. The cost of sales is a net of vendor’s rebates and discounts.
The Company subleases certain mini stores that are within the supermarket to other parties. The Company collects security deposits and rents from these sub-lease tenants. The rent income collected from sub-lease tenants are recognized as rental income and deducted rental expense.
Selling expenses
Selling expenses mainly consist
of advertising costs, promotion expenses, and payroll and related expenses for personnel engaged in selling and marketing activities.
Advertising expenses, which consist primarily of online and offline advertisements, are expensed when the services are performed. The
Company’s advertising expenses were $
General and administrative expenses
General and administrative expenses mainly consist of payroll and related costs for employees involved in general corporate functions, professional fees and other general corporate expenses, as well as expenses associated with the use by these functions of facilities and equipment, such as rental and depreciation expenses.
11
MAISON SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 2023 (UNAUDITED) AND APRIL 30, 2023
Concentrations of risks
(a) Major customers
For each of the three months
ended July 31, 2023 and 2022, the Company did not have any customers that accounted for more than
(b) Major vendors
| Three Months Ended July 31, 2023 | Three Months Ended July 31, 2022 | |||||||||
| Supplier | Percentage of Total Purchases | Supplier | Percentage of Total Purchases | |||||||
| A | | % | A | | % | |||||
| B | % | B | % | |||||||
| C | % | C | % | |||||||
(c) Credit risks
Financial instruments that are potentially subject to credit risk consist principally of accounts receivable. Accounts receivable are typically unsecured and derived from products sold to customers, and are thereby exposed to credit risk. However, the Company believes the concentration of credit risk in its accounts receivable is substantially mitigated by its ongoing credit evaluation process and relatively short collection terms. The Company does not generally require collateral from customers. The Company evaluates the need for an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends, and other information. Historically, the Company did not have any bad debt on its accounts receivable.
The Company also has loan receivables to its centralized vendors occasionally. The loan receivables are typically unsecured and exposed to credit risk. However, the Company believes that the loan receivables amount to its centralized vendor is managed by its finance department and these centralized vendors are still providing products monthly to the Company. The Company does not generally require collateral from the vendors. The Company also evaluates the need for an allowance for doubtful accounts based on upon factors surrounding the credit risks. Historically, the Company did not have any bad debt on its loan receivables and all loan receivables been collected in subsequent period.
Income taxes
Income taxes are accounted for in accordance with the provisions of ASC 740. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company’s deferred tax assets are subject to periodic recoverability assessments. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount that more likely than not will be realized. In determining the need for a valuation allowance, management reviews both positive and negative evidence, including current and historical results of operations, future income projections, and the overall prospects of our business. Realization of the deferred tax assets is principally dependent upon achievement of projected future taxable income offset by deferred tax liabilities. Changes in recognition or measurement are reflected in the period in which the judgment occurs.
The Company utilizes a two-step approach
to recognizing and measuring uncertain income tax positions (tax contingencies). The first step is to evaluate the tax position for recognition
by determining if the weight of available evidence indicates it is more likely than not the position will be sustained on audit, including
resolution of related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount which is more
than
On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (the CARES Act) was signed into law, intended to provide economic relief to those impacted by the COVID-19 pandemic. The CARES Act, among other things, includes provisions addressing the carryback of net operating losses for specific periods, temporary modifications to the limitations placed on the tax deductibility of net interest expenses, and technical amendments for qualified improvement property (QIP). The impacts of the CARES Act are recorded as components within the Company’s deferred income tax liabilities and income tax receivable on the Company’s balance sheets.
12
MAISON SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 2023 (UNAUDITED) AND APRIL 30, 2023
Earnings (loss) per share
Basic earnings (loss) per ordinary share is computed by dividing net earnings (loss) attributable to common stockholders by the weighted-average number of common stock outstanding during the period. Diluted earnings per share is computed by dividing net income attributable to common stockholders by the sum of the weighted average number of common stock outstanding and of potential common stock (e.g., convertible securities, options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common stock that has an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) is excluded from the calculation of diluted earnings per share. For the three months ended July 31, 2023 and 2022, the Company had no dilutive potential common stock.
Related Parties
The Company identifies related parties, accounts for, and discloses related party transactions in accordance with ASC Topic 850 “Related Party Disclosures” and other relevant ASC standards. Parties are considered to be related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal with if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. The Company discloses all significant related party transactions in Note 13 — “Related party balances and transactions”.
Segment Information
The Company’s chief operating decision-maker has been identified as the chief executive officer, who reviews financial information presented on a consolidated basis accompanied by disaggregated information about revenues by different product types for purposes of allocating resources and evaluating financial performance. The Company and its subsidiaries offer grocery products, general merchandise, health and beauty care products, pharmacy, fuel and other items and services in its stores. The Company’s supermarket stores are geographically based, have similar economic characteristics, and similar expected long-term financial performance. The Company’s operating segments and reporting units are its four stores, which are reported in one reportable segment. There are no segment managers who are held accountable for operations, operating results, and plans for levels or components below the consolidated unit level. Based on qualitative and quantitative criteria established by ASC Topic 280, “Segment Reporting”, the Company considers itself to be operating within one reportable segment.
Recently Issued Accounting Pronouncements
The Company considers the applicability and impact of all ASUs. Management periodically reviews new accounting standards that are issued. Under the Jumpstart Our Business Startups Act of 2012, as amended (the “JOBS Act”), the Company meets the definition of an emerging growth company and has elected the extended transition period for complying with new or revised accounting standards, which delays the adoption of these accounting standards until they would apply to private companies.
In March 2023, the FASB issued ASU 2023-01, Lease (Topic 842): Common Control Arrangements, which clarifies the accounting for leasehold improvements associated with leases between entities under common control (hereinafter referred to as common control lease). ASU 2023-01 requires entities to amortize leasehold improvements associated with common control lease over the useful life to the common control group (regardless of the lease term) as long as the lessee controls the use of the underlying asset through a lease, and to account for any remaining leasehold improvements as a transfer between entities under common control through an adjustment to equity when the lessee no longer controls the underlying asset. This ASU will be effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted for both interim and annual financial statements that have not yet been made available for issuance. An entity may apply ASU 2023-01 either prospectively or retrospectively. The Company is currently evaluating the impact that the adoption of ASU 2023-01 will have on our consolidated financial statement presentations and disclosures.
No other new accounting pronouncements issued or effective had, or are expected to have, a material impact on the Company’s consolidated financial statements.
13
MAISON SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 2023 (UNAUDITED) AND APRIL 30, 2023
3. Inventories, net
| July 31, 2023 | April 30, 2023 | |||||||
| Perishables | $ | $ | ||||||
| Non-perishables | ||||||||
| Reserve for inventory shrinkage | ( | ) | ( | ) | ||||
| Inventories, net | $ | $ | ||||||
| Three Months Ended July 31, 2023 | Three Months Ended July 31, 2022 | |||||||
| Beginning balance | $ | $ | ||||||
| GF Supermarket of MP, Inc. inventory shrinkage reserve at July 1, 2022 | ||||||||
| Provision for (reversal of) inventory shrinkage reserve | ( | ) | ||||||
| Ending Balance | $ | $ | ||||||
4. Prepayments
| July 31, 2023 | April 30, 2023 | |||||||
| Prepayment for inventory purchases | $ | $ | ||||||
| Total prepayments | $ | $ | ||||||
As of July 31, 2023, the prepayment
mainly consists of $
5. Loan receivables
On April 30, 2020, the Company
entered a promissory note with its vendor Drop in the Ocean, Inc. with a total loan amount of up to $
The Company entered a promissory
note with its vendor XHJC Holding Inc. on January 1, 2022, with a total loan amount of up to $
14
MAISON SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 2023 (UNAUDITED) AND APRIL 30, 2023
6. Property and equipment, net
| July 31, 2023 | April 30, 2023 | |||||||
| Furniture & Fixtures | $ | $ | ||||||
| Equipment | ||||||||
| Leasehold Improvement | ||||||||
| Automobile | ||||||||
| Total property and equipment | ||||||||
| Accumulated depreciation | ( | ) | ( | ) | ||||
| Property and equipment, net | $ | $ | ||||||
Depreciation expenses included
in the general and administrative expenses for the three months ended July 31, 2023 and 2022 were $
7. Intangible assets
Intangible assets mainly consisted
of a trademark acquired through the acquisition of Maison Monterey Park on June 30, 2022. The fair value of the trademark at acquisition
date was $
8. Equity method investment
On June 27, 2023, the Company invested
$
As of July 31, 2023, the Company
had net accounts receivable of $
15
HKGF ARCADIA
BALANCE SHEET
| July 31, 2023 (Unaudited) | ||||
| ASSETS | ||||
| Current Assets | ||||
| Cash and equivalents | $ | |||
| Accounts receivable | ||||
| Inventories, net | ||||
| Total Current Assets | ||||
| Property and equipment, net | ||||
| Intangible asset, net | ||||
| Goodwill | ||||
| Security deposits | ||||
| Total Assets | $ | |||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||
| Current Liabilities | ||||
| Accounts payable | $ | |||
| Accrued expenses and other payables | ||||
| Total Current Liabilities | ||||
| Total Liabilities | ||||
| Stockholders’ Equity | ||||
| Paid in Capital | ||||
| Subscription receivable | ( | ) | ||
| Accumulated deficit | ( | ) | ||
| Total Stockholders’ Equity | ||||
| Total Liabilities and Stockholders’ Equity | $ | |||
16
| For the period from July 1, 2023 to July 31, 2023 | ||||
| Net Revenues | ||||
| Supermarket | $ | |||
| Total Revenues, Net | ||||
| Cost of Revenues | ||||
| Supermarket | ||||
| Total Cost of Revenues | ||||
| Gross Profit | ||||
| Operating Expenses | ||||
| Total Operating Expenses | ||||
| Loss from Operations | ( | ) | ||
| Income (Loss) Before Income Taxes | ( | ) | ||
| Income Tax Provisions | ||||
| Net Loss | ( | ) | ||
| Net Loss Attributable to Maison Solutions Inc. | $ | ( | ) | |
9. Goodwill
Goodwill represented the excess fair
value of the assets under the fair value of the identifiable assets owned at the closing of the acquisition of Maison Monetary Park, including
an assembled workforce, which cannot be sold or transferred separately from the other assets in the business. See Note 19 — “Acquisition
of subsidiary” for additional information. As of July 31, 2023, the Company had goodwill of $
10. Accrued expenses and other payables
| July 31, 2023 | April 30, 2023 | |||||||
| Accrued payroll | $ | $ | ||||||
| Accrued interest expense | ||||||||
| Accrued loss for legal matter | ||||||||
| Other payables | ||||||||
| Due to third parties | ||||||||
| Sales tax payable | ||||||||
| Total accrued expenses and other payables | $ | $ | ||||||
11. Note payable
As of July 31, 2023 and
April 30, 2023, the Company had an outstanding note payable of $
17
MAISON SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 2023 (UNAUDITED) AND APRIL 30, 2023
12. Loan payables
| Lender | Due date | July 31, 2023 | April 30, 2023 | |||||||
| American First National Bank | $ | $ | ||||||||
| U.S. Small Business Administration | ||||||||||
| Total loan payables | ||||||||||
| Current portion of loan payables | ( | ) | ( | ) | ||||||
| Non-current loan payables | $ | $ | ||||||||
American First National Bank — a National Banking Association
On March 2, 2017, Maison Monrovia
entered into a $
The collateral for the bank loans
is personally guaranteed by Mr. Wu, who is the prior owner and applicant for the bank loan, and each store’s assets including
inventory, fixture, equipment, etc. At the same time, a minimum of $
| Borrower | Due date | July 31, 2023 | April 30, 2023 | |||||||
| Maison Monrovia | $ | $ | ||||||||
| Maison San Gabriel | ||||||||||
| Maison El Monte | ||||||||||
| Total SBA loan payables | $ | $ | ||||||||
On June 15, 2020, Maison
Monrovia entered into a $
On January 12, 2022, Maison
San Gabriel entered into an additional $
On January 6, 2022, Maison
El Monte, Inc. entered into an additional $
Per the SBA loan agreement, all
interest payments on these three loans were deferred to December 2022. As of July 31, 2023 and April 30, 2023, the Company’s
aggregate balance on the three SBA loans was $
18
MAISON SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 2023 (UNAUDITED) AND APRIL 30, 2023
| Year Ending April 30, | Amount | |||
| 2024 | $ | |||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| Thereafter | ||||
| Total | $ | |||
13. Related party balances and transactions
Sales to related parties
| Name of Related Party | Nature | Relationship | Three Months ended July 31, 2023 | Three Months ended July 31, 2022 | ||||||||
| The United Food, LLC | $ | $ | ||||||||||
| GF Supermarket of MP, Inc. (the Company acquired all the assets from Hong Kong Supermarket of Monterey Park, Ltd on August 1, 2021) | ||||||||||||
| HKGF Market of Arcadia, LLC | ||||||||||||
| HKGF Market of Alhambra, Inc. | ||||||||||||
| Total | $ | $ | ||||||||||
Purchases from related parties
| Name of Related Party | Nature | Relationship | Three Months Ended July 31, 2023 | Three Months ended July 31, 2022 | ||||||||
| The United Food, LLC | $ | $ | ||||||||||
| HKGF Market of Arcadia, LLC | ||||||||||||
| GF Supermarket of MP, Inc. (the Company acquired all the assets from Hong Kong Supermarket of Monterey Park, Ltd on August 1, 2021) | ||||||||||||
| Dai Cheong Trading Co Inc. | ||||||||||||
| HKGF Market of Alhambra, Inc. | ||||||||||||
| Total | $ | $ | ||||||||||
19
MAISON SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 2023 (UNAUDITED) AND APRIL 30, 2023
| Name of Investment Company | Nature of Operation | Investment percentage | Relationship | As of July 31, 2023 | As of April 30, 2023 | |||||||||||
| Dai Cheong Trading Co Inc. | % | $ | $ | |||||||||||||
| HKGF Market of Alhambra, Inc. | % | |||||||||||||||
| HKGF Market of Arcadia, LLC | % | |||||||||||||||
| Total | $ | $ | ||||||||||||||
In May 2021, the Company
purchased a
In December 2021, the Company
purchased a
On June 27, 2023, the Company
invested $
Related party balances
Accounts receivable — sales to related parties
| Name of Related Party | Nature | Relationship | July 31, 2023 | April 30, 2023 | ||||||||
| HKGF Supermarket of Arcadia LLC. | $ | $ | ||||||||||
| HKGF Market of Alhambra, Inc. | ||||||||||||
| United Food LLC. | ||||||||||||
| Total | $ | $ | ||||||||||
Accounts payable — purchase from related parties
| Name of Related Party | Nature | Relationship | July 31, 2023 | April 30, 2023 | ||||||||
| Hong Kong Supermarket of Monterey Park, Ltd | non-interest bearing | $ | $ | |||||||||
| Dai Cheong Trading Co Inc. | ||||||||||||
| Total | $ | $ | ||||||||||
20
MAISON SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 2023 (UNAUDITED) AND APRIL 30, 2023
Other receivables — related parties
| Name of Related Party | Nature | Relationship | July 31, 2023 | April 30, 2023 | ||||||||
| Ideal Investment | non-interest bearing | |||||||||||
| Ideal City Capital | non-interest bearing | |||||||||||
| Total | $ | $ | ||||||||||
Other payables — related parties
| Name of Related Party | Nature | Relationship | July 31, 2023 | April 30, 2023 | ||||||||
| John Xu | non-interest bearing | $ | $ | |||||||||
| Grace Xu | non-interest bearing | |||||||||||
| Total | $ | $ | ||||||||||
14. Leases
The Company accounted for leases in accordance with ASU No. 2016-02, Leases (Topic 842) for all periods presented. The Company leases certain supermarkets and office facilities from third parties. Some of the Company’s leases include one or more options to renew, which are typically at the Company’s sole discretion. The Company evaluates the renewal options, and when it is reasonably certain of exercise, it will include the renewal period in its lease term. New lease modifications result in re-measurement of the right of use (“ROU”) assets and lease liabilities. Operating ROU assets and lease liabilities are recognized at the lease commencement date, based on the present value of lease payments over the lease term. Since the implicit rate for the Company’s leases is not readily determinable, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The incremental borrowing rate is the rate of interest that the Company would have to pay to borrow, on a collateralized basis, an amount equal to the lease payments in a similar economic environment and over a similar term.
| Store | Lease Term Due | |
| Maison Monrovia * | ||
| Maison San Gabriel | ||
| Maison El Monte | ||
| Maison Monterey Park |
| * |
As of July 31, 2023, the average
remaining term of the supermarkets’ store lease is
In June and November 2022, the
Company entered three leases for three copiers with terms of 63 months for each. As of July 31, 2023, the average remaining term of the
copier lease is
The copier lease detail information is listed below:
| Store | Lease Term Due | |
| Maison Monrovia | ||
| Maison San Gabriel | ||
| Maison Monterey Park |
The Company’s total lease
expenses under ASC 842 are $
21
MAISON SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 2023 (UNAUDITED) AND APRIL 30, 2023
| July 31, 2023 | April 30, 2023 | |||||||
| Operating ROU: | ||||||||
| ROU assets – supermarket leases | $ | $ | ||||||
| ROU assets – copier leases | ||||||||
| Total operating ROU assets | $ | $ | ||||||
| July 31, 2023 | April 30, 2023 | |||||||
| Operating lease obligations: | ||||||||
| Current operating lease liabilities | $ | $ | ||||||
| Non-current operating lease liabilities | ||||||||
| Total lease liabilities | $ | $ | ||||||
| Years Ending July 31, | Operating lease liabilities | |||
| 2024 | $ | |||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| Thereafter | ||||
| Total future undiscounted lease payments | ||||
| Less: interest | ( | ) | ||
| Present value of lease liabilities | $ | |||
15. Stockholder’s equity
Common stock
Maison was initially authorized
to issue
16. Income Taxes
Maison Solutions is a Delaware holding company that is subject to the U.S. income tax. Maison Monrovia and Maison San Gabriel are pass through entities whose income or losses flow through Maison Solution’s income tax return.
Since its formation in 2019, the Company and its subsidiaries filed separate returns based upon a tax year-end of December 31. The Company recently filed an application with the Internal Revenue Service (“IRS”) to change its and its subsidiaries year-end to April 30. Upon approval from the tax authorities, the Company intends to file stub period corporate income tax returns for each of the entities for the period January 1, 2023 to April 30, 2023, and prospectively file individual entity’s corporate income tax return with year-end of April 30 for the fiscal year starting from May 1, 2023. The income tax provision in these financial statements is based upon the pretax income (loss) for the three months ended July 31, 2023 and 2022.
22
MAISON SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 2023 (UNAUDITED) AND APRIL 30, 2023
Income Tax Provision
| Three Months ended July 31, 2023 | Three Months ended July 31, 2022 | |||||||
| Current: | ||||||||
| Federal income tax expense | $ | $ | ||||||
| State income tax expense | ||||||||
| Deferred: | ||||||||
| Federal income tax benefit | ( | ) | ( | ) | ||||
| State income tax benefit | ( | ) | ( | ) | ||||
| Total | $ | $ | ||||||
| Three Months ended July 31, 2023 | Three Months ended July 31, 2022 | |||||||
| Federal statutory rate | % | ( | )% | |||||
| State statutory rate, net of effect of state income tax deductible to federal income tax | % | ( | )% | |||||
| Permanent difference – penalties, interest, and others | ( | )% | % | |||||
| Utilization of net operating losses (“NOL”) | ( | )% | % | |||||
| Valuation allowance | % | % | ||||||
| Effective tax rate | % | % | ||||||
| July 31, 2023 | April 30, 2023 | |||||||
| Deferred tax assets: | ||||||||
| Bad debt expense | $ | $ | ||||||
| Lease liabilities, net of ROU | ||||||||
| NOL | ||||||||
| Valuation allowance | ( | ) | ( | ) | ||||
| Deferred tax assets, net | $ | $ | ||||||
| Deferred tax liability: | ||||||||
| Trademark acquired at acquisition of Maison Monterey Park | ||||||||
| Deferred tax liability, net of deferred tax assets | $ | $ | ||||||
As of July 31, 2023 and April
30, 2023, Maison and Maison El Monte had approximately $
23
MAISON SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 2023 (UNAUDITED) AND APRIL 30, 2023
The Company recorded $
The Company intends to file amended income tax returns in 2023 with respect to these positions. The tax late payment was mainly due to the change in the tax year-end; the year-end for the purpose of financial statements reporting already changed to fiscal year ending April 30 from calendar year-end, and the Company recorded the income tax provision and income tax liability for the three months ending July 31, 2023 and 2022 and as of July 31, 2023 and April 30, 2023 for the taxable income (loss) in the consolidated financial statements. The Company has not yet filed an amendment to the income tax returns and therefore did not receive the actual tax late payment notice from the IRS yet. As of July 31, 2023, the Company’s U.S. income tax returns filed for the year ending on December 31, 2019 and thereafter are subject to examination by the relevant taxation authorities.
17. Other income
For the three months ended July
31, 2023, other income mainly consists of $
18. Commitments and contingencies
Contingencies
The Company is otherwise periodically involved in various legal proceedings that are incidental to the conduct of its business, including, but not limited to, employment discrimination claims, customer injury claims, and investigations. When the potential liability from a matter can be estimated and the loss is considered probable, the Company records the estimated loss. Due to uncertainties related to the resolution of lawsuits, investigations, and claims, the ultimate outcome may differ from the estimates. Although the Company cannot predict with certainty the ultimate resolution of any lawsuits, investigations, and claims asserted against it, management does not believe any currently pending legal proceeding to which the Company is a party will have a material adverse effect on its financial statements.
In May 2020, Maison El Monte was named as a co-defendant in a complaint filed by a consumer advocacy group alleging violations of a California health and safety regulation. The case is pending in the Superior Court of the State of California, and as such, the Company has not made any accruals of possible loss for the year ended April 30, 2023 related to this case.
In June 2022, Maison San
Gabriel entered into a confidential settlement agreement with the plaintiff in connection with a California employment law case whereby
Maison San Gabriel agreed to pay $
Commitments
On
April 19, 2021, JD E-commerce America Limited (“JD US”) and the Company entered into a Collaboration Agreement (the
“Collaboration Agreement”) pursuant to which JD.com will provide services to Maison focused on updating in store technology
through the development of a new mobile app, the updating of new in-store technology, and revising store layouts to promote efficiency.
The Collaboration Agreement provided for a consultancy and initialization fee of $
24
MAISON SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 2023 (UNAUDITED) AND APRIL 30, 2023
19. Acquisition of subsidiary
On
June 30, 2022, the Company purchased
| Total purchase considerations | $ | |||
| Fair value of tangible assets acquired: | ||||
| Accounts receivable | ||||
| Due from related party | ||||
| Property and equipment | ||||
| Security deposit | ||||
| Inventory | ||||
| Deferred tax asset | ||||
| Operating lease right-of-use assets | ||||
| Intangible assets (trademark) acquired | ||||
| Total identifiable assets acquired | ||||
| Fair value of liabilities assumed: | ||||
| Bank overdraft | ( | ) | ||
| Accounts payable | ( | ) | ||
| Contract liabilities | ( | ) | ||
| Income tax payable | ( | ) | ||
| Accrued liability and other payable | ( | ) | ||
| Tenant Security deposit | ( | ) | ||
| Operating lease liabilities | ( | ) | ||
| Deferred tax liability | ( | ) | ||
| Total liabilities assumed | ( | ) | ||
| Net identifiable assets acquired | ||||
| Goodwill as a result of the acquisition | $ |
The following condensed unaudited pro forma consolidated results of operations for the Company for the three months ended July 31, 2022 present the results of operations of the Company and Maison Monterey Park as if the acquisitions occurred on May 1, 2022, respectively.
| For
the Three Months Ended July 31, 2022 | ||||
| (Unaudited) | ||||
| Revenue | $ | |||
| Operating costs and expenses | ||||
| Loss from operations | ( | ) | ||
| Other income | ||||
| Income tax expense | ( | ) | ||
| Net loss | $ | ( | ) | |
20. Subsequent Event
The Company follows the guidance in FASB ASC 855-10 for the disclosure of subsequent events. The Company evaluated subsequent events through the date the financial statements were issued and determined the Company has no major subsequent event that need to be disclosed.
25
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This management’s discussion and analysis of financial condition and results of operations contains forward-looking statements that involve risks and uncertainties. See “Cautionary Note Regarding Forward-Looking Statements” for a discussion of the uncertainties, risks and assumptions associated with those statements. You should read the following discussion in conjunction with our consolidated financial statements and related notes which are included elsewhere in this Quarterly Report on Form 10-Q. Our actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including, but not limited to, those described under “Risk Factors,” and included in other portions of this Quarterly Report on Form 10-Q.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties, and assumptions about us that may cause our actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other Securities and Exchange Commission (“SEC”) filings. References to “we”, “us”, “our,” “Maison” or the “Company” are to Maison Solutions Inc., except where the context requires otherwise.
Overview
We are a fast-growing, specialty grocery retailer offering traditional Asian food and merchandise to modern U.S. consumers, in particular to members of Asian-American communities. We are committed to providing Asian fresh produce, meat, seafood, and other daily necessities in a manner that caters to traditional Asian-American family values and cultural norms, while also accounting for the new and faster-paced lifestyle of younger generations and the diverse makeup of the communities in which we operate. To achieve this, we are developing a center-satellite stores network. Since our formation in July 2019, we have acquired equity interests in four (4) traditional Asian supermarkets in Los Angeles, California. Since April 30, 2022, we have been operating these supermarkets as center stores. The center stores target traditional Asian-American, family-oriented customers with a variety of meat, fresh produce and other merchandise, while additionally stocking items which appeal to the broader community. We are operating these traditional Asian-American, family-oriented supermarkets with our management’s deep cultural understanding of our consumers’ unique consumption habits. In addition to the traditional supermarkets, on December 31, 2021, we acquired a 10% equity interest in a new grocery store located in Alhambra, California, a young and active community (the “Alhambra Store”). The Alhambra store is 100% owned by Mrs. Grace Xu, the spouse of Mr. John Xu, our chief executive officer. We intend to acquire the remaining 90% equity interest in the Alhambra Store with a portion of the net proceeds from our initial public offering. Our intention is that the Alhambra Store will serve as our first satellite store. The investment in the Alhambra Store is considered a related party transaction because Mrs. Xu is the spouse of Mr. Xu, our CEO. Please refer to “Certain Relationships and Related Party Transactions” for further explanation. In May 2021, the Company acquired 10% of the equity interests in Dai Cheong, a wholesale business which mainly supplies foods and groceries imported from Asia, which is owned by our CEO John Xu. We intend to acquire the controlling ownership of Dai Cheong with a portion of the net proceeds of our initial public offering. By adding Dai Cheong to our portfolio, we will take the first step toward creating a vertically integrated supply-retail structure. Having an importer as a part of our portfolio will allow us the opportunity to offer a wider variety of products and to reap the benefits of preferred wholesale pricing. On June 27, 2023, we invested $1,440,000 for 40% equity interest in HKGF Market of Arcadia, LLC (“HKGF Arcadia”), a supermarket in the city of Arcadia, California, to further expands our footprint to new neighborhood.
Collaboration with JD.com
On April 19, 2021, JD US, the U.S. subsidiary of JD.com, and Maison entered into a Collaboration Agreement (the “Collaboration Agreement”) pursuant to which JD.com will provide services to Maison focused on updating in store technology through the development of a new mobile app, the updating of new in-store technology, and revising store layouts to promote efficiency. The agreement included a consultancy and initialization fee of $220,000, 40% of which was payable within 3 days of effectiveness and which has been paid, 40% of which is due within 3 days of the completion and delivery of initialization services as outlined in the Collaboration Agreement, and the remaining 20% is payable within three (3) days of the completion and delivery of the implementation services, as outlined in the Collaboration Agreement. The Collaboration Agreement also included certain additional storage and implementation fees to be determined by the parties and royalty fees, following the commercial launch of the platform developed by JD.com, of 1.2% of gross merchandise value based on information generated by the platform. For each additional store requiring Consultancy and Initialization service, an additional $50,000 will be charged for preparing the feasibility plan for such additional store. The Collaboration Agreement has an initial term of 10 years and customary termination and indemnification provisions. Simultaneously with the effectiveness of the Collaboration Agreement, JD and Maison entered into an Intellectual Property License Agreement (the “IP Agreement”) outlining certain trademarks, logos and designs and other intellectual property rights used in connection with the retail supermarket operations outlined in the Collaboration Agreement, which includes an initial term of 10 years and customary termination provisions.
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Key Factors that Affect Operating Results
Inflation
The inflation rate for the United States was 3.2% for the three months ended July 31, 2023, 4.9% for the year ended April 30, 2023 and 8.3% for the year ended April 30, 2022 according to Bureau of Labor Statistics. Inflation increased our purchase costs, occupancy costs, and payroll costs. To offset inflationary pressures for the three months ended July 31, 2023, we have increased our products’ selling price to cover these increased costs.
Operating Cost Increase After Initial Public Offering
Following our initial public offering, we will be subject to increased operating costs related to our listing on Nasdaq and we are subject to increased costs related to our compliance with Securities Act and Exchange Act periodic reporting annual audit expenses, the legal service expenses, and related consulting service expenses.
Supply Chain Disruptions
Due to ongoing inflationary and supply chain pressures related to the COVID-19 pandemic, the Company experienced financial pressure when ordering and receiving products during 2021 and through April 30, 2023. Specifically, the Company was impacted by increased shipping costs attributable to container shortages, port delays, and truck and driver shortages. We attempted to mitigate these disruptions by diversifying our supply chains, establishing backup plans, and increasing our inventory levels, as well as adjusting our products’ prices. During the fourth quarter of 2023, the Company was able to evolve its operations to successfully navigate such challenges, including the diversification of its supplier network, the adjustment of its inventory purchase pattern, and the continued focus on and investment in automation in its operations and its E-commerce platform. To gain buying power, the Company works with third-party vendors who have more buying power to get products. To work with these third-parties, the Company needs to provide prepayments per order. Moreover, over the course of fiscal year 2023 and to-date, we saw a gradual easing of shipping costs and improvement in on-time shipping from our overseas vendors. While these supply chain challenges have led to an increase in costs to consumers, they have not materially impacted our ability to offer products and our sales increased during the three months ended July 31, 2023 comparing with the three months ended July 31, 2022. For the three months ended July 31, 2023, our sales were $13.8 million, a $2.3 million increase from $11.4 million for the three months ended July 31, 2022. Gross profit increased $0.8 million to approximately $3.1 million for the three months ended July 31, 2023 from approximately $2.3 million for the three months ended July 31, 2022, as a result of our acquisition of Maison Monterey Park in July 2022.
Competition
Food retail is a competitive industry. Our competition varies and includes national, regional, and local conventional supermarkets, national superstores, alternative food retailers, natural foods stores, smaller specialty stores, farmers’ markets, supercenters, online retailers, mass or discount retailers and membership warehouse clubs. Our principal competitors include 99 Ranch Market and H-Mart for conventional supermarkets and Weee! for online groceries. Each of these stores competes with us based on product selection, product quality, customer service, price, store format, location, or a combination of these factors. In addition, some competitors are aggressively expanding their number of stores or their product offerings. Some of these competitors may have been in business longer, may have more experience operating multiple store locations, or may have greater financial or marketing resources than us.
As competition in certain areas intensifies or competitors open stores within proximity to our stores, our results of operations may be negatively impacted through a loss of sales, decrease in market share, reduction in margin from competitive price changes, or greater operating costs. In addition, other established food retailers could enter our markets, increasing competition for market share.
Payroll
As of July 31, 2023, we had approximately 171 employees. Our employees are not unionized nor, to our knowledge, are there any plans for them to unionize. We have never experienced a strike or significant work stoppage. We consider our employee relations to be good. Minimum wage rates in some states have recently increased. For example, the minimum wage rose from $13 to $14 per hour from 2020 to 2021 and increased to $15.50 per hour in 2023 in Los Angeles. Payroll and payroll tax expenses were $1.7 million for the three months ended July 31, 2023, and $1.7 million for the three months ended July 31, 2022.
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Vendor and Supply Management
Maison believes that a centralized and efficient vendor and supply management system is the key to profitability. Maison has major vendors, including Drop in The Ocean, Inc., ONCO Food Corp., GF Distribution, Inc., and XHJC Holding Inc. For the three months ended July 31, 2023, two suppliers accounted for 34% and 19% of the Company’s total purchases, respectively. For the three months ended July 31, 2022, three suppliers accounted for 21%, 20%, and 19% of the Company’s total purchases, respectively. Maison believes that its centralized vendor management enhances its negotiating power and improves its ability to manage vendor payables.
Store Maintenance and Renovation
From time to time, Maison conducts maintenance on the fixtures and equipment for its stores. Any maintenance or renovations could interrupt the operation of our stores and result in a decline in customer volume. Significant maintenance or renovation would affect our operation and operating results. Meanwhile, improving the store environment can also attract more customers and lead to an increase in sales. Maison focused on improving stores for the three months ended July 31, 2023 and 2022. We spent $80,274 for the three months ended July 31, 2023 for repairs and maintenance of all departments, a slight decrease of $4,693 compared to $84,967 for the three months ended July 31, 2022.
Critical Accounting Policy
Related Parties
The Company identifies related parties, and accounts for, and discloses related party transactions in accordance with ASC Topic 850 “Related Party Disclosures” and other relevant ASC standards. Parties are considered to be related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal with if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the periods presented. Significant accounting estimates are used for, but not limited to, useful lives of property and equipment, commitments and contingencies, inventory reserve, allowance for estimated uncollectable accounts receivables and other receivables, impairment of long-lived assets, contract liabilities, and valuation of deferred tax assets. Given the global economic climate and additional or unforeseen effects from the COVID-19 pandemic, these estimates have become more challenging, and actual results could differ materially from these estimates.
Inventories
Inventories, consisting of products available for sale, are primarily accounted for using the first-in, first-out method, and are valued at the lower of cost and net realizable value. This valuation requires us to make judgments, based on currently available information, about the likely method of disposition, such as through sales to individual customers, returns to product vendors, or liquidations, and expected recoverable values of each disposition category. The Company records inventory shrinkage based on historical data and management’s estimates and provided a reserve for inventory shrinkage for the three months ended July 31, 2023 and 2022.
Revenue Recognition
The Company adopted ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), from May 1, 2020 using the modified retrospective transition approach to all contracts that did not have an impact on the beginning retained earnings on May 1, 2020. The Group’s revenue recognition policies effective on the adoption date of ASC 606 are presented as below.
In accordance with ASC Topic 606, the Company’s performance obligation is satisfied upon the transfer of goods to the customer, which occurs at the point of sale. Revenues are recorded net of discounts, sales taxes, and returns and allowances.
The Company sells Company gift cards to customers. There are no administrative fees on unused gift cards and the gift cards do not have an expiration date. Gift card sales are recorded as contract liability when sold and are recognized as revenue when either the gift card is redeemed or the likelihood of the gift card being redeemed is remote (“gift card breakage”). The Company’s gift card breakage rate is based upon historical redemption patterns and it recognizes breakage revenue utilizing the redemption recognition method. The Company also offers discounts on the gift cards sold to its customers. The discounts are recorded as sales discount when gift card been redeemed.
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The Company’s contract liability related to gift cards was $370,836 and $449,334 as of July 31, 2023 and April 30, 2023, respectively.
Leases
On May 1, 2020, the Company adopted ASU 2016-02, Lease (FASB ASC Topic 842). The adoption of Topic 842 resulted in the presentation of operating lease right-of-use (“ROU”) assets and operating lease liabilities on the consolidated balance sheet. See Note 14 — “Leases” for additional information.
The Company determines if an arrangement contains a lease at the inception of a contract under ASC Topic 842. At the commencement of each lease, management determines its classification as an operating or finance lease. For leases that qualify as operating leases, ROU assets and liabilities are recognized at the commencement date based on the present value of any remaining lease payments over the lease term. For this purpose, the Company considers only payments that are fixed and determinable at the time of commencement. As most of its leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The ROU assets include adjustments for accrued lease payments.
ROU assets also include any lease payments made prior to commencement and are recorded net of any lease incentives received. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that it will exercise such options.
A short-term lease is defined as a lease that, at the commencement date, has a lease term of 12 months or less and does not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise. When determining whether a lease qualifies as a short-term lease, the Company evaluates the lease term and the purchase option. Hence, the Company does not recognize any operating lease ROU assets and operating lease liabilities for short-term leases.
The Company evaluates the carrying value of ROU assets if there are indicators of impairment and review the recoverability of the related asset group. If the carrying value of the asset group is determined to not be recoverable and is in excess of the estimated fair value, the Company will record an impairment loss in other expenses in the consolidated statements of operations.
The Company also subleases certain mini stores that are within the supermarket to other parties. The Company collects security deposits and rent from these sub-lease tenants. The rent income collected from sub-lease tenants recognized as rental income and deducted occupancy cost.
Recently Issued Accounting Pronouncements
Please refer to Note 2 “Summary of significant accounting policies” for details.
How to Assess Our Performance
In assessing performance, management considers a variety of performance and financial measures, including principal growth in net revenue, gross profit and selling, and general and administrative expenses. The key measures that we use to evaluate the performance of our business are set forth below.
Net Revenue
Our net revenues comprise gross revenues net of returns and discounts. We do not record sales taxes as a component of retail revenues as it is considered a pass-through conduit for collecting and remitting sales taxes.
Gross Profit
We calculate gross profit as net revenues less cost of revenues and occupancy costs. Gross margin represents gross profit as a percentage of net revenues. Occupancy costs include store rental costs. The components of our cost of revenues and occupancy costs may not be identical to those of our competitors. As a result, our gross profit and gross margin may not be comparable to similar data made available by our competitors.
Cost of revenue includes the purchase price of consumer products, inbound and outbound shipping costs, including costs related to our sorting and delivery center, which is the warehouse attached to the El Monte store, and where we are the transportation service provider. Shipping costs to receive products from our suppliers are included in our inventory and recognized in cost of revenues upon sale of products to our customers.
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Selling, General and Administrative Expenses
Selling, general, and administrative expenses primarily consist of retail operational expenses, administrative salaries and benefits costs, marketing, advertising, and corporate overhead.
Marketing costs primarily consist of advertising, payroll, and related expenses for personnel engaged in marketing and selling activities.
General and administrative expenses primarily consist of costs for corporate functions, including payroll and related expenses; facilities and equipment expenses, such as depreciation and amortization expense and rent; and professional fees and litigation costs.
Results of Operations for the Three Months Ended July 31, 2023 and 2022
| Three Months ended July 31, | ||||||||||||||||
| 2023 | 2022 | Change | Percentage Change | |||||||||||||
| Net revenues | $ | 13,752,315 | $ | 11,409,688 | $ | 2,342,627 | 20.5 | % | ||||||||
| Cost of revenues | 10,646,219 | 9,104,839 | 1,541,380 | 16.9 | % | |||||||||||
| Gross profit | 3,106,096 | 2,304,849 | 801,247 | 34.8 | % | |||||||||||
| Operating expenses | ||||||||||||||||
| Selling expenses | 2,264,550 | 2,168,218 | 96,332 | 4.4 | % | |||||||||||
| General and administrative expenses | 1,058,291 | 657,628 | 400,663 | 60.9 | % | |||||||||||
| Total operating expenses | 3,322,841 | 2,825,846 | 496,995 | 17.6 | % | |||||||||||
| Loss from operations | (216,745 | ) | (520,997 | ) | 304,252 | 58.4 | % | |||||||||
| Other income, net | 355,493 | 124 | 355,369 | 286,587.9 | % | |||||||||||
| Interest expense | (46,566 | ) | (31,588 | ) | 14,978 | 47.4 | % | |||||||||
| Income (loss) before income taxes | 92,182 | (552,461 | ) | 644,643 | 116.7 | % | ||||||||||
| Income tax provisions | (118,906 | ) | (17,926 | ) | 100,980 | 563.3 | % | |||||||||
| Net loss | (26,724 | ) | (570,387 | ) | 543,663 | 95.3 | % | |||||||||
| Net income attributable to noncontrolling interests | 78,215 | 26,653 | 51,562 | 193.5 | % | |||||||||||
| Net loss attributable to Maison Solutions Inc. | $ | (104,939 | ) | $ | (597,040 | ) | $ | 492,101 | 82.4 | % | ||||||
Revenues
| Three Months ended July 31, | ||||||||||||||||
| 2023 | 2022 | Change | Percentage Change | |||||||||||||
| Perishables | $ | 7,723,846 | $ | 6,454,274 | $ | 1,269,572 | 19.7 | % | ||||||||
| Non-perishables | 6,028,469 | 4,955,414 | 1,073,055 | 21.7 | % | |||||||||||
| Net revenue | $ | 13,752,315 | $ | 11,409,688 | $ | 2,342,627 | 20.5 | % | ||||||||
Our net revenues were approximately $13.8 million for the three months ended July 31, 2023, an increase of approximately $2.3 million or 20.5%, from approximately $11.4 million for the three months ended July 31, 2022. The increase in net revenues was driven by the inclusion of revenues from our newly acquired subsidiary Maison Monterey Park supermarket by $3.3 million which was partially offset by decreased sales at Maison San Gabriel by $0.7 million, decreased sales at Maison Monrovia by $0.2 million and decreased sales at Maison El Monte by $66,062. The $0.9 million decrease for our existing three stores was mainly due to (i) the lessening impact of the COVID-19 pandemic and more people eating out instead of eating pre-made meals from grocery stores and cooking at home; (ii) increased competition from two newly opened Asian supermarkets near Maison San Gabriel, and (iii) a reduction in purchases through our online purchase business as a result of customers returning to switching back to pre-pandemic shopping patterns and habits as the impact of COVID-19 continued to decline.
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Cost of Revenues
| Three Months ended July 31, | ||||||||||||||||
| 2023 | 2022 | Change | Percentage Change | |||||||||||||
| Total cost of revenues | $ | 10,646,219 | $ | 9,104,839 | $ | 1,541,380 | 16.9 | % | ||||||||
Cost of revenues includes cost of supermarket product sales and occupancy costs, which are store rent expense, depreciation for store property and equipment, inventory shrinkage costs and store supplies. The depreciation expense comes from machinery & equipment, such as refrigerator, water heater, forklift, and freezer and furniture & fixtures, such as metal shelves, shopping cart, and LED lights. Shrinkage costs are different for different types of products. For example, fruits and vegetables have a high allowance rate during the receiving and display process. The seafood and meat departments have a low allowance rate because the non-fresh products can freeze and sell for the same price or even higher price after being cut. The cost of revenues increased by approximately $1.5 million, from $9.1 million for three months ended July 31, 2022, to approximately $10.6 million for the three months ended July 31, 2023. The increase in the cost of revenue was due to the inclusion of cost of revenue from our newly acquired Maison Monterey Park supermarket of $3.3 million which was partially offset by decreased freight costs from the other three supermarkets.
Gross Profit and Gross Margin
| Three Months ended July 31, | ||||||||||||||||
| 2023 | 2022 | Change | Percentage Change | |||||||||||||
| Gross Profit | $ | 3,106,096 | $ | 2,304,849 | $ | 801,247 | 34.8 | % | ||||||||
| Gross Margin | 22.6 | % | 20.2 | % | 2.4 | % | ||||||||||
Gross profit was approximately $3.1 million and $2.3 million for the three months ended July 31, 2023 and 2022, respectively. Gross margin was 22.6% and 20.2% for the three months ended July 31, 2023 and 2022, respectively. Our supermarkets’ sales profit margins increased by 2.4% from the three months ended July 31, 2023 compared to the three months ended July 31, 2022, which was mainly due to 1) the overall 3% - 5% increase of our grocery products for all the supermarkets in the end of 2022 in response to the high inflation of consumer products, and 2) the increased profit margin of our El Monte store and Monrovia store, as we hired new grocery department managers for these two stores with extensive industry experience to assist in reorganizing the stores, developing new marketing strategies to promote sales, and setting up effective product purchasing policies to lower the costs.
Total Operating Expenses
| Three Months ended July 31, | ||||||||||||||||
| 2023 | 2022 | Change | Percentage Change | |||||||||||||
| Selling Expense | $ | 2,264,550 | $ | 2,168,218 | $ | 96,332 | 4.4 | % | ||||||||
| General and Administrative Expense | 1,058,291 | 657,628 | 400,663 | 60.9 | % | |||||||||||
| Total Operating Expense | $ | 3,322,841 | $ | 2,825,846 | $ | 496,995 | 17.6 | % | ||||||||
| Percentage of revenue | 24.2 | % | 24.8 | % | (0.6 | )% | ||||||||||
Total operating expenses were approximately $3.3 million for the three months ended July 31, 2023, an increase of approximately $0.5 million, compared to approximately $2.8 million for the three months ended July 31, 2022. Total operating expenses as a percentage of revenues were 24.2% and 24.8% for the three months ended July 31, 2023 and 2022, respectively. The increase in operating expenses was primarily attributable to the increase in selling expenses, which includes the increase in advertising expenses, security and alarm expenses, and credit card service charges. Advertising and promotion expense increased by $20,559 in the three months ended July 31, 2023, as compared to the three months ended July 31, 2022 due to outsourcing our weekly advertising activities to a professional advertising firm for achieving the optimal result. Alarm and security expenses increased by $24,854 in the three months ended July 31, 2023, as compared to the three months ended July 31, 2022 due to the acquisition of new store and enhancement of our stores’ security in response to an increased crime rate in the nearby areas. Credit card service charges increased by $87,283 due to the increased sales from the acquisition of Maison Monterey Park. The increase was partially offset by decreased payroll expense by $35,565 in the three months ended July 31, 2023, as compared to the three months ended July 31, 2022 due to the resignation of our two major and senior buyers for our vegetable and fruit department in June 2022, however we hired a new buyer in the end of 2022.
The increase in general and administrative expenses during the three months ended July 31, 2023 was primarily due to increased IPO related professional fees, including legal, audit, and consulting fees of approximately $0.5 million. The increase was partially offset by decreased traveling expense of $46,045 due to the significant decrease in traveling. During the three months ended July 31, 2023 and 2022, we had professional fees of approximately $0.7 million and $0.3 million, respectively.
Other Income (Expense), Net
Other income was $355,493 for the three months ended July 31, 2023 and $124 for the three months ended July 31, 2022. The increase in other income was mainly attributable to the $383,161 employee retention credit (“ERC”) received for the three months ended July 31,2023 (after net-off with investment loss of $28,456). The ERC is a refundable tax credit for businesses that continued to pay employees while shut down due to the COVID-19 pandemic or had significant declines in gross receipts from March 13, 2020 to December 31, 2021.
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Interest Expense, Net
Interest expense was $46,566 for the three months ended July 31, 2023, an increase of $14,978, from interest expense of $31,588 for the three months ended July 31, 2022. The interest expense was for the SBA loan and AFNB loan.
Income Taxes Provisions
Income tax expense was $118,906 for the three months ended July 31, 2023, an increase of $100,980, from income taxes expense of $17,926 for the three months ended July 31, 2022. The increase was mainly due to increased taxable income for the three months ended July 31, 2023 compared to loss for the three months ended July 31, 2022.
Net Loss
Net loss attributable to the Company was $104,939 for the three months ended July 31, 2023, a decrease of $492,101, or 82.4%, from a $597,040 net loss attributable to the Company for the three months ended July 31, 2022. This was mainly attributable to the reasons discussed above, which included an approximately $0.8 million increase in gross profit and a $0.3 million increase in other income, which was partially offset by increased operating expenses of $0.5 million and increased income tax expense of $0.1 million.
Liquidity and Capital Resources
Cash Flows for the Three Months Ended July 31, 2023 Compared to the Three Months Ended July 31, 2022
As of July 31, 2023, we had cash, cash equivalents and restricted cash of approximately $1.6 million. We had net loss attributable to us of $104,939 for the three months ended July 31, 2023 and had a working capital deficit of approximately $1.4 million as of July 31, 2023. As of July 31, 2023, the Company had outstanding loan facilities of approximately $0.23 million due to American First National Bank, a National Banking Association, and approximately $2.60 million due to the SBA. The covenants of the loans require that, so long as the loan agreements remain in effect, each borrower must maintain a ratio of debt service coverage of at least 1.3 to 1.0. This coverage ratio is evaluated as of the end of each fiscal year. As of April 30, 2022, the coverage ratio for Maison Monrovia was 1.01 and the coverage ratio for Maison San Gabriel was 2.00. The Company reported this situation to American First National Bank and there was no change on the note’s term up to the date the Company issued these consolidated financial statements. However, due to the violation of a covenant as of April 30, 2022, the Company reclassified the loan balance of $313,278 under Maison Monrovia as current loan payable. As of July 31, 2023, the coverage ratio for Maison Monrovia was 0.54 and the coverage ratio for Maison San Gabriel was 0.88. However, the new coverage ratio would not change the existing treatment for the loan of Good Fortune Supermarket of Monrovia, LP.
In assessing its liquidity, management monitors and analyzes the Company’s cash on-hand, its ability to generate sufficient revenue sources in the future, and its operating and capital expenditure commitments. We have funded our working capital, operations and other capital requirements in the past primarily by equity contributions from shareholders, cash flow from operations, government grants, and bank loans. Cash is required to pay purchase costs for inventory, rental expenses, salaries, income taxes, other operating expenses and to repay debts. Our ability to repay our current expenses and obligations will depend on the future realization of our current assets. Management has considered the historical experience, the economy, trends in the retail grocery industry, the expected collectability of our accounts receivable and the realization of the inventories as of July 31, 2023 and April 30, 2023. Our ability to continue to fund these items may be affected by general economic, competitive, and other factors, many of which are outside of our control.
We plan to acquire and open additional supermarkets with a portion of the proceeds of our initial public offering to expand our footprint to both the West Coast and the East Coast. This includes completing the acquisition of the remaining 90% equity interests in both the Alhambra Store and Dai Cheong; opening new satellite stores in both Southern and Northern California in 2024 or 2025; acquiring up to five (5) center stores in 2024 and 2025 as part of our East Coast expansion; and establishing a new warehouse in New York City to serve the East Coast by the end of 2025. Upon completion of our East Coast expansion, we expect that we will operate a total of ten center stores by the end of 2025.
To accomplish such expansion plan, we estimate the total related capital investment and expenditures to be approximately $35 million to $40 million, among which approximately $13 million to $16 million will be required within the next 12 months to support our preparation and opening of new stores in Southern and Northern California and acquiring additional supermarkets on the East Coast. This is based on management’s best estimate as of the date of this Report. We will also need approximately $0.23 million to fully settle our loan from American First National Bank.
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We believe that our current cash and cash flows provided by operating activities will be sufficient to meet our working capital needs for our existing business in the next 12 months from the date of the issuance date of the financial statements. However, we plan to use part of the proceeds from our initial public offering to support our business expansion described above. We may also seek additional financing, to the extent needed, and there can be no assurance that such financing will be available on favorable terms, or at all. Such financing may include the use of additional debt or the sale of additional equity securities. Any financing which involves the sale of equity securities or instruments that are convertible into equity securities could result in immediate and possibly significant dilution to our existing shareholders. If it is determined that the cash requirements exceed the Company’s amounts of cash on hand, the Company may also seek to issue additional debt or obtain financial support from shareholders. The principal stockholder of the Company has made a commitment to provide financial support to the Company whenever necessary and will continue to provide support following the consummation of our initial public offering.
All of our business expansion endeavors involve risks and will require significant management, human resources, and capital expenditures. There is no assurance that the investment to be made by us as contemplated under our future expansion plans will be successful and generate the expected return. If we are not able to manage our growth or execute our strategies effectively, or at all, our business, results of operations, and prospects may be materially and adversely affected.
The following table summarizes our cash flow data for the three Months ended July 31, 2023 and 2022.
| Three
Months ended July 31, | ||||||||
| 2023 | 2022 | |||||||
| Net cash provided by operating activities | $ | 596,541 | $ | 519,636 | ||||
| Net cash used in investing activities | (1,452,809 | ) | - | |||||
| Net cash provided by (used in) financing activities | (101,417 | ) | 207,543 | |||||
| Net change in cash and restricted cash | $ | (957,685 | ) | $ | 727,179 | |||
Operating Activities
Net cash provided by operating activities was approximately $0.6 million for the three months ended July 31, 2023, mainly comprised of a decrease to accounts receivable from related parties of $22,611, decrease to inventories of $111,174, decrease to prepayments of $463,423, decrease to other receivables and other current assets of $200,754, an increase of outstanding accounts payable from related party of $16,402, an increase of operating lease liabilities of $67,547, and an increase of taxes payables of $120,665.
The net cash provided by operating activities for the three months ended July 31, 2023 was mainly offset by net loss of $26,724 with non-cash adjustment to net loss including depreciation expense of $67,236, bad debt reversal of $105,322, provision for inventory shrinkage reversal of $3,237, an increase of accounts receivable of $76,974, an increase of payment for accrued expenses and other payables of $58,795, and an increase of payment to accounts payable of $154,894.
We had a net loss of $26,724 for the three months ended July 31, 2023, a decrease of $543,663 compared with a net loss of $570,387 for the three months ended July 31, 2022, our cash inflow of $596,541 for the three months ended July 31, 2023 represented an increase of $76,905, compared with a $519,636 cash inflow in the three months ended July 31, 2022. The increased net cash inflow for the three months ended July 31, 2023 was mainly due to decreased outstanding accounts receivable of $318,081, decreased payments for account payable from related parties of $551,954, decreased payments for taxes payables of $102,584, which were partially offset by decreased cash inflow from prepayments of $204,231, decreased cash inflow from accounts payable of $479,542, decreased cash inflow from accrued expenses and other payables of $128,227, increased cash outflow from contract liabilities of $19,725, and increased cash outflow from other long-term payables of 57,436.
Net cash provided by operating activities was $519,636 for the three months ended July 31, 2022, mainly comprised of a decrease to accounts receivable from related parties of $322,815, decrease to prepayments of $667,654, decrease to payment for other receivables and other current assets of $349,964, decrease to purchase of inventories of $68,533, an increase of outstanding accounts payable of $324,648, an increase of outstanding accrued expenses and other payables of $69,432, an increase of operating lease liabilities of $46,862, and an increase of other loan-term payable of $61,913.
The net cash provided by operating activities for the three months ended July 31, 2022 was mainly offset by net loss of $570,387 with non-cash adjustment to net loss including depreciation expense of $141,498, an increase of accounts receivable of $395,055, and a decrease of outstanding accounts payable from related parties of $535,552.
33
Investing Activities
Net cash used in investing activities was approximately $1.5 million for the three months ended July 31, 2023, which mainly consisted of the purchase of equipment of $12,809, and payment for 40% investment into Good Fortune Arcadia supermarket of $1.4 million.
Net cash used in investing activities was $0 for the three months ended July 31, 2022.
Financing Activities
Net cash used in financing activities was approximately $0.1 million for the three Months ended July 31, 2023, which mainly consisted of repayment on loans payable of $101,417.
Net cash provided by financing activities was approximately $0.2 million for the three months ended July 31, 2022, which mainly consisted of bank overdrafts of $281,940, but was partly offset with borrowings from related parties of $482,120.
Debt
American First National Bank — a National Banking Association
On March 2, 2017, Good Fortune Supermarket of Monrovia, LP entered into a $1.0 million Business Loan Agreement with American First National Bank, a National Banking Association, at 4.5% annual interest rate for the years ended April 30, 2022 and 2021, with interest ranging from 4.5% to 7.75% for the year ended April 30, 2023, and with a maturity date on March 2, 2024. On March 2, 2017, Good Fortune Supermarket of San Gabriel, LP, entered into a $1.0 million Business Loan Agreement with American First National Bank, a National Banking Association, at 4.5% annual interest rate for the year ended April 30, 2022 and 2021, with interest ranging from 4.5% to 7.75% for the year ended April 30, 2023, and with and maturity date on March 2, 2024. The interest rate for these two loans is subject to change from time to time based on changes in an independent index which is the Wall Street Journal US prime as published in the Wall Street Journal Money Rate Section. The annual interest rate was ranging from 4.5% to 5.75% for the three months ended July 31, 2022, and was 7.75% for the three months ended July 31, 2023 for these two loans. The covenant of the loans required that, so long as the loan agreements remains in effect, the borrower will maintain a ratio of debt service coverage within 1.300 to 1.000. This coverage ratio will be evaluated as of the end of each fiscal year. Due to the violation of a covenant as of April 30, 2022, the Company reclassified the loan balance of $313,278 under Good Fortune Supermarket of Monrovia, LP as current loan payable since then.
U.S. Small Business Administration
On June 15, 2020, Maison Monrovia entered into a $150,000 Business Loan Agreement with Small Business Administration, SBA, at 3.75% annual interest rate and the maturity date on June 15, 2050. On June 15, 2020, Maison San Gabriel entered into a $150,000 Business Loan Agreement with Small Business Administration, SBA, at 3.75% annual interest rate and the maturity date on June 15, 2050. On June 15, 2020, Maison El Monte, entered into a $150,000 Business Loan Agreement with Small Business Administration, SBA, at 3.75% annual interest rate and the maturity date on June 15, 2050. Per the SBA loan agreement, all these three loans’ interest payments were deferred to December 2022.
On January 12, 2022, Maison San Gabriel received an extra $1,850,000 fund from Small Business Administration, SBA, at 3.75% annual interest rate and the maturity date on June 15, 2050. Maison El Monte received an extra $350,000 from Small Business Administration, SBA, at 3.75% annual interest rate and the maturity date on June 15, 2050.
Commitments and Contractual Obligations
The following table presents the Company’s material contractual obligations as of July 31, 2023:
| Contractual Obligations | Total | Less
than 1 year | 1–3 years | 3–5 years | Thereafter | |||||||||||||||
| American First National Bank, a National Banking Association | $ | 227,166 | $ | 227,166 | $ | — | $ | — | $ | — | ||||||||||
| U.S. Small Business Administration | 2,603,544 | 58,323 | 133,419 | 142,417 | 2,269,386 | |||||||||||||||
| Operating Lease Obligations and others | 24,031,836 | 1,780,559 | 3,993,768 | 4,425,476 | 13,832,033 | |||||||||||||||
| $ | 26,862,546 | $ | 2,066,047 | $ | 4,127,187 | $ | 4,567,893 | $ | 16,101,419 | |||||||||||
34
The following table presents the Company’s material contractual obligations as of April 30, 2023:
| Contractual Obligations | Total | Less
than 1 year | 1–3 years | 3–5 years | Thereafter | |||||||||||||||
| American First National Bank, a National Banking Association | $ | 307,797 | $ | 307,797 | $ | — | $ | — | $ | — | ||||||||||
| U.S. Small Business Administration | 2,624,330 | 63,030 | 132,341 | 141,255 | 2,287,704 | |||||||||||||||
| Operating Lease Obligations and others | 24,472,942 | 1,761,182 | 3,920,356 | 4,510,125 | 14,281,279 | |||||||||||||||
| $ | 27,405,069 | $ | 2,132,009 | $ | 4,052,697 | $ | 4,651,380 | $ | 16,568,983 | |||||||||||
Off-Balance Sheet Arrangements
The Company, has guaranteed all of the loans described above and its CEO Mr. John Xu has personally guaranteed the loans with the U.S. Small Business Administration. The Company does not have any other off-balance sheet arrangements that either have, or are reasonably likely to have, a current or future material effect on its financial condition.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
This item is not required for smaller reporting companies.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered in this Quarterly Report on Form 10-Q. Based on this evaluation and the material weaknesses described below, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of July 31, 2023.
As described in our Annual Report on Form 10-K for the year ended April 30, 2023, under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, our management conducted an evaluation of the effectiveness of our internal control over financial reporting as of April 30, 2023 based on the framework in “Internal Control — Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the control deficiencies identified during this evaluation and set forth below, our management concluded that we did not maintain effective internal control over financial reporting as of April 30, 2023 due to the existence of a material weakness in internal control over financial reporting as described below.
As set forth below, management will take steps to remediate the control deficiencies identified below. Notwithstanding the control deficiencies described below, we have performed additional analyses and other procedures to enable management to conclude that our consolidated financial statements included in this Form 10-Q fairly present, in all material respects, our financial condition and results of operations as of and for the quarter ended July 31, 2023.
Material Weakness
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
35
Management has determined that the Company did not maintain effective internal control over financial reporting as of the three-month period ended July 31, 2023, due to the existence of the following material weakness identified by management, as related to: (i) insufficient full-time employees with the necessary levels of accounting expertise and knowledge to compile and analyze consolidated financial statements and related disclosures in accordance with U.S. GAAP and address complex accounting issues under U.S. GAAP; (ii) the lack of timely related party transaction monitoring and the failure to keep a related party list and keep records of related party transactions on a regular basis; (iii) the failure to keep an up-to-date perpetual inventory control system or timely perform company-wide inventory count at or near its fiscal year-end date. Specifically, maintaining records for inbound warehouse purchases or have specialized personnel to scan goods into the warehouse on a timely basis; (iv) the lack of adequate policies and procedures in control environment and control activities to ensure that the Company’s policies and procedures have been carried out as planned; ;(v) information technology general control in the areas of: (1) Risk and Vulnerability Assessment; (2) Selection and Management/Monitoring of Critical Vendors; (3) System Development and Change Management; (4) Backup Management; (5) System Security & Access: Deficiency in the Area of Audit Trail Record Control, Password Management, Vulnerability Scanning or Penetration Testing; (6) Segregation of Duties, Privileged Access, and Monitoring Controls; and (7) System Monitoring and Incident Management; and (vi) accounting personnel have the ability in the accounting system to prepare, review, and post the same accounting journal entry.
Plan of Remediation of Material Weakness in Internal Control Over Financial Reporting
Following the identification and communication of the material weaknesses, management is in the process of taking certain actions to remediate the material weakness related to our lack of U.S. GAAP experience. We plan to hire additional credentialed professional staff and consulting professionals with greater knowledge and experience of U.S. GAAP and related regulatory requirements to oversee our financial reporting process in order to ensure our compliance with U.S. GAAP and other relevant securities laws. In addition, we plan to provide additional training to our accounting personnel on U.S. GAAP, and other regulatory requirements regarding the preparation of financial statements. Until such time as we hire qualified accounting personnel with the requisite U.S. GAAP knowledge and experience and train our current accounting personnel, we have engaged an outside CPA with U.S. GAAP knowledge and experience to supplement our current internal accounting personnel and assist us in the preparation of our financial statements to ensure that our financial statements are prepared in accordance with U.S. GAAP.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on Effectiveness of Controls and Procedures
In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.
36
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In the ordinary course of our business, we are subject to periodic lawsuits, investigations and claims, including, but not limited to, contractual disputes, employment, health and safety matters. Although we cannot predict with certainty the ultimate resolution of any lawsuits, investigations and claims asserted against it, we do not believe any currently pending legal proceedings to which the Company is a party will have a material adverse effect on our business, prospects, financial condition, cash flows or results of operations.
ITEM 1A. RISK FACTORS
Not required for a smaller reporting company. However, as of the date of this Report, there have been no material changes to the risk factors included in our Annual Report on Form 10-K for the year ended April 30, 2023.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable.
ITEM 5. OTHER INFORMATION
None.
37
ITEM 6. EXHIBITS
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
| * | Filed herewith. |
| ** | Furnished herewith. |
38
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| MAISON SOLUTIONS INC. | ||
| Date: September 12, 2023 | By: | /s/ John Xu |
| Name: | John Xu | |
| Title: | Chief Executive Officer, Chairman and President | |
| (Principal Executive Officer) | ||
| Date: September 12, 2023 | By: | /s/ Alexandria M. Lopez |
| Name: | Alexandria M. Lopez | |
| Title: | Chief Financial Officer | |
| (Principal Financial Officer and Principal Accounting Officer) | ||
39
Exhibit 31.1
CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, John Xu, certify that:
| (1) | I have reviewed this Quarterly Report on Form 10-Q of Maison Solutions Inc.; |
| (2) | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| (3) | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| (4) | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| (5) | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| September 12, 2023 | By: | /s/ John Xu |
| John Xu | ||
| Chief Executive Officer, Chairman and President | ||
| (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Alexandria M. Lopez, certify that:
| (1) | I have reviewed this Quarterly Report on Form 10-Q of Maison Solutions Inc.; |
| (2) | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| (3) | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| (4) | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| (5) | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| September 12, 2023 | By: | /s/ Alexandria M. Lopez |
| Alexandria M. Lopez Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT
TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the accompanying Quarterly Report on Form 10-Q of Maison Solutions Inc. (the "Company”) for the quarter ended July 31, 2023, as filed with the U.S. Securities and Exchange Commission (the “Report”), the undersigned hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to my knowledge and belief, that:
| (1) | the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
| (2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| September 12, 2023 | By: | /s/ John Xu |
| John Xu | ||
| Chief Executive Officer, Chairman and President (Principal Executive Officer) |
Exhibit 32.2
CERTIFICATION PURSUANT
TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the accompanying Quarterly Report on Form 10-Q of Maison Solutions Inc. (the "Company”) for the quarter ended July 31, 2023, as filed with the U.S. Securities and Exchange Commission (the “Report”), the undersigned hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to my knowledge and belief, that:
| (1) | the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
| (2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| September 12, 2023 | By: | /s/ Alexandria M. Lopez |
| Alexandria M. Lopez | ||
|
Chief Financial Officer (Principal Financial Officer and |
Consolidated Balance Sheets (Parentheticals) - $ / shares |
Jul. 31, 2023 |
Apr. 30, 2023 |
|---|---|---|
| Class A Common Stock | ||
| Common stock par value (in Dollars per share) | $ 0.0001 | $ 0.0001 |
| Common stock, shares authorized | 92,000,000 | 92,000,000 |
| Common stock, shares issued | 13,760,000 | 13,760,000 |
| Common stock, shares outstanding | 13,760,000 | 13,760,000 |
| Class B Common Stock | ||
| Common stock par value (in Dollars per share) | $ 0.0001 | $ 0.0001 |
| Common stock, shares authorized | 3,000,000 | 3,000,000 |
| Common stock, shares issued | 2,240,000 | 2,240,000 |
| Common stock, shares outstanding | 2,240,000 | 2,240,000 |
Consolidated Statements of Operations (Unaudited) (Parentheticals) - $ / shares |
3 Months Ended | |
|---|---|---|
Jul. 31, 2023 |
Jul. 31, 2022 |
|
| Income Statement [Abstract] | ||
| Diluted | $ (0.01) | $ (0.04) |
| Diluted | 16,000,000 | 16,000,000 |
Consolidated Statements of Changes in Stockholders’ Equity (Deficit) (Unaudited) - USD ($) |
Class A
Common Stock
|
Class B
Common Stock
|
Additional Paid-in Capital |
Retained Earnings (Accumulated Deficit) |
Noncontrolling Interests |
Total |
|---|---|---|---|---|---|---|
| Balance at Apr. 30, 2022 | $ 1,376 | $ 224 | $ (729,093) | $ (119,551) | $ (847,044) | |
| Balance (in Shares) at Apr. 30, 2022 | 13,760,000 | 2,240,000 | ||||
| Net income (loss) | (597,040) | 26,653 | (570,387) | |||
| Balance at Jul. 31, 2022 | $ 1,376 | $ 224 | (1,326,133) | (92,898) | (1,417,431) | |
| Balance (in Shares) at Jul. 31, 2022 | 13,760,000 | 2,240,000 | ||||
| Balance at Apr. 30, 2023 | $ 1,376 | $ 224 | 522,710 | 267,947 | 792,257 | |
| Balance (in Shares) at Apr. 30, 2023 | 13,760,000 | 2,240,000 | ||||
| Net income (loss) | (104,939) | 78,215 | (26,724) | |||
| Balance at Jul. 31, 2023 | $ 1,376 | $ 224 | $ 417,771 | $ 346,162 | $ 765,533 | |
| Balance (in Shares) at Jul. 31, 2023 | 13,760,000 | 2,240,000 |
Organization |
3 Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
Jul. 31, 2023 | ||||||||||
| Organization [Abstract] | ||||||||||
| Organization | 1. Organization
Maison Solutions Inc. (“Maison”, the “Company”, and formerly known as “Maison International Inc.”) was founded on July 24, 2019 as an Illinois corporation with its principal place of business in California. In September 2021, the Company was redomiciled in the State of Delaware as a corporation registered under the laws of the State of Delaware.
Immediately upon formation, the Company acquired three retail Asian supermarkets with two brands (Good Fortune and Hong Kong Supermarkets) in Los Angeles, California and rebranded them as “HK Good Fortune Supermarkets”. Upon completion of these acquisitions, these entities became controlled subsidiaries of the Company (hereafter collectively referred to as “Maison Group”).
The Company, through its four subsidiaries engages in the specialty grocery retailer business. The Company is a fast-growing specialty grocery retailer offering traditional Asian food and merchandise to U.S. consumers, in particular to Asian-American communities. |
Summary of Significant Accounting Policies |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Significant Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of significant accounting policies | 2. Summary of significant accounting policies
Basis of presentation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities Exchange Commission (“SEC”).
The interim consolidated financial information as of July 31, 2023 and for the three months periods ended July 31, 2023 and 2022 have been prepared without audit, pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures, which are normally included in consolidated financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to such rules and regulations. The interim consolidated financial information should be read in conjunction with the Financial Statements and the notes thereto, included in the Company’s Annual Report on Form 10-K for the fiscal year ended April 30, 2023, previously filed with the SEC on August 1, 2023.
In the opinion of management, all adjustments (which include all significant normal and recurring adjustments) necessary to present a fair statement of the Company’s interim consolidated financial position as of June 30, 2023, its interim consolidated results of operations and cash flows for the three months ended July 31, 2023 and 2022, as applicable, have been made. The interim results of operations are not necessarily indicative of the operating results for the full fiscal year or any future periods.
Principles of consolidation
The consolidated financial statements include the financial statements of the Company and its subsidiaries and, when applicable, entities for which the Company has a controlling financial interest. All transactions and balances among the Company and its subsidiaries have been eliminated upon consolidation.
Noncontrolling interests
The Company follows FASB (Financial Accounting Standards Board) ASC (Accounting Standards Codification) Topic 810, “Consolidation,” governing the accounting for and reporting of noncontrolling interests (“NCI”) in partially owned consolidated subsidiaries and the loss of control of subsidiaries. Certain provisions of this standard indicate, among other things, that NCI be treated as a separate component of equity, not as a liability, that increases and decreases in the parent’s ownership interest that leave control intact be treated as equity transactions rather than as step acquisitions or dilution gains or losses, and that losses of a partially-owned consolidated subsidiary be allocated to noncontrolling interests even when such allocation might result in a deficit balance.
The net income attributed to NCI was separately designated in the accompanying statements of operations. Losses attributable to NCI in a subsidiary may exceed a NCI’s interests in the subsidiary’s equity. The excess attributable to NCI is attributed to those interests. NCIs shall continue to be attributed their share of losses even if that attribution results in a deficit NCIs balance.
As of July 31, 2023 and April 30, 2023, the Company had NCIs of $346,162 and $267,947, respectively, which represent 9% of the equity interest of Maison San Gabriel, 14.75% of the equity interest of Maison Monrovia and 8.33% of the equity interest of Maison El Monte. For the three months ended July 31, 2023 and 2022, the Company had net income of $78,215 and $26,653, respectively, that were attributable to NCIs.
Liquidity
As reflected in the accompanying consolidated financial statements, the Company had retained earnings of $417,771 at July 31, 2023, the Company had net loss attributable to the Company of $104,939 and $597,040 for the three months ended July 31, 2023 and 2022, respectively. The management plans to increase its revenue by strengthening its sales force, providing attractive sales incentive programs, recruiting experienced industry-related managerial personnel, and increasing marketing and promotion activities. Management also intends to raise additional funds by way of a private or public offering, or by obtaining loans from banks or others.
The Company had $1.61 million cash on hand and working capital deficit of $1.44 million at July 31, 2023. The Company has historically funded its working capital needs primarily from operations. The working capital requirements are affected by the efficiency of operations and depend on the Company’s ability to increase its revenue. The Company believes that its cash on hand and operating cash flows will be sufficient to fund its operations over at least the next 12 months from the date of issuance of these financial statements. However, the Company may need additional cash resources in the future if the Company experiences changed business conditions or other developments, and may also need additional cash resources in the future if the Company wishes to pursue opportunities for investment, acquisition, strategic cooperation or other similar actions. If it is determined that the cash requirements exceed the Company’s amounts of cash on hand, the Company may seek to issue debt or equity securities or obtain a credit facility.
Use of estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the periods presented. Significant accounting estimates are used for, but not limited to, useful lives of property and equipment, commitments and contingencies, inventory reserve, allowance for estimated uncollectable accounts receivable and other receivables, impairment of long-lived assets, contract liabilities and valuation of deferred tax assets. Given the global economic climate and additional or unforeseen effects from the COVID-19 pandemic, these estimates have become more challenging, and actual results could differ materially from these estimates.
Cash and cash equivalents
Cash and equivalents include cash on hand, demand deposits and short-term cash investments that are highly liquid in nature and have original maturities when purchased of three months or less. The Company’s cash is maintained at financial institutions in the United States of America. Deposits in these financial institutions may, from time to time, exceed the Federal Deposit Insurance Corporation (“FDIC”)’s federally insured limits. The standard insurance amount is $250,000 per depositor, per insured bank, for each account ownership category. The bank deposits exceeding the standard insurance amount will not be covered. As of July 31, 2023 and April 30, 2023, cash balances held in the banks, exceeding the standard insurance amount, are $862,081 and $1,819,766, respectively. The Company has not experienced any losses in accounts held in these financial institutions and believes it is not exposed to any risks on its cash held in these financial institutions.
Cash from operating, investing and financing activities of the consolidated statement of cash flows are net of assets and liabilities acquired of Maison Monterey Park.
Restricted cash
Restricted cash is an amount of cash deposited with banks in conjunction with borrowings from banks. Restriction on the use of such cash and the interest earned thereon is imposed by the banks and remains effective throughout the terms of the bank borrowings and notes payable. Restricted cash is classified as non-current assets on the Company’s consolidated balance sheets, as all the balances are not expected to be released to cash within the next 12 months. As of July 31, 2023 and April 30, 2023, the Company had restricted cash of $1,101 and $1,101, respectively.
Accounts receivable
The Company’s accounts receivable arises from product sales. The Company does not adjust its receivables for the effects of a significant financing component at contract inception if it expects to collect the receivables in one year or less from the time of sale. The Company does not expect to collect receivables greater than one year from the time of sale.
The Company’s policy is to maintain an allowance for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. As of July 31, 2023 and April 30, 2023, there was no allowance for the doubtful accounts.
Accounts receivable — related parties
Accounts receivable consist primarily of receivables from related parties on 30-day credit terms and are presented net of an allowance for estimated uncollectible amounts. The Company periodically assesses its accounts receivable for collectability on a specific identification basis. If collectability of an account becomes unlikely, an allowance is recorded for that doubtful account. Once collection efforts have been exhausted, the accounts receivable is written off against the allowance. As of July 31, 2023 and April 30, 2023, there was no allowance for the doubtful accounts.
Inventories, net
Inventories consisting of products available for sale are primarily accounted for using the first-in, first-out method and are valued at the lower of cost and net realizable value. This valuation requires the Company to make judgments, based on currently available information, about the likely method of disposition, such as through sales to individual customers, returns to product vendors, liquidations, and expected recoverable values of each disposition category. The Company records inventory shrinkage based on the historical data and management’s estimates and provides a reserve for inventory shrinkage for the three months ended July 31, 2023 and 2022.
Prepayments
Prepayments and deposits are mainly comprised of cash deposited and advanced to suppliers for future inventory purchases and services to be performed. This amount is refundable and bears no interest. For any prepayments that management determines will not be in receipts of inventories, services, or refundable, the Company recognizes an allowance account to reserve such balances. Management reviews its prepayments on a regular basis to determine if the allowance is adequate and adjusts the allowance when necessary. Delinquent account balances are written-off against allowance for doubtful accounts after management has determined that the likelihood of collection is not probable. As of July 31, 2023 and April 30, 2023, the Company had made prepayment to its vendors. The Company’s management continues to evaluate the reasonableness of the allowance policy and update it if necessary.
Other receivables and other current assets
Other receivables and other current assets primarily include non-interest-bearing loans of the other business entities. Management regularly reviews the aging of receivables and changes in payment trends and records allowances when management believes collection of amounts due are at risk. Accounts considered uncollectable are written off against allowances after exhaustive efforts at collection are made. As of July 31, 2023 and April 30, 2023, the Company did not have any bad debt allowance for other receivables.
Property and equipment
Property and equipment are stated at cost less accumulated depreciation. Depreciation expense is computed using the straight-line method over the estimated useful lives of the individual assets.
The following table includes the estimated useful lives of certain of our asset classes:
The cost and related accumulated depreciation of assets sold or otherwise retired are eliminated from the accounts and any gain or loss is included in the consolidated statements of operations. Expenditures for maintenance and repairs are charged to earnings as incurred, while additions, renewals and betterments, which are expected to extend the useful life of assets, are capitalized. The Company also re-evaluates the periods of depreciation to determine whether subsequent events and circumstances warrant revised estimates of useful lives.
Impairment of long-lived assets
Long-lived assets, which include property, plant and equipment, intangible assets with finite lives, and operating lease right-of-use assets, are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable.
Recoverability of long-lived assets to be held and used is measured by comparing the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the assets. Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable.
The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the asset’s carrying amount may not be recoverable. The Company conducts its long-lived asset impairment analyses in accordance with ASC 360-10-15, “Impairment or Disposal of Long-Lived Assets.” ASC 360-10-15 requires the Company to group assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities and evaluate the asset group against the sum of the undiscounted future cash flows. If the undiscounted cash flows do not indicate the carrying amount of the asset is recoverable, an impairment charge is measured as the amount by which the carrying amount of the asset group asset group exceeds its fair value based on discounted cash flow analysis or appraisals. There was no impairment of long-lived assets for the three months ended July 31, 2023 and 2022.
Security deposits
Security deposits primarily include deposits made to the Company’s landlord for its supermarkets and office facilities. These deposits are refundable upon expiration of the lease.
Long-term investment
The Company accounts for investments with less than 20% of the voting shares and does not have the ability to exercise significant influence over operating and financial policies of the investee using the cost method. The Company elects the measurements alternative and records investment in equity securities at the historical cost in its consolidated financial statements and subsequently records any dividends received from the net accumulated earrings of the investee as income. Dividends received in excess of earnings are considered a return of investment and are recorded as reduction in the cost of the investments.
In May 2021, the Company purchased a 10% equity interest in Dai Cheong Trading Inc., a grocery trading company, for $162,665 from DC Holding. DC Holding is 100% owned by John Xu, the Chairman and Chief Executive Officer of the Company. See Note 13 — “Related party balances and transactions”.
In December 2021, the Company purchased a 10% equity interest in HKGF Market of Alhambra, Inc, the legal entity holding the store for $40,775 from Ms. Grace Xu, sole shareholder of HKGF Market of Alhambra, Inc. and a related party as the spouse of Mr. John Xu, the Chairman and Chief Executive Officer of the Company. See Note 13 — “Related party balances and transactions”.
On June 27, 2023, the Company invested $1,440,000 for 40% interest in HKGF Market of Arcadia, LLC (“HKGF Arcadia”). See Note 8 — “Equity method investment”. The Company has determined that HKGF Arcadia is not a VIE and has evaluated its consolidation analysis under the voting interest model. Because the Company does not own greater than 50% of the outstanding voting shares, either directly or indirectly, it has accounted for its investment in HKGF Arcadia under the equity method of accounting. Under this method, the investor (“Maison”) recognizes its share of the profits and losses of the investee (“HKGF Arcadia”) in the periods when these profits and losses are also reflected in the accounts of the investee. Any profit or loss recognized by the investor appears in its income statement, any recognized profit increases the investment recorded by the investor, while a recognized loss decreases the investment.
Investment in equity securities is evaluated for impairment when facts or circumstances indicate that the fair value of the long-term investments is less than its carrying value. An impairment is recognized when a decline in fair value is determined to be other-than-temporary. The Company reviews several factors to determine whether a loss is other-than-temporary. These factors include, but are not limited to, the: (i) nature of the investment; (ii) cause and duration of the impairment; (iii) extent to which fair value is less than cost; (iv) financial condition and near-term prospects of the investments; and (v) ability to hold the security for a period sufficient to allow for any anticipated recovery in fair value. No event had occurred and indicated that other-than-temporary impairment existed and therefore the Company did not record any impairment charges for its investments for the three months ended July 31, 2023.
Goodwill
Goodwill is the excess of purchase price and related costs over the value assigned to the net tangible and identifiable intangible assets of businesses acquired. In accordance with ASC Topic 350, “Intangibles-Goodwill and Other,” goodwill is not amortized but is tested for impairment, annually or more frequently when circumstances indicate a possible impairment may exist. Impairment testing is performed at a reporting unit level.
Generally, the Company first performs a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If factors indicate that this is the case, the Company then estimates the fair value of the related reporting unit determined using discounted cash flow (“DCF”) analysis. A number of significant assumptions and estimates are involved in the application of the DCF analysis to forecast operating cash flows, including the discount rate, the internal rate of return and projections of realizations and costs to produce. Management considers historical experience and all available information at the time the fair values of its reporting units are estimated.
If the fair value is less than the carrying value, the goodwill of the reporting unit is determined to be impaired and the Company will record an impairment equal to the excess of the carrying value over its fair value. The Company did not record any impairment loss during the three Months ended July 31, 2023 and 2022.
Leases
On May 1, 2020, the Company adopted Accounting Standards Update (“ASU”) 2016-02, Lease (FASB ASC Topic 842). The adoption of Topic 842 resulted in the presentation of operating lease right-of-use (“ROU”) assets and operating lease liabilities on the consolidated balance sheet. See Note 14 — “Leases” for additional information.
The Company determines if an arrangement contains a lease at the inception of a contract under ASC Topic 842. At the commencement of each lease, management determines its classification as an operating or finance lease. For leases that qualify as operating leases, ROU assets and liabilities are recognized at the commencement date based on the present value of any remaining lease payments over the lease term. For this purpose, the Company considers only payments that are fixed and determinable at the time of commencement. As most of its leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The ROU assets include adjustments for accrued lease payments. The ROU asset also includes any lease payments made prior to commencement and is recorded net of any lease incentives received. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that it will exercise such options.
A short-term lease is defined as a lease that, at the commencement date, has a lease term of 12 months or less and does not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise. When determining whether a lease qualifies as a short-term lease, the Company evaluates the lease term and the purchase option. Hence, the Company does not recognize any operating lease ROU assets and operating lease liabilities for short-term leases.
The Company evaluates the carrying value of ROU assets if there are indicators of impairment and review the recoverability of the related asset group. If the carrying value of the asset group is determined to not be recoverable and is in excess of the estimated fair value, the Company will record an impairment loss in other expenses in the consolidated statements of operations.
The Company also subleases certain mini stores that are within the supermarket to other parties. The Company collects security deposits and rent from these sub-lease tenants. The rent income collected from sub-lease tenants recognized as rental income and deducted occupancy cost. Occupancy cost mainly consists of rents and common area maintenance fees.
Fair value measurements
The Company records its financial assets and liabilities in accordance with the framework for measuring fair value in accordance with U.S GAAP. This framework establishes a fair value hierarchy that prioritizes the inputs used to measure fair value:
Fair value measurements of nonfinancial assets and non-financial liabilities are primarily used in the impairment analysis of intangible assets and long-lived assets.
Financial instruments included in current assets and current liabilities are reported in the consolidated balance sheets at cost, which approximate fair value because of the short period of time between the origination of such instruments and their expected realization and their current market rates of interest.
Revenue recognition
The Company adopted ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), from May 1, 2020, using the modified retrospective transition approach to all contracts that did not have an impact on the beginning retained earnings on May 1, 2020. The Group’s revenue recognition policies effective on the adoption date of ASC 606 are presented as below.
In accordance with ASC Topic 606, the Company’s performance obligation is satisfied upon the transfer of goods to the customer, which occurs at the point of sale. Revenues are recorded net of discounts, sales taxes, and returns and allowances.
The Company sells Company gift cards to customers. There are no administrative fees on unused gift cards, and the gift cards do not have an expiration date. Gift card sales are recorded as contract liability when sold and are recognized as revenue when either the gift card is redeemed or the likelihood of the gift card being redeemed is remote (“gift card breakage”). The Company’s gift card breakage rate is based upon historical redemption patterns and it recognizes breakage revenue utilizing the redemption recognition method. The Company also offers discounts on the gift cards sold to its customers. The discounts are recorded as sales discount when gift card been redeemed. The Company’s contract liability related to gift cards was $370,836 and $449,334 as of July 31, 2023 and April 30, 2023, respectively.
The following table summarizes disaggregated revenue from contracts with customers by product group: perishable and non-perishable goods. Perishable product categories include meat, seafood, vegetables, and fruit. Non-perishable product categories include grocery, liquor, cigarettes, lottery, newspaper, reusable bag, non-food, and health products.
Cost of sales
Cost of sales includes the rental expense, depreciation, the direct costs of purchased merchandise, shrinkage costs, store supplies, and inbound shipping costs. The cost of sales is a net of vendor’s rebates and discounts.
The Company subleases certain mini stores that are within the supermarket to other parties. The Company collects security deposits and rents from these sub-lease tenants. The rent income collected from sub-lease tenants are recognized as rental income and deducted rental expense.
Selling expenses
Selling expenses mainly consist of advertising costs, promotion expenses, and payroll and related expenses for personnel engaged in selling and marketing activities. Advertising expenses, which consist primarily of online and offline advertisements, are expensed when the services are performed. The Company’s advertising expenses were $30,637 and $10,078 for the three months ended July 31, 2023 and 2022, respectively.
General and administrative expenses
General and administrative expenses mainly consist of payroll and related costs for employees involved in general corporate functions, professional fees and other general corporate expenses, as well as expenses associated with the use by these functions of facilities and equipment, such as rental and depreciation expenses.
Concentrations of risks
(a) Major customers
For each of the three months ended July 31, 2023 and 2022, the Company did not have any customers that accounted for more than 10% of consolidated total net sales.
(b) Major vendors
The following table sets forth information as to the Company’s suppliers that accounted for 10% or more of the Company’s total purchases for the three months ended July 31, 2023 and 2022.
(c) Credit risks
Financial instruments that are potentially subject to credit risk consist principally of accounts receivable. Accounts receivable are typically unsecured and derived from products sold to customers, and are thereby exposed to credit risk. However, the Company believes the concentration of credit risk in its accounts receivable is substantially mitigated by its ongoing credit evaluation process and relatively short collection terms. The Company does not generally require collateral from customers. The Company evaluates the need for an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends, and other information. Historically, the Company did not have any bad debt on its accounts receivable.
The Company also has loan receivables to its centralized vendors occasionally. The loan receivables are typically unsecured and exposed to credit risk. However, the Company believes that the loan receivables amount to its centralized vendor is managed by its finance department and these centralized vendors are still providing products monthly to the Company. The Company does not generally require collateral from the vendors. The Company also evaluates the need for an allowance for doubtful accounts based on upon factors surrounding the credit risks. Historically, the Company did not have any bad debt on its loan receivables and all loan receivables been collected in subsequent period.
Income taxes
Income taxes are accounted for in accordance with the provisions of ASC 740. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company’s deferred tax assets are subject to periodic recoverability assessments. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount that more likely than not will be realized. In determining the need for a valuation allowance, management reviews both positive and negative evidence, including current and historical results of operations, future income projections, and the overall prospects of our business. Realization of the deferred tax assets is principally dependent upon achievement of projected future taxable income offset by deferred tax liabilities. Changes in recognition or measurement are reflected in the period in which the judgment occurs.
The Company utilizes a two-step approach to recognizing and measuring uncertain income tax positions (tax contingencies). The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not the position will be sustained on audit, including resolution of related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount which is more than 50% likely of being realized upon ultimate settlement. The Company considers many factors when evaluating our tax positions and estimating its tax benefits, which may require periodic adjustments and which may not accurately forecast actual outcomes. The Company includes interest and penalties related to its tax contingencies in income tax expense.
On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (the CARES Act) was signed into law, intended to provide economic relief to those impacted by the COVID-19 pandemic. The CARES Act, among other things, includes provisions addressing the carryback of net operating losses for specific periods, temporary modifications to the limitations placed on the tax deductibility of net interest expenses, and technical amendments for qualified improvement property (QIP). The impacts of the CARES Act are recorded as components within the Company’s deferred income tax liabilities and income tax receivable on the Company’s balance sheets.
Earnings (loss) per share
Basic earnings (loss) per ordinary share is computed by dividing net earnings (loss) attributable to common stockholders by the weighted-average number of common stock outstanding during the period. Diluted earnings per share is computed by dividing net income attributable to common stockholders by the sum of the weighted average number of common stock outstanding and of potential common stock (e.g., convertible securities, options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common stock that has an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) is excluded from the calculation of diluted earnings per share. For the three months ended July 31, 2023 and 2022, the Company had no dilutive potential common stock.
Related Parties
The Company identifies related parties, accounts for, and discloses related party transactions in accordance with ASC Topic 850 “Related Party Disclosures” and other relevant ASC standards. Parties are considered to be related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal with if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. The Company discloses all significant related party transactions in Note 13 — “Related party balances and transactions”.
Segment Information
The Company’s chief operating decision-maker has been identified as the chief executive officer, who reviews financial information presented on a consolidated basis accompanied by disaggregated information about revenues by different product types for purposes of allocating resources and evaluating financial performance. The Company and its subsidiaries offer grocery products, general merchandise, health and beauty care products, pharmacy, fuel and other items and services in its stores. The Company’s supermarket stores are geographically based, have similar economic characteristics, and similar expected long-term financial performance. The Company’s operating segments and reporting units are its four stores, which are reported in one reportable segment. There are no segment managers who are held accountable for operations, operating results, and plans for levels or components below the consolidated unit level. Based on qualitative and quantitative criteria established by ASC Topic 280, “Segment Reporting”, the Company considers itself to be operating within one reportable segment.
Recently Issued Accounting Pronouncements
The Company considers the applicability and impact of all ASUs. Management periodically reviews new accounting standards that are issued. Under the Jumpstart Our Business Startups Act of 2012, as amended (the “JOBS Act”), the Company meets the definition of an emerging growth company and has elected the extended transition period for complying with new or revised accounting standards, which delays the adoption of these accounting standards until they would apply to private companies.
In March 2023, the FASB issued ASU 2023-01, Lease (Topic 842): Common Control Arrangements, which clarifies the accounting for leasehold improvements associated with leases between entities under common control (hereinafter referred to as common control lease). ASU 2023-01 requires entities to amortize leasehold improvements associated with common control lease over the useful life to the common control group (regardless of the lease term) as long as the lessee controls the use of the underlying asset through a lease, and to account for any remaining leasehold improvements as a transfer between entities under common control through an adjustment to equity when the lessee no longer controls the underlying asset. This ASU will be effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted for both interim and annual financial statements that have not yet been made available for issuance. An entity may apply ASU 2023-01 either prospectively or retrospectively. The Company is currently evaluating the impact that the adoption of ASU 2023-01 will have on our consolidated financial statement presentations and disclosures.
No other new accounting pronouncements issued or effective had, or are expected to have, a material impact on the Company’s consolidated financial statements. |
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Inventories, Net |
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| Inventories, net | 3. Inventories, net
A summary of inventories, net is as follows:
Movements of reserve for inventory shrinkage are as follows:
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Prepayments |
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| Prepayments | 4. Prepayments
As of July 31, 2023, the prepayment mainly consists of $1,063,820 paid to XHJC Holding Inc which is the Company’s new centralized vendor and $20,000 paid to GF distribution, the Company’s major vendor. As of April 30, 2023, the prepayment mainly consists of $1,527,243 paid to XHJC Holding Inc which is the Company’s new centralized vendor and $20,000 paid to GF distribution, the Company’s major vendor. |
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Loan Receivables |
3 Months Ended |
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Jul. 31, 2023 | |
| Loan Receivables [Abstract] | |
| Loan Receivables | 5. Loan receivables
On April 30, 2020, the Company entered a promissory note with its vendor Drop in the Ocean, Inc. with a total loan amount of up to $4,000,000 with 6% interest. Drop in the Ocean, Inc. repaid $1,800,000 to the Company on September 9, 2022, $1,200,000 on October 14, 2022, $761,932 on October 28, 2022, and $215,344 on October 30, 2022, including the 6% interest as stated in the promissory note.
The Company entered a promissory note with its vendor XHJC Holding Inc. on January 1, 2022, with a total loan amount of up to $1,000,000 with 4% interest. On November 4, 2022, XHJC Holding Inc. repaid the remaining $433,136 in full to the Company. |
Property and Equipment, Net |
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| Property and equipment, net | 6. Property and equipment, net
Depreciation expenses included in the general and administrative expenses for the three months ended July 31, 2023 and 2022 were $5,792 and $15,246, respectively. Depreciation expense included in the cost of sales for the three months ended July 31, 2023 and 2022 were $57,920 and $124,962, respectively. |
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Intangible Assets |
3 Months Ended |
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Jul. 31, 2023 | |
| Intangible Assets [Abstract] | |
| Intangible assets | 7. Intangible assets
Intangible assets mainly consisted of a trademark acquired through the acquisition of Maison Monterey Park on June 30, 2022. The fair value of the trademark at acquisition date was $194,000, to be amortized over 15 years. The amortization of the trademark for the three months ended July 31, 2023 and was $3,233 and $1,078. Estimated amortization expense for each of the next five years at July 31, 2023 is as follows: $12,936, $12,936, $12,936, $12,936 and $12,936. In addition, the Company had $292 and $212 amortization expenses of liquid license for the three months ended July 31, 2023 and 2022, respectively. |
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| Equity method investment [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Equity method investment | 8. Equity method investment
On June 27, 2023, the Company invested $1,440,000 for 40% interest in HKGF Market of Arcadia, LLC (“HKGF Arcadia”). The Company recorded $28,456 investment loss for the three months ended July 31, 2023. As of July 31, 2023, the Company had investment of $1,411,544 into HKGF Arcadia.
As of July 31, 2023, the Company had net accounts receivable of $149,989 from JC Business Guys, Inc. (“JCBG”), who is the 60% owner of HKGF Arcadia. For the three months ended July 31,2023 and 2022, total sales to JCBG was $0 and $85,387, respectively.
The following table shows the condensed balance sheet of HKGF Arcadia as of July 31, 2023.
HKGF ARCADIA BALANCE SHEET
The following table shows the condensed statement of operations of HKGF Arcadia for the period from July 1, 2023 to July 31, 2023.
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Goodwill |
3 Months Ended |
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Jul. 31, 2023 | |
| Goodwill [Abstract] | |
| Goodwill | 9. Goodwill
Goodwill represented the excess fair value of the assets under the fair value of the identifiable assets owned at the closing of the acquisition of Maison Monetary Park, including an assembled workforce, which cannot be sold or transferred separately from the other assets in the business. See Note 19 — “Acquisition of subsidiary” for additional information. As of July 31, 2023, the Company had goodwill of $2,222,211. The Company did not record any impairment to the goodwill for the three months ended July 31, 2023. |
Accrued Expenses and Other Payables |
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| Accrued expenses and other payables | 10. Accrued expenses and other payables
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Note Payable |
3 Months Ended |
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Jul. 31, 2023 | |
| Note Payable [Abstract] | |
| Note payable | 11. Note payable
As of July 31, 2023 and April 30, 2023, the Company had an outstanding note payable of $150,000 to a third-party individual with annual interest rate of 10%, payable upon demand. The note had accrued interest of $25,000 and $21,500 as of July 31, 2023 and April 30, 2023, respectively. |
Loan Payables |
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| Loan payables | 12. Loan payables
A summary of the Company’s loans is listed as follows:
American First National Bank — a National Banking Association
On March 2, 2017, Maison Monrovia entered into a $1.0 million Business Loan Agreement with American First National Bank, a National Banking Association, at a 4.5% annual interest rate with a maturity date on March 2, 2024. On March 2, 2017, Maison San Gabriel, entered into a $1.0 million Business Loan Agreement with American First National Bank at a 4.5% annual interest rate with a maturity date on March 2, 2024. The covenant of loans required that, so long as the loan agreements remains in effect, borrower will maintain a ratio of debt service coverage within 1.300 to 1.000. This coverage ratio will be evaluated as of the end of each fiscal year. The interest rate for these two loans is subject to change from time to time based on changes in an independent index which is the Wall Street Journal US prime as published in the Wall Street Journal Money Rate Section. The annual interest rate for these two loans was ranging from 4.5% to 5.75% for the three months ended July 31, 2022, and was 7.75% for the three months ended July 31, 2023.
The collateral for the bank loans is personally guaranteed by Mr. Wu, who is the prior owner and applicant for the bank loan, and each store’s assets including inventory, fixture, equipment, etc. At the same time, a minimum of $1.0 million in general liability insurance to cover the collateral business assets located at 935 W. Duarte Dr. Monrovia, CA 91016. As of April 30, 2022, the coverage ratio for Maison Monrovia was 1.01 and the coverage ratio for Maison San Gabriel was 2.00. The Company reported this situation to American First National Bank and there was no change on the term up to the date the Company issued these consolidated financial statements. Due to the violation of a covenant as of April 30, 2022, the Company reclassified the loan balance of $313,278 under Maison Monrovia as current loan payable since then. The interest expense for this loan were $5,330 and $7,635, respectively, for the three months ended July 31, 2023 and 2022.
U.S. Small Business Administration (the “SBA”)
On June 15, 2020, Maison Monrovia entered into a $150,000 Business Loan Agreement with the SBA at 3.75% annual interest rate and a maturity date on June 15, 2050. On June 15, 2020, Maison San Gabriel entered into a $150,000 Business Loan Agreement with the SBA at 3.75% annual interest rate and a maturity date on June 15, 2050. On June 15, 2020, Maison El Monte entered into a $150,000 Business Loan Agreement with SBA at 3.75% annual interest rate and a maturity date on June 15, 2050.
On January 12, 2022, Maison San Gabriel entered into an additional $1,850,000 Business Loan Agreement with the SBA at 3.75% annual interest rate and a maturity date on June 15, 2050.
On January 6, 2022, Maison El Monte, Inc. entered into an additional $350,000 Business Loan Agreement with the SBA at 3.75% annual interest rate and a maturity date on June 15, 2050.
Per the SBA loan agreement, all interest payments on these three loans were deferred to December 2022. As of July 31, 2023 and April 30, 2023, the Company’s aggregate balance on the three SBA loans was $2,603,544 and $2,624,329, respectively. Interest expenses were $23,462 and $23,953 for the three months ended July 31, 2023 and 2022, respectively. During the three months ended July 31, 2023, the Company made repayment of $52,040 (which includes principal of $20,785 and interest expense of $31,255).
As of July 31, 2023, the future minimum principal amount of loan payments to be paid by year are as follows:
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Related Party Balances and Transactions |
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| Related party balances and transactions | 13. Related party balances and transactions
Related party transactions
Sales to related parties
Purchases from related parties
Investment in equity securities purchased from related parties
In May 2021, the Company purchased a 10% equity interest in Dai Cheong Trading Inc., a grocery trading company, for $162,665 from DC Holding CA, Inc. DC Holding CA, Inc. is owned by John Xu, the Chairman and Chief Executive Officer of the Company.
In December 2021, the Company purchased a 10% equity interest in HKGF Market of Alhambra, Inc, the legal entity holding the Alhambra store for $40,775 from Ms. Grace Xu, a related party as the spouse of Mr. John Xu, the Chairman and Chief Executive Officer of the Company.
On June 27, 2023, the Company invested $1,440,000 for 40% partnership interest in HKGF Arcadia. For the three months ended July 31, 2023, the Company recorded $28,456 investment loss on this investment.
Related party balances
Accounts receivable — sales to related parties
Accounts payable — purchase from related parties
Other receivables — related parties
Other payables — related parties
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| Leases | 14. Leases
The Company accounted for leases in accordance with ASU No. 2016-02, Leases (Topic 842) for all periods presented. The Company leases certain supermarkets and office facilities from third parties. Some of the Company’s leases include one or more options to renew, which are typically at the Company’s sole discretion. The Company evaluates the renewal options, and when it is reasonably certain of exercise, it will include the renewal period in its lease term. New lease modifications result in re-measurement of the right of use (“ROU”) assets and lease liabilities. Operating ROU assets and lease liabilities are recognized at the lease commencement date, based on the present value of lease payments over the lease term. Since the implicit rate for the Company’s leases is not readily determinable, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The incremental borrowing rate is the rate of interest that the Company would have to pay to borrow, on a collateralized basis, an amount equal to the lease payments in a similar economic environment and over a similar term.
The Company’s leases mainly consist of store rent and copier rent. The store lease detail information is listed below:
As of July 31, 2023, the average remaining term of the supermarkets’ store lease is 9.87 years.
In June and November 2022, the Company entered three leases for three copiers with terms of 63 months for each. As of July 31, 2023, the average remaining term of the copier lease is 4.29 years.
The copier lease detail information is listed below:
The Company’s total lease expenses under ASC 842 are $0.78 million and $0.56 million for the three months ended July 31, 2023 and 2022, respectively. The Company’s ROU assets and lease liabilities are recognized using an effective interest rate of range 4.5% to 6.25%, which was determined using the Company’s incremental borrowing rate. The Company’s operating ROU assets and lease liabilities were as follows:
As of July 31, 2023, the five-year maturity of the Company’s operating lease liabilities is as follow:
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Stockholder’s Equity |
3 Months Ended |
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| Stockholder’s Equity [Abstract] | |
| Stockholder’s equity | 15. Stockholder’s equity
Common stock
Maison was initially authorized to issue 500,000 shares of common stock with a par value of $0.0001 per share. On September 8, 2021, the total number of authorized shares of all classes of stock was increased to 100,000,000 by way of a 200-for-1 stock split, among which, the authorized shares were divided in to 92,000,000 shares of Class A common stock entitled to one (1) vote per share, 3,000,000 shares of Class B common stock entitled to ten (10) votes per share, and 5,000,000 shares of preferred stock. For the Class A common stock and Class B common stock, the rights of the holders of Class A common stock and Class B common stock are identical, except with respect to voting and conversion rights. Each share of Class A common stock is entitled to one (1) vote. Each share of Class B common stock is entitled to ten votes and is convertible at any time into one share of Class A common stock. John Xu holds all of our outstanding shares of Class B common stock. All shares and per share amounts used herein and in the accompanying consolidated financial statements have been retroactively adjusted to reflect (i) the increase of share capital as if the change of share numbers became effective as of the beginning of the first period presented for Maison Group and (ii) the reclassification of all outstanding shares of our common stock beneficially owned by Golden Tree USA Inc. into Class B common stock, which are collectively referred to as the “Reclassification”. |
Income Taxes |
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| Income Taxes | 16. Income Taxes
Maison Solutions is a Delaware holding company that is subject to the U.S. income tax. Maison Monrovia and Maison San Gabriel are pass through entities whose income or losses flow through Maison Solution’s income tax return.
Since its formation in 2019, the Company and its subsidiaries filed separate returns based upon a tax year-end of December 31. The Company recently filed an application with the Internal Revenue Service (“IRS”) to change its and its subsidiaries year-end to April 30. Upon approval from the tax authorities, the Company intends to file stub period corporate income tax returns for each of the entities for the period January 1, 2023 to April 30, 2023, and prospectively file individual entity’s corporate income tax return with year-end of April 30 for the fiscal year starting from May 1, 2023. The income tax provision in these financial statements is based upon the pretax income (loss) for the three months ended July 31, 2023 and 2022.
Income Tax Provision
The provision for income taxes provisions consists of the following components:
The following is a reconciliation of the difference between the actual (benefit) provision for income taxes and the (benefit) provision computed by applying the federal statutory rate on income (loss) before income taxes:
Deferred tax assets and liabilities are recognized for the expected future tax consequences of differences between the carrying amounts of assets and liabilities and their respective tax bases using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred taxes are comprised of the following:
As of July 31, 2023 and April 30, 2023, Maison and Maison El Monte had approximately $2.78 million and $2.25 million, respectively, of U.S. federal NOL carryovers available to offset future taxable income which do not expire but are limited to 80% of income until utilized. As of July 31, 2023 and April 30, 2023, Maison and Maison El Monte had approximately $2.11 million and $1.58 million, respectively, of California state net operating loss which can be carried forward up to 20 years to offset future taxable income. In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets depends upon the Company’s future generation of taxable income during the periods in which temporary differences representing net future deductible amounts become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. After consideration of all the information available, management believes that significant uncertainty exists with respect to future realization of the deferred tax assets and has therefore established a full valuation allowance.
The Company recorded $11,279 and $11,261 of interest and penalties related to understated income tax payments for the three months ended July 31, 2023 and 2022, respectively. As of July 31, 2023 and April 30, 2023, the Company had significant uncertain tax positions of $114,561 and $103,282.
The Company intends to file amended income tax returns in 2023 with respect to these positions. The tax late payment was mainly due to the change in the tax year-end; the year-end for the purpose of financial statements reporting already changed to fiscal year ending April 30 from calendar year-end, and the Company recorded the income tax provision and income tax liability for the three months ending July 31, 2023 and 2022 and as of July 31, 2023 and April 30, 2023 for the taxable income (loss) in the consolidated financial statements. The Company has not yet filed an amendment to the income tax returns and therefore did not receive the actual tax late payment notice from the IRS yet. As of July 31, 2023, the Company’s U.S. income tax returns filed for the year ending on December 31, 2019 and thereafter are subject to examination by the relevant taxation authorities. |
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Other Income |
3 Months Ended |
|---|---|
Jul. 31, 2023 | |
| Other Income [Abstract] | |
| Other income | 17. Other income
For the three months ended July 31, 2023, other income mainly consists of $0.38 million employee retention credit (“ERC”) received (after net-off with investment loss of $28,456). The ERC is a tax credit for businesses that continued to pay employees while shut down due to the COVID-19 pandemic or had significant declines in gross receipts from March 13, 2020 to December 31, 2021. |
Commitments and Contingencies |
3 Months Ended |
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Jul. 31, 2023 | |
| Commitments and Contingencies [Abstract] | |
| Commitments and contingencies | 18. Commitments and contingencies
Contingencies
The Company is otherwise periodically involved in various legal proceedings that are incidental to the conduct of its business, including, but not limited to, employment discrimination claims, customer injury claims, and investigations. When the potential liability from a matter can be estimated and the loss is considered probable, the Company records the estimated loss. Due to uncertainties related to the resolution of lawsuits, investigations, and claims, the ultimate outcome may differ from the estimates. Although the Company cannot predict with certainty the ultimate resolution of any lawsuits, investigations, and claims asserted against it, management does not believe any currently pending legal proceeding to which the Company is a party will have a material adverse effect on its financial statements.
In May 2020, Maison El Monte was named as a co-defendant in a complaint filed by a consumer advocacy group alleging violations of a California health and safety regulation. The case is pending in the Superior Court of the State of California, and as such, the Company has not made any accruals of possible loss for the year ended April 30, 2023 related to this case.
In June 2022, Maison San Gabriel entered into a confidential settlement agreement with the plaintiff in connection with a California employment law case whereby Maison San Gabriel agreed to pay $98,500 to plaintiff in full settlement of all claims in the case. As a result of the settlement agreement, the Company accrued $98,500 as a loss relating to the case for the fiscal year ended April 30, 2022. During the year ended April 30, 2023, the Company accrued additional $40,000 litigation loss. This settlement amount is subject to reduction by a court proceeding scheduled in 2023.
Commitments
On April 19, 2021, JD E-commerce America Limited (“JD US”) and the Company entered into a Collaboration Agreement (the “Collaboration Agreement”) pursuant to which JD.com will provide services to Maison focused on updating in store technology through the development of a new mobile app, the updating of new in-store technology, and revising store layouts to promote efficiency. The Collaboration Agreement provided for a consultancy and initialization fee of $220,000, 40% of which was payable within three (3) days of effectiveness, 40% of which is due within three (3) days of the completion and delivery of initialization services (including initializing of a feasibility plan, store digitalization, delivery of online retailing and e-commerce business and operational solutions for the Stores) as outlined in the Collaboration Agreement, and the remaining 20% is payable within three (3) days of the completion and delivery of the implementation services (including product and merchandise supply chain configuration, staff training for operation and management of the digital solutions, installation and configuration of hardware, customization of software, concept design and implementation), as outlined in the Collaboration Agreement. The Collaboration Agreement also included certain additional storage and implementation fees to be determined by the parties and royalty fees, following the commercial launch of the platform developed by JD US, of 1.2% of gross merchandise value based on information generated by the platform. For each additional store requiring Consultancy and Initialization service, an additional $50,000 will be charged for preparing the feasibility plan for such additional store. The Collaboration Agreement has an initial term of 10 years and customary termination and indemnification provisions. Simultaneously with the effectiveness of the Collaboration Agreement, JD US and Maison entered into an Intellectual Property License Agreement (the “IP Agreement”) outlining certain trademarks, logos and designs, and other intellectual property rights used in connection with the retail supermarket operations outlined in the Collaboration Agreement, which includes an initial term of 10 years and customary termination provisions. There are no additional licensing fees or costs associated with the IP Agreement. As of the date of this report, there is no new progress on the collaboration agreement with JD US. |
Acquisition of Subsidiary |
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| Acquisition of Subsidiary [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Acquisition of subsidiary | 19. Acquisition of subsidiary
On June 30, 2022, the Company purchased 100% equity interest in GF Supermarket of MP, Inc (“Maison Monterey Park”), the legal entity holding a supermarket in Monterey Park. Mrs. Grace Xu (spouse of Mr. John Xu, the Company’s chief executive officer) is the selling shareholder of GF Supermarket of MP Inc. with 49% ownership percentage. Another selling shareholder of GF Supermarket of MP Inc. is DNL Management Inc with 51% ownership percentage, who is not a related party of the Company. The purchase consideration was $1.5 million. On February 21, 2023, the Company and the selling shareholders renegotiated and entered into an Amended Stock Purchase Agreement with an effective date on October 31, 2022, to amend the purchase price to $2.5 million, which both parties believed reflected the true fair value of Maison Monterey Park.
The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition. Goodwill as a result of the acquisition of Maison Monterey Park is calculated as follows:
The following condensed unaudited pro forma consolidated results of operations for the Company for the three months ended July 31, 2022 present the results of operations of the Company and Maison Monterey Park as if the acquisitions occurred on May 1, 2022, respectively.
The pro forma results are not necessarily indicative of the actual results that would have occurred had the acquisitions been completed as of the beginning of the periods presented, nor are they necessarily indicative of future consolidated results.
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Subsequent Event |
3 Months Ended |
|---|---|
Jul. 31, 2023 | |
| Subsequent Events [Abstract] | |
| Subsequent Event | 20. Subsequent Event
The Company follows the guidance in FASB ASC 855-10 for the disclosure of subsequent events. The Company evaluated subsequent events through the date the financial statements were issued and determined the Company has no major subsequent event that need to be disclosed. |
Accounting Policies, by Policy (Policies) |
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| Summary of Significant Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Basis of presentation | Basis of presentation The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities Exchange Commission (“SEC”). The interim consolidated financial information as of July 31, 2023 and for the three months periods ended July 31, 2023 and 2022 have been prepared without audit, pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures, which are normally included in consolidated financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to such rules and regulations. The interim consolidated financial information should be read in conjunction with the Financial Statements and the notes thereto, included in the Company’s Annual Report on Form 10-K for the fiscal year ended April 30, 2023, previously filed with the SEC on August 1, 2023. In the opinion of management, all adjustments (which include all significant normal and recurring adjustments) necessary to present a fair statement of the Company’s interim consolidated financial position as of June 30, 2023, its interim consolidated results of operations and cash flows for the three months ended July 31, 2023 and 2022, as applicable, have been made. The interim results of operations are not necessarily indicative of the operating results for the full fiscal year or any future periods. |
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| Principles of consolidation | Principles of consolidation The consolidated financial statements include the financial statements of the Company and its subsidiaries and, when applicable, entities for which the Company has a controlling financial interest. All transactions and balances among the Company and its subsidiaries have been eliminated upon consolidation.
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| Noncontrolling interests | Noncontrolling interests The Company follows FASB (Financial Accounting Standards Board) ASC (Accounting Standards Codification) Topic 810, “Consolidation,” governing the accounting for and reporting of noncontrolling interests (“NCI”) in partially owned consolidated subsidiaries and the loss of control of subsidiaries. Certain provisions of this standard indicate, among other things, that NCI be treated as a separate component of equity, not as a liability, that increases and decreases in the parent’s ownership interest that leave control intact be treated as equity transactions rather than as step acquisitions or dilution gains or losses, and that losses of a partially-owned consolidated subsidiary be allocated to noncontrolling interests even when such allocation might result in a deficit balance. The net income attributed to NCI was separately designated in the accompanying statements of operations. Losses attributable to NCI in a subsidiary may exceed a NCI’s interests in the subsidiary’s equity. The excess attributable to NCI is attributed to those interests. NCIs shall continue to be attributed their share of losses even if that attribution results in a deficit NCIs balance. As of July 31, 2023 and April 30, 2023, the Company had NCIs of $346,162 and $267,947, respectively, which represent 9% of the equity interest of Maison San Gabriel, 14.75% of the equity interest of Maison Monrovia and 8.33% of the equity interest of Maison El Monte. For the three months ended July 31, 2023 and 2022, the Company had net income of $78,215 and $26,653, respectively, that were attributable to NCIs. |
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| Liquidity | Liquidity As reflected in the accompanying consolidated financial statements, the Company had retained earnings of $417,771 at July 31, 2023, the Company had net loss attributable to the Company of $104,939 and $597,040 for the three months ended July 31, 2023 and 2022, respectively. The management plans to increase its revenue by strengthening its sales force, providing attractive sales incentive programs, recruiting experienced industry-related managerial personnel, and increasing marketing and promotion activities. Management also intends to raise additional funds by way of a private or public offering, or by obtaining loans from banks or others. The Company had $1.61 million cash on hand and working capital deficit of $1.44 million at July 31, 2023. The Company has historically funded its working capital needs primarily from operations. The working capital requirements are affected by the efficiency of operations and depend on the Company’s ability to increase its revenue. The Company believes that its cash on hand and operating cash flows will be sufficient to fund its operations over at least the next 12 months from the date of issuance of these financial statements. However, the Company may need additional cash resources in the future if the Company experiences changed business conditions or other developments, and may also need additional cash resources in the future if the Company wishes to pursue opportunities for investment, acquisition, strategic cooperation or other similar actions. If it is determined that the cash requirements exceed the Company’s amounts of cash on hand, the Company may seek to issue debt or equity securities or obtain a credit facility. |
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| Use of estimates | Use of estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the periods presented. Significant accounting estimates are used for, but not limited to, useful lives of property and equipment, commitments and contingencies, inventory reserve, allowance for estimated uncollectable accounts receivable and other receivables, impairment of long-lived assets, contract liabilities and valuation of deferred tax assets. Given the global economic climate and additional or unforeseen effects from the COVID-19 pandemic, these estimates have become more challenging, and actual results could differ materially from these estimates. |
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| Cash and cash equivalents | Cash and cash equivalents Cash and equivalents include cash on hand, demand deposits and short-term cash investments that are highly liquid in nature and have original maturities when purchased of three months or less. The Company’s cash is maintained at financial institutions in the United States of America. Deposits in these financial institutions may, from time to time, exceed the Federal Deposit Insurance Corporation (“FDIC”)’s federally insured limits. The standard insurance amount is $250,000 per depositor, per insured bank, for each account ownership category. The bank deposits exceeding the standard insurance amount will not be covered. As of July 31, 2023 and April 30, 2023, cash balances held in the banks, exceeding the standard insurance amount, are $862,081 and $1,819,766, respectively. The Company has not experienced any losses in accounts held in these financial institutions and believes it is not exposed to any risks on its cash held in these financial institutions. Cash from operating, investing and financing activities of the consolidated statement of cash flows are net of assets and liabilities acquired of Maison Monterey Park.
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| Restricted cash | Restricted cash Restricted cash is an amount of cash deposited with banks in conjunction with borrowings from banks. Restriction on the use of such cash and the interest earned thereon is imposed by the banks and remains effective throughout the terms of the bank borrowings and notes payable. Restricted cash is classified as non-current assets on the Company’s consolidated balance sheets, as all the balances are not expected to be released to cash within the next 12 months. As of July 31, 2023 and April 30, 2023, the Company had restricted cash of $1,101 and $1,101, respectively. |
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| Accounts receivable | Accounts receivable The Company’s accounts receivable arises from product sales. The Company does not adjust its receivables for the effects of a significant financing component at contract inception if it expects to collect the receivables in one year or less from the time of sale. The Company does not expect to collect receivables greater than one year from the time of sale. The Company’s policy is to maintain an allowance for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. As of July 31, 2023 and April 30, 2023, there was no allowance for the doubtful accounts. |
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| Accounts receivable — related parties | Accounts receivable — related parties Accounts receivable consist primarily of receivables from related parties on 30-day credit terms and are presented net of an allowance for estimated uncollectible amounts. The Company periodically assesses its accounts receivable for collectability on a specific identification basis. If collectability of an account becomes unlikely, an allowance is recorded for that doubtful account. Once collection efforts have been exhausted, the accounts receivable is written off against the allowance. As of July 31, 2023 and April 30, 2023, there was no allowance for the doubtful accounts. |
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| Inventories, net | Inventories, net Inventories consisting of products available for sale are primarily accounted for using the first-in, first-out method and are valued at the lower of cost and net realizable value. This valuation requires the Company to make judgments, based on currently available information, about the likely method of disposition, such as through sales to individual customers, returns to product vendors, liquidations, and expected recoverable values of each disposition category. The Company records inventory shrinkage based on the historical data and management’s estimates and provides a reserve for inventory shrinkage for the three months ended July 31, 2023 and 2022. |
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| Prepayments | Prepayments Prepayments and deposits are mainly comprised of cash deposited and advanced to suppliers for future inventory purchases and services to be performed. This amount is refundable and bears no interest. For any prepayments that management determines will not be in receipts of inventories, services, or refundable, the Company recognizes an allowance account to reserve such balances. Management reviews its prepayments on a regular basis to determine if the allowance is adequate and adjusts the allowance when necessary. Delinquent account balances are written-off against allowance for doubtful accounts after management has determined that the likelihood of collection is not probable. As of July 31, 2023 and April 30, 2023, the Company had made prepayment to its vendors. The Company’s management continues to evaluate the reasonableness of the allowance policy and update it if necessary. |
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| Other receivables and other current assets | Other receivables and other current assets Other receivables and other current assets primarily include non-interest-bearing loans of the other business entities. Management regularly reviews the aging of receivables and changes in payment trends and records allowances when management believes collection of amounts due are at risk. Accounts considered uncollectable are written off against allowances after exhaustive efforts at collection are made. As of July 31, 2023 and April 30, 2023, the Company did not have any bad debt allowance for other receivables.
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| Property and equipment | Property and equipment Property and equipment are stated at cost less accumulated depreciation. Depreciation expense is computed using the straight-line method over the estimated useful lives of the individual assets. The following table includes the estimated useful lives of certain of our asset classes:
The cost and related accumulated depreciation of assets sold or otherwise retired are eliminated from the accounts and any gain or loss is included in the consolidated statements of operations. Expenditures for maintenance and repairs are charged to earnings as incurred, while additions, renewals and betterments, which are expected to extend the useful life of assets, are capitalized. The Company also re-evaluates the periods of depreciation to determine whether subsequent events and circumstances warrant revised estimates of useful lives. |
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| Impairment of long-lived assets | Impairment of long-lived assets Long-lived assets, which include property, plant and equipment, intangible assets with finite lives, and operating lease right-of-use assets, are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets to be held and used is measured by comparing the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the assets. Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable. The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the asset’s carrying amount may not be recoverable. The Company conducts its long-lived asset impairment analyses in accordance with ASC 360-10-15, “Impairment or Disposal of Long-Lived Assets.” ASC 360-10-15 requires the Company to group assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities and evaluate the asset group against the sum of the undiscounted future cash flows. If the undiscounted cash flows do not indicate the carrying amount of the asset is recoverable, an impairment charge is measured as the amount by which the carrying amount of the asset group asset group exceeds its fair value based on discounted cash flow analysis or appraisals. There was no impairment of long-lived assets for the three months ended July 31, 2023 and 2022. |
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| Security deposits | Security deposits Security deposits primarily include deposits made to the Company’s landlord for its supermarkets and office facilities. These deposits are refundable upon expiration of the lease. |
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| Long-term investment | Long-term investment The Company accounts for investments with less than 20% of the voting shares and does not have the ability to exercise significant influence over operating and financial policies of the investee using the cost method. The Company elects the measurements alternative and records investment in equity securities at the historical cost in its consolidated financial statements and subsequently records any dividends received from the net accumulated earrings of the investee as income. Dividends received in excess of earnings are considered a return of investment and are recorded as reduction in the cost of the investments.
In May 2021, the Company purchased a 10% equity interest in Dai Cheong Trading Inc., a grocery trading company, for $162,665 from DC Holding. DC Holding is 100% owned by John Xu, the Chairman and Chief Executive Officer of the Company. See Note 13 — “Related party balances and transactions”. In December 2021, the Company purchased a 10% equity interest in HKGF Market of Alhambra, Inc, the legal entity holding the store for $40,775 from Ms. Grace Xu, sole shareholder of HKGF Market of Alhambra, Inc. and a related party as the spouse of Mr. John Xu, the Chairman and Chief Executive Officer of the Company. See Note 13 — “Related party balances and transactions”. On June 27, 2023, the Company invested $1,440,000 for 40% interest in HKGF Market of Arcadia, LLC (“HKGF Arcadia”). See Note 8 — “Equity method investment”. The Company has determined that HKGF Arcadia is not a VIE and has evaluated its consolidation analysis under the voting interest model. Because the Company does not own greater than 50% of the outstanding voting shares, either directly or indirectly, it has accounted for its investment in HKGF Arcadia under the equity method of accounting. Under this method, the investor (“Maison”) recognizes its share of the profits and losses of the investee (“HKGF Arcadia”) in the periods when these profits and losses are also reflected in the accounts of the investee. Any profit or loss recognized by the investor appears in its income statement, any recognized profit increases the investment recorded by the investor, while a recognized loss decreases the investment. Investment in equity securities is evaluated for impairment when facts or circumstances indicate that the fair value of the long-term investments is less than its carrying value. An impairment is recognized when a decline in fair value is determined to be other-than-temporary. The Company reviews several factors to determine whether a loss is other-than-temporary. These factors include, but are not limited to, the: (i) nature of the investment; (ii) cause and duration of the impairment; (iii) extent to which fair value is less than cost; (iv) financial condition and near-term prospects of the investments; and (v) ability to hold the security for a period sufficient to allow for any anticipated recovery in fair value. No event had occurred and indicated that other-than-temporary impairment existed and therefore the Company did not record any impairment charges for its investments for the three months ended July 31, 2023. |
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| Goodwill | Goodwill Goodwill is the excess of purchase price and related costs over the value assigned to the net tangible and identifiable intangible assets of businesses acquired. In accordance with ASC Topic 350, “Intangibles-Goodwill and Other,” goodwill is not amortized but is tested for impairment, annually or more frequently when circumstances indicate a possible impairment may exist. Impairment testing is performed at a reporting unit level. Generally, the Company first performs a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If factors indicate that this is the case, the Company then estimates the fair value of the related reporting unit determined using discounted cash flow (“DCF”) analysis. A number of significant assumptions and estimates are involved in the application of the DCF analysis to forecast operating cash flows, including the discount rate, the internal rate of return and projections of realizations and costs to produce. Management considers historical experience and all available information at the time the fair values of its reporting units are estimated. If the fair value is less than the carrying value, the goodwill of the reporting unit is determined to be impaired and the Company will record an impairment equal to the excess of the carrying value over its fair value. The Company did not record any impairment loss during the three Months ended July 31, 2023 and 2022.
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| Leases | Leases On May 1, 2020, the Company adopted Accounting Standards Update (“ASU”) 2016-02, Lease (FASB ASC Topic 842). The adoption of Topic 842 resulted in the presentation of operating lease right-of-use (“ROU”) assets and operating lease liabilities on the consolidated balance sheet. See Note 14 — “Leases” for additional information. The Company determines if an arrangement contains a lease at the inception of a contract under ASC Topic 842. At the commencement of each lease, management determines its classification as an operating or finance lease. For leases that qualify as operating leases, ROU assets and liabilities are recognized at the commencement date based on the present value of any remaining lease payments over the lease term. For this purpose, the Company considers only payments that are fixed and determinable at the time of commencement. As most of its leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The ROU assets include adjustments for accrued lease payments. The ROU asset also includes any lease payments made prior to commencement and is recorded net of any lease incentives received. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that it will exercise such options. A short-term lease is defined as a lease that, at the commencement date, has a lease term of 12 months or less and does not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise. When determining whether a lease qualifies as a short-term lease, the Company evaluates the lease term and the purchase option. Hence, the Company does not recognize any operating lease ROU assets and operating lease liabilities for short-term leases. The Company evaluates the carrying value of ROU assets if there are indicators of impairment and review the recoverability of the related asset group. If the carrying value of the asset group is determined to not be recoverable and is in excess of the estimated fair value, the Company will record an impairment loss in other expenses in the consolidated statements of operations. The Company also subleases certain mini stores that are within the supermarket to other parties. The Company collects security deposits and rent from these sub-lease tenants. The rent income collected from sub-lease tenants recognized as rental income and deducted occupancy cost. Occupancy cost mainly consists of rents and common area maintenance fees. |
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| Fair value measurements | Fair value measurements The Company records its financial assets and liabilities in accordance with the framework for measuring fair value in accordance with U.S GAAP. This framework establishes a fair value hierarchy that prioritizes the inputs used to measure fair value:
Fair value measurements of nonfinancial assets and non-financial liabilities are primarily used in the impairment analysis of intangible assets and long-lived assets. Financial instruments included in current assets and current liabilities are reported in the consolidated balance sheets at cost, which approximate fair value because of the short period of time between the origination of such instruments and their expected realization and their current market rates of interest.
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| Revenue recognition | Revenue recognition The Company adopted ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), from May 1, 2020, using the modified retrospective transition approach to all contracts that did not have an impact on the beginning retained earnings on May 1, 2020. The Group’s revenue recognition policies effective on the adoption date of ASC 606 are presented as below. In accordance with ASC Topic 606, the Company’s performance obligation is satisfied upon the transfer of goods to the customer, which occurs at the point of sale. Revenues are recorded net of discounts, sales taxes, and returns and allowances. The Company sells Company gift cards to customers. There are no administrative fees on unused gift cards, and the gift cards do not have an expiration date. Gift card sales are recorded as contract liability when sold and are recognized as revenue when either the gift card is redeemed or the likelihood of the gift card being redeemed is remote (“gift card breakage”). The Company’s gift card breakage rate is based upon historical redemption patterns and it recognizes breakage revenue utilizing the redemption recognition method. The Company also offers discounts on the gift cards sold to its customers. The discounts are recorded as sales discount when gift card been redeemed. The Company’s contract liability related to gift cards was $370,836 and $449,334 as of July 31, 2023 and April 30, 2023, respectively. The following table summarizes disaggregated revenue from contracts with customers by product group: perishable and non-perishable goods. Perishable product categories include meat, seafood, vegetables, and fruit. Non-perishable product categories include grocery, liquor, cigarettes, lottery, newspaper, reusable bag, non-food, and health products.
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| Cost of sales | Cost of sales Cost of sales includes the rental expense, depreciation, the direct costs of purchased merchandise, shrinkage costs, store supplies, and inbound shipping costs. The cost of sales is a net of vendor’s rebates and discounts. The Company subleases certain mini stores that are within the supermarket to other parties. The Company collects security deposits and rents from these sub-lease tenants. The rent income collected from sub-lease tenants are recognized as rental income and deducted rental expense. |
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| Selling expenses | Selling expenses Selling expenses mainly consist of advertising costs, promotion expenses, and payroll and related expenses for personnel engaged in selling and marketing activities. Advertising expenses, which consist primarily of online and offline advertisements, are expensed when the services are performed. The Company’s advertising expenses were $30,637 and $10,078 for the three months ended July 31, 2023 and 2022, respectively. |
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| General and administrative expenses | General and administrative expenses General and administrative expenses mainly consist of payroll and related costs for employees involved in general corporate functions, professional fees and other general corporate expenses, as well as expenses associated with the use by these functions of facilities and equipment, such as rental and depreciation expenses.
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| Concentrations of risks | Concentrations of risks (a) Major customers For each of the three months ended July 31, 2023 and 2022, the Company did not have any customers that accounted for more than 10% of consolidated total net sales. (b) Major vendors The following table sets forth information as to the Company’s suppliers that accounted for 10% or more of the Company’s total purchases for the three months ended July 31, 2023 and 2022.
(c) Credit risks Financial instruments that are potentially subject to credit risk consist principally of accounts receivable. Accounts receivable are typically unsecured and derived from products sold to customers, and are thereby exposed to credit risk. However, the Company believes the concentration of credit risk in its accounts receivable is substantially mitigated by its ongoing credit evaluation process and relatively short collection terms. The Company does not generally require collateral from customers. The Company evaluates the need for an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends, and other information. Historically, the Company did not have any bad debt on its accounts receivable. The Company also has loan receivables to its centralized vendors occasionally. The loan receivables are typically unsecured and exposed to credit risk. However, the Company believes that the loan receivables amount to its centralized vendor is managed by its finance department and these centralized vendors are still providing products monthly to the Company. The Company does not generally require collateral from the vendors. The Company also evaluates the need for an allowance for doubtful accounts based on upon factors surrounding the credit risks. Historically, the Company did not have any bad debt on its loan receivables and all loan receivables been collected in subsequent period. |
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| Income taxes | Income taxes Income taxes are accounted for in accordance with the provisions of ASC 740. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company’s deferred tax assets are subject to periodic recoverability assessments. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount that more likely than not will be realized. In determining the need for a valuation allowance, management reviews both positive and negative evidence, including current and historical results of operations, future income projections, and the overall prospects of our business. Realization of the deferred tax assets is principally dependent upon achievement of projected future taxable income offset by deferred tax liabilities. Changes in recognition or measurement are reflected in the period in which the judgment occurs. The Company utilizes a two-step approach to recognizing and measuring uncertain income tax positions (tax contingencies). The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not the position will be sustained on audit, including resolution of related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount which is more than 50% likely of being realized upon ultimate settlement. The Company considers many factors when evaluating our tax positions and estimating its tax benefits, which may require periodic adjustments and which may not accurately forecast actual outcomes. The Company includes interest and penalties related to its tax contingencies in income tax expense. On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (the CARES Act) was signed into law, intended to provide economic relief to those impacted by the COVID-19 pandemic. The CARES Act, among other things, includes provisions addressing the carryback of net operating losses for specific periods, temporary modifications to the limitations placed on the tax deductibility of net interest expenses, and technical amendments for qualified improvement property (QIP). The impacts of the CARES Act are recorded as components within the Company’s deferred income tax liabilities and income tax receivable on the Company’s balance sheets.
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| Earnings (loss) per share | Earnings (loss) per share Basic earnings (loss) per ordinary share is computed by dividing net earnings (loss) attributable to common stockholders by the weighted-average number of common stock outstanding during the period. Diluted earnings per share is computed by dividing net income attributable to common stockholders by the sum of the weighted average number of common stock outstanding and of potential common stock (e.g., convertible securities, options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common stock that has an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) is excluded from the calculation of diluted earnings per share. For the three months ended July 31, 2023 and 2022, the Company had no dilutive potential common stock. |
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| Related Parties | Related Parties The Company identifies related parties, accounts for, and discloses related party transactions in accordance with ASC Topic 850 “Related Party Disclosures” and other relevant ASC standards. Parties are considered to be related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal with if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. The Company discloses all significant related party transactions in Note 13 — “Related party balances and transactions”. |
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| Segment Information | Segment Information The Company’s chief operating decision-maker has been identified as the chief executive officer, who reviews financial information presented on a consolidated basis accompanied by disaggregated information about revenues by different product types for purposes of allocating resources and evaluating financial performance. The Company and its subsidiaries offer grocery products, general merchandise, health and beauty care products, pharmacy, fuel and other items and services in its stores. The Company’s supermarket stores are geographically based, have similar economic characteristics, and similar expected long-term financial performance. The Company’s operating segments and reporting units are its four stores, which are reported in one reportable segment. There are no segment managers who are held accountable for operations, operating results, and plans for levels or components below the consolidated unit level. Based on qualitative and quantitative criteria established by ASC Topic 280, “Segment Reporting”, the Company considers itself to be operating within one reportable segment. |
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| Recently Issued Accounting Pronouncements | Recently Issued Accounting Pronouncements The Company considers the applicability and impact of all ASUs. Management periodically reviews new accounting standards that are issued. Under the Jumpstart Our Business Startups Act of 2012, as amended (the “JOBS Act”), the Company meets the definition of an emerging growth company and has elected the extended transition period for complying with new or revised accounting standards, which delays the adoption of these accounting standards until they would apply to private companies. In March 2023, the FASB issued ASU 2023-01, Lease (Topic 842): Common Control Arrangements, which clarifies the accounting for leasehold improvements associated with leases between entities under common control (hereinafter referred to as common control lease). ASU 2023-01 requires entities to amortize leasehold improvements associated with common control lease over the useful life to the common control group (regardless of the lease term) as long as the lessee controls the use of the underlying asset through a lease, and to account for any remaining leasehold improvements as a transfer between entities under common control through an adjustment to equity when the lessee no longer controls the underlying asset. This ASU will be effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted for both interim and annual financial statements that have not yet been made available for issuance. An entity may apply ASU 2023-01 either prospectively or retrospectively. The Company is currently evaluating the impact that the adoption of ASU 2023-01 will have on our consolidated financial statement presentations and disclosures. No other new accounting pronouncements issued or effective had, or are expected to have, a material impact on the Company’s consolidated financial statements. |
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Summary of Significant Accounting Policies (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Significant Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Estimated Useful Lives of Certain of Our Asset Alasses | The following table includes
the estimated useful lives of certain of our asset classes:
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| Schedule of Disaggregated Revenue from Contracts with Customers | The following table summarizes
disaggregated revenue from contracts with customers by product group: perishable and non-perishable goods. Perishable product categories
include meat, seafood, vegetables, and fruit. Non-perishable product categories include grocery, liquor, cigarettes, lottery, newspaper,
reusable bag, non-food, and health products.
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| Schedule of Table Sets Forth Information as to the Company’s Suppliers | The following table sets forth
information as to the Company’s suppliers that accounted for 10% or more of the Company’s total purchases for the three
months ended July 31, 2023 and 2022.
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Inventories, Net (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Inventories, Net [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Inventories, Net | A summary of inventories, net
is as follows:
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| Schedule of Movements of Reserve for Inventory Shrinkage | Movements of reserve for inventory
shrinkage are as follows:
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Prepayments (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||
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Jul. 31, 2023 | |||||||||||||||||||||||||||||||||||||
| Prepayments [Abstract] | |||||||||||||||||||||||||||||||||||||
| Schedule of Prepayments |
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Property and Equipment, Net (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property Plant and Equipment [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Property and Equipment, Net |
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Equity method investment (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Equity method investment [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Condensed Balance Sheet | The following table shows the condensed
balance sheet of HKGF Arcadia as of July 31, 2023.
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| Schedule of Condensed Statement of Operations | The following table shows the condensed
statement of operations of HKGF Arcadia for the period from July 1, 2023 to July 31, 2023.
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Accrued Expenses and Other Payables (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accrued Expenses and Other Payables [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Accrued Expenses and Other Payables |
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Loan Payables (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Loan Payables [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Company’s Loans | A summary of the Company’s
loans is listed as follows:
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| Schedule of Small Business Administration | U.S. Small Business
Administration (the “SBA”)
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| Schedule of Future Minimum Principal Amount of Loan Payments | As of July 31, 2023, the future
minimum principal amount of loan payments to be paid by year are as follows:
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Related Party Balances and Transactions (Tables) |
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Jul. 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Related Party Transactions [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Related Party Transactions | Related party transactions
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| Schedule of Investment in Equity Securities Purchased from Related Parties | Investment
in equity securities purchased from related parties
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Leases (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Store Lease Detail Information | The Company’s leases mainly
consist of store rent and copier rent. The store lease detail information is listed below:
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| Schedule of Operating ROU Assets and Lease Liabilities | The Company’s operating
ROU assets and lease liabilities were as follows:
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| Schedule of Operating Lease Liabilities Maturity | As of July 31, 2023, the five-year maturity
of the Company’s operating lease liabilities is as follow:
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Income Taxes (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income Taxes [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Provision for Income Taxes Provisions | The provision for income taxes
provisions consists of the following components:
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| Schedule of Federal Statutory Rate on Income (Loss) before Income Taxes | The following is a reconciliation
of the difference between the actual (benefit) provision for income taxes and the (benefit) provision computed by applying the federal
statutory rate on income (loss) before income taxes:
|
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| Schedule of Deferred Tax Assets and Liabilities | Deferred tax assets and liabilities
are recognized for the expected future tax consequences of differences between the carrying amounts of assets and liabilities and their
respective tax bases using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred taxes are
comprised of the following:
|
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Acquisition of Subsidiary (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jul. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Acquisition of Subsidiary [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Fair Values of the Assets Acquired and Liabilities Assumed | The
following table summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition. Goodwill as a result
of the acquisition of Maison Monterey Park is calculated as follows:
|
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| Schedule of Indicative of Future Consolidated Results | The
pro forma results are not necessarily indicative of the actual results that would have occurred had the acquisitions been completed as
of the beginning of the periods presented, nor are they necessarily indicative of future consolidated results.
|
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Summary of Significant Accounting Policies (Details) - Schedule of Estimated Useful Lives of Certain of Our Asset Alasses |
3 Months Ended |
|---|---|
Jul. 31, 2023 | |
| Public Utility, Property, Plant and Equipment [Line Items] | |
| Leasehold improvements | Shorter of the lease term or estimated useful life of the assets |
| Furniture & fixtures [Member] | Minimum [Member] | |
| Public Utility, Property, Plant and Equipment [Line Items] | |
| Property and equipment | 5 years |
| Furniture & fixtures [Member] | Maximum [Member] | |
| Public Utility, Property, Plant and Equipment [Line Items] | |
| Property and equipment | 10 years |
| Equipment [Member] | Minimum [Member] | |
| Public Utility, Property, Plant and Equipment [Line Items] | |
| Property and equipment | 5 years |
| Equipment [Member] | Maximum [Member] | |
| Public Utility, Property, Plant and Equipment [Line Items] | |
| Property and equipment | 10 years |
| Automobiles [Member] | |
| Public Utility, Property, Plant and Equipment [Line Items] | |
| Property and equipment | 5 years |
Summary of Significant Accounting Policies (Details) - Schedule of Disaggregated Revenue from Contracts with Customers - USD ($) |
3 Months Ended | |
|---|---|---|
Jul. 31, 2023 |
Jul. 31, 2022 |
|
| Summary of Significant Accounting Policies (Details) - Schedule of Disaggregated Revenue from Contracts with Customers [Line Items] | ||
| Total revenues | $ 13,752,315 | $ 11,409,688 |
| Perishables [Member] | ||
| Summary of Significant Accounting Policies (Details) - Schedule of Disaggregated Revenue from Contracts with Customers [Line Items] | ||
| Total revenues | 7,723,846 | 6,454,274 |
| Non-perishables [Member] | ||
| Summary of Significant Accounting Policies (Details) - Schedule of Disaggregated Revenue from Contracts with Customers [Line Items] | ||
| Total revenues | $ 6,028,469 | $ 4,955,414 |
Summary of Significant Accounting Policies (Details) - Schedule of Table Sets Forth Information as to the Company’s Suppliers |
Jul. 31, 2023 |
Jul. 31, 2022 |
|---|---|---|
| A [Member] | ||
| Revenue from External Customer [Line Items] | ||
| Percentage of Total Purchases | 34.00% | 21.00% |
| B [Member] | ||
| Revenue from External Customer [Line Items] | ||
| Percentage of Total Purchases | 19.00% | 20.00% |
| C [Member] | ||
| Revenue from External Customer [Line Items] | ||
| Percentage of Total Purchases | 9.00% | 19.00% |
Inventories, Net (Details) - Schedule of Inventories, Net - USD ($) |
Jul. 31, 2023 |
Apr. 30, 2023 |
|---|---|---|
| Schedule of Inventories Net [Abstract] | ||
| Perishables | $ 456,925 | $ 487,912 |
| Non-perishables | 2,453,637 | 2,533,824 |
| Reserve for inventory shrinkage | (39,513) | (42,750) |
| Inventories, net | $ 2,871,049 | $ 2,978,986 |
Inventories, Net (Details) - Schedule of Movements of Reserve for Inventory Shrinkage - USD ($) |
3 Months Ended | |
|---|---|---|
Jul. 31, 2023 |
Jul. 31, 2022 |
|
| Schedule of Movements of Reserve for Inventory Shrinkage [Abstract] | ||
| Beginning balance | $ 42,750 | $ 135,122 |
| GF Supermarket of MP, Inc. Inventory shrinkage reserve at July 1, 2022 | 37,684 | |
| Provision for (Reverse of) inventory shrinkage reserve | (3,237) | 8,306 |
| Ending Balance | $ 39,513 | $ 181,112 |
Prepayments (Details) - USD ($) |
1 Months Ended | 3 Months Ended |
|---|---|---|
Apr. 30, 2023 |
Jul. 31, 2023 |
|
| Vendor [Member] | ||
| Prepayments (Details) [Line Items] | ||
| Prepayment amount | $ 20,000 | $ 20,000 |
| XHJC [Member] | ||
| Prepayments (Details) [Line Items] | ||
| Prepayment amount | $ 1,527,243 | $ 1,063,820 |
Prepayments (Details) - Schedule of Prepayments - USD ($) |
Jul. 31, 2023 |
Apr. 30, 2023 |
|---|---|---|
| Schedule of prepayments [Abstract] | ||
| Prepayment for inventory purchases | $ 1,083,820 | $ 1,547,243 |
| Total prepayments | $ 1,083,820 | $ 1,547,243 |
Loan Receivables (Details) - USD ($) |
Nov. 04, 2022 |
Oct. 30, 2022 |
Oct. 28, 2022 |
Oct. 14, 2022 |
Sep. 09, 2022 |
Jan. 01, 2022 |
Apr. 30, 2020 |
|---|---|---|---|---|---|---|---|
| Loan Receivables [Abstract] | |||||||
| Loan amount | $ 1,000,000 | $ 4,000,000 | |||||
| Loan amount interest rate | 6.00% | 4.00% | 6.00% | ||||
| Repaid amount | $ 433,136 | $ 215,344 | $ 761,932 | $ 1,200,000 | $ 1,800,000 |
Property and Equipment, Net (Details) - USD ($) |
3 Months Ended | |
|---|---|---|
Jul. 31, 2023 |
Jul. 31, 2022 |
|
| Property Plant and Equipment [Abstract] | ||
| Depreciation expenses | $ 5,792 | |
| General and administrative expenses | $ 15,246 | |
| Depreciation expense cost of sales | $ 57,920 | $ 124,962 |
Property and Equipment, Net (Details) - Schedule of Property and Equipment, Net - USD ($) |
Jul. 31, 2023 |
Apr. 30, 2023 |
|---|---|---|
| Property, Plant and Equipment [Line Items] | ||
| Total property and equipment | $ 4,573,974 | $ 4,561,165 |
| Accumulated depreciation | (3,953,413) | (3,889,702) |
| Property and equipment, net | 620,561 | 671,463 |
| Furniture & Fixtures [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Total property and equipment | 3,025,516 | 3,025,516 |
| Equipment [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Total property and equipment | 1,011,333 | 1,011,333 |
| Leasehold Improvement [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Total property and equipment | 499,453 | 486,644 |
| Automobile [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Total property and equipment | $ 37,672 | $ 37,672 |
Equity method investment (Details) - USD ($) |
1 Months Ended | 3 Months Ended | |||
|---|---|---|---|---|---|
Jul. 27, 2023 |
Dec. 31, 2021 |
Jul. 31, 2023 |
Jul. 31, 2022 |
Apr. 30, 2023 |
|
| Equity method investment (Details) [Line Items] | |||||
| Equity interest percentage | 10.00% | ||||
| Investment loss | $ (28,456) | ||||
| Investment | 1,411,544 | ||||
| Equity Method Investment, Amount Sold | 0 | $ 85,387 | |||
| HKGF Market of Arcadia, LLC [Member] | |||||
| Equity method investment (Details) [Line Items] | |||||
| Invested amount | $ 1,440,000 | ||||
| Equity interest percentage | 40.00% | ||||
| Investment loss | 28,456 | ||||
| Investment | $ 1,411,544 | ||||
| HKGF Market of Arcadia, LLC [Member] | Owner [Member] | |||||
| Equity method investment (Details) [Line Items] | |||||
| Ownership percentage | 60.00% | ||||
| JC Business Guys, Inc. [Member] | |||||
| Equity method investment (Details) [Line Items] | |||||
| Net accounts receivable | $ 149,989 | ||||
Equity method investment (Details) - Schedule of Condensed Balance Sheet - HKGF Arcadia [Member] |
Jul. 31, 2023
USD ($)
|
|---|---|
| Current Assets | |
| Cash and equivalents | $ 86,395 |
| Accounts receivable | 10,696 |
| Inventories, net | 425,133 |
| Total Current Assets | 522,224 |
| Property and equipment, net | 426,786 |
| Intangible asset, net | 6,031 |
| Goodwill | 1,680,000 |
| Security deposits | 159,589 |
| Total Assets | 2,794,630 |
| Current Liabilities | |
| Accounts payable | 1,039,292 |
| Accrued expenses and other payables | 3,400 |
| Total Current Liabilities | 1,042,692 |
| Total Liabilities | 1,042,692 |
| Stockholders’ Equity | |
| Paid in Capital | 3,440,000 |
| Subscription receivable | (1,300,000) |
| Accumulated deficit | (388,062) |
| Total Stockholders’ Equity | 1,751,938 |
| Total Liabilities and Stockholders’ Equity | $ 2,794,630 |
Equity method investment (Details) - Schedule of Condensed Statement of Operations - HKGF Arcadia [Member] |
1 Months Ended |
|---|---|
|
Jul. 31, 2023
USD ($)
| |
| Net Revenues | |
| Total Revenues, Net | $ 577,824 |
| Cost of Revenues | |
| Total Cost of Revenues | 428,535 |
| Gross Profit | 149,289 |
| Operating Expenses | 220,430 |
| Total Operating Expenses | 220,430 |
| Loss from Operations | (71,141) |
| Income (Loss) Before Income Taxes | (71,141) |
| Income Tax Provisions | |
| Net Loss | (71,141) |
| Net Loss Attributable to Maison Solutions Inc. | (28,456) |
| Supermarket | |
| Net Revenues | |
| Total Revenues, Net | 577,824 |
| Cost of Revenues | |
| Total Cost of Revenues | $ 428,535 |
Goodwill (Details) |
Jul. 31, 2023
USD ($)
|
|---|---|
| Goodwill [Abstract] | |
| Goodwill | $ 2,222,211 |
Accrued Expenses and Other Payables (Details) - Schedule of Accrued Expenses and Other Payables - USD ($) |
Jul. 31, 2023 |
Apr. 30, 2023 |
|---|---|---|
| Schedule of accrued expenses and other payables [Abstract] | ||
| Accrued payroll | $ 263,616 | $ 301,527 |
| Accrued interest expense | 131,388 | 127,638 |
| Accrued loss for legal matter | 237,000 | 237,000 |
| Other payables | 16,342 | 26,878 |
| Due to third parties | 118,703 | 145,775 |
| Sales tax payable | 41,952 | 28,978 |
| Total accrued expenses and other payables | $ 809,001 | $ 867,796 |
Note Payable (Details) - USD ($) |
Jul. 31, 2023 |
Apr. 30, 2023 |
|---|---|---|
| Note Payable [Abstract] | ||
| Note payable | $ 150,000 | |
| Interest rate percentage | 10.00% | |
| Accrued interest | $ 25,000 | $ 21,500 |
Loan Payables (Details) - Schedule of Company’s Loans - USD ($) |
3 Months Ended | |
|---|---|---|
Jul. 31, 2023 |
Apr. 30, 2023 |
|
| Loan Payables (Details) - Schedule of Company’s Loans [Line Items] | ||
| Total loan payables | $ 2,830,710 | $ 2,932,127 |
| Current portion of loan payables | (285,489) | (370,828) |
| Non-current loan payables | $ 2,545,221 | 2,561,299 |
| American First National Bank [Member] | ||
| Loan Payables (Details) - Schedule of Company’s Loans [Line Items] | ||
| Total loan payables due date | March 2, 2024 | |
| Total loan payables | $ 227,166 | 307,798 |
| U.S. Small Business Administration [Member] | ||
| Loan Payables (Details) - Schedule of Company’s Loans [Line Items] | ||
| Total loan payables due date | June 15, 2050 | |
| Total loan payables | $ 2,603,544 | $ 2,624,329 |
Loan Payables (Details) - Schedule of Small Business Administration - USD ($) |
3 Months Ended | |
|---|---|---|
Jul. 31, 2023 |
Apr. 30, 2023 |
|
| Maison Monrovia [Member] | ||
| Debt Instrument [Line Items] | ||
| SBA loan payables due date | June 15, 2050 | |
| Total SBA loan payables | $ 147,419 | $ 148,574 |
| Maison San Gabriel [Member] | ||
| Debt Instrument [Line Items] | ||
| SBA loan payables due date | June 15, 2050 | |
| Total SBA loan payables | $ 1,965,117 | 1,980,725 |
| Maison El Monte [Member] | ||
| Debt Instrument [Line Items] | ||
| SBA loan payables due date | June 15, 2050 | |
| Total SBA loan payables | $ 491,007 | 495,030 |
| U.S. Small Business Administration [Member] | ||
| Debt Instrument [Line Items] | ||
| Total SBA loan payables | $ 2,603,544 | $ 2,624,329 |
Loan Payables (Details) - Schedule of Future Minimum Principal Amount of Loan Payments |
Apr. 30, 2023
USD ($)
|
|---|---|
| Schedule of Future Minimum Principal Amount of Loan Payments [Abstract] | |
| 2024 | $ 58,323 |
| 2025 | 65,626 |
| 2026 | 67,792 |
| 2027 | 70,041 |
| 2028 | 72,376 |
| Thereafter | 2,269,386 |
| Total | $ 2,603,544 |
Related Party Balances and Transactions (Details) - USD ($) |
1 Months Ended | 3 Months Ended | ||
|---|---|---|---|---|
Jun. 27, 2023 |
Dec. 31, 2021 |
May 31, 2021 |
Jul. 31, 2023 |
|
| Related Party Balances and Transactions (Details) [Line Items] | ||||
| Percentage of equity interest | 10.00% | |||
| Trading amount | $ 162,665 | |||
| Related party amount | $ 40,775 | |||
| Investment loss | $ 28,456 | |||
| HKGF Arcadia [Member] | ||||
| Related Party Balances and Transactions (Details) [Line Items] | ||||
| Percentage of equity interest | 40.00% | |||
| Invested amount | $ 1,440,000 | |||
| Dai Cheong Trading Inc. [Member] | ||||
| Related Party Balances and Transactions (Details) [Line Items] | ||||
| Percentage of equity interest | 10.00% | |||
Leases (Details) - USD ($) |
3 Months Ended | 8 Months Ended | 12 Months Ended | |||
|---|---|---|---|---|---|---|
Apr. 01, 2023 |
Jul. 31, 2023 |
Jul. 31, 2022 |
Mar. 31, 2024 |
Mar. 31, 2026 |
Mar. 31, 2025 |
|
| Leases (Details) [Line Items] | ||||||
| Lease term | 5 years | |||||
| Monthly based rent | $ 40,000 | |||||
| Percentage of increase base rent | 3.00% | |||||
| Increased lease term | 4 years | |||||
| ROU and lease liability | $ 3,620,000 | |||||
| Average remaining term | 4 years 3 months 14 days | |||||
| Total lease expenses | $ 780,000 | $ 560,000 | ||||
| Minimum [Member] | ||||||
| Leases (Details) [Line Items] | ||||||
| Effective interest rate | 4.50% | |||||
| Maximum [Member] | ||||||
| Leases (Details) [Line Items] | ||||||
| Effective interest rate | 6.25% | |||||
| Forecast [Member] | ||||||
| Leases (Details) [Line Items] | ||||||
| Monthly based rent | $ 5,000 | $ 1,000 | $ 2,500 | |||
| Supermarkets’ Store [Member] | ||||||
| Leases (Details) [Line Items] | ||||||
| Average remaining term | 9 years 10 months 13 days | |||||
Leases (Details) - Schedule of Store Lease Detail Information |
3 Months Ended | |||
|---|---|---|---|---|
Jul. 31, 2023 | ||||
| Maison Monrovia [Member] | ||||
| Schedule of Store Lease Detail Information [Abstract] | ||||
| Lease Term Due | August 31, 2055 (with extension) | [1] | ||
| Maison San Gabriel [Member] | ||||
| Schedule of Store Lease Detail Information [Abstract] | ||||
| Lease Term Due | November 30, 2030 | |||
| Maison El Monte [Member] | ||||
| Schedule of Store Lease Detail Information [Abstract] | ||||
| Lease Term Due | July 14, 2028 | |||
| Maison Monterey Park [Member] | ||||
| Schedule of Store Lease Detail Information [Abstract] | ||||
| Lease Term Due | May 1, 2028 | |||
| Maison Monrovia One [Member] | ||||
| Schedule of Store Lease Detail Information [Abstract] | ||||
| Lease Term Due | January 1, 2028 | |||
| Maison San Gabriel One [Member] | ||||
| Schedule of Store Lease Detail Information [Abstract] | ||||
| Lease Term Due | January 1, 2028 | |||
| Maison Monterey Park One [Member] | ||||
| Schedule of Store Lease Detail Information [Abstract] | ||||
| Lease Term Due | August 1, 2027 | |||
| ||||
Leases (Details) - Schedule of Operating ROU Assets and Lease Liabilities - USD ($) |
3 Months Ended | 12 Months Ended |
|---|---|---|
Jul. 31, 2023 |
Apr. 30, 2023 |
|
| Operating ROU: | ||
| ROU assets – supermarket leases | $ 22,010,209 | $ 22,517,925 |
| ROU assets – copier leases | 26,328 | 27,265 |
| Total operating ROU assets | 22,036,537 | 22,545,190 |
| Operating lease obligations: | ||
| Current operating lease liabilities | 1,780,559 | 1,761,182 |
| Non-current operating lease liabilities | 22,251,277 | 22,711,760 |
| Total lease liabilities | $ 24,031,836 | $ 24,472,942 |
Leases (Details) - Schedule of Operating Lease Liabilities Maturity |
Jul. 31, 2023
USD ($)
|
|---|---|
| Schedule of Operating Lease Liabilities Maturity [Abstract] | |
| 2024 | $ 2,805,260 |
| 2025 | 2,865,825 |
| 2026 | 2,926,578 |
| 2027 | 2,980,223 |
| 2028 | 2,866,526 |
| Thereafter | 24,218,071 |
| Total lease payments | 38,662,483 |
| Less: interest | (14,630,647) |
| Present value of lease liabilities | $ 24,031,836 |
Stockholder’s Equity (Details) - $ / shares |
3 Months Ended | ||
|---|---|---|---|
Sep. 08, 2021 |
Jul. 31, 2023 |
Apr. 30, 2023 |
|
| Stockholder’s Equity (Details) [Line Items] | |||
| Common stock, shares authorized | 100,000,000 | 500,000 | |
| Common stock par value | $ 0.0001 | ||
| Stock split, descriptions | 200-for-1 stock split | ||
| Preferred stock, shares authorized | 5,000,000 | ||
| Class A common stock [Member] | |||
| Stockholder’s Equity (Details) [Line Items] | |||
| Common stock, shares authorized | 92,000,000 | 92,000,000 | 92,000,000 |
| Common stock par value | $ 0.0001 | $ 0.0001 | |
| Common stock voting rights | one | ||
| Class B common stock [Member] | |||
| Stockholder’s Equity (Details) [Line Items] | |||
| Common stock, shares authorized | 3,000,000 | 3,000,000 | 3,000,000 |
| Common stock par value | $ 0.0001 | $ 0.0001 | |
| Common stock voting rights | ten | ||
| John Xu [Member] | Class A common stock [Member] | |||
| Stockholder’s Equity (Details) [Line Items] | |||
| Common stock voting rights | one | ||
| John Xu [Member] | Class B common stock [Member] | |||
| Stockholder’s Equity (Details) [Line Items] | |||
| Common stock voting rights | ten |
Income Taxes (Details) - USD ($) |
Jul. 31, 2023 |
Apr. 30, 2023 |
Jul. 31, 2022 |
|---|---|---|---|
| Income Taxes [Abstract] | |||
| Tax amount | $ 2,780,000 | $ 2,250,000 | |
| Percentage of income tax utilized | 80.00% | ||
| Net operating loss carry forwards | $ 2,110,000 | 1,580,000 | |
| Net operating loss carry forwards expiration date | 20 years | ||
| Interest and penalties | $ 11,279 | $ 11,261 | |
| Uncertain tax | $ 114,561 | $ 103,282 |
Income Taxes (Details) - Schedule of Provision for Income Taxes Provisions - USD ($) |
3 Months Ended | |
|---|---|---|
Jul. 31, 2023 |
Jul. 31, 2022 |
|
| Schedule of provision for income taxes [Abstract] | ||
| Federal income tax expense | $ 82,564 | $ 7,720 |
| State income tax expense | 38,102 | 10,507 |
| Federal income tax benefit | (1,320) | (226) |
| State income tax benefit | (440) | (75) |
| Total | $ 118,906 | $ 17,926 |
Income Taxes (Details) - Schedule of Federal Statutory Rate on Income (Loss) before Income Taxes - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Jul. 31, 2023 |
Jul. 31, 2022 |
|
| Schedule of Federal Statutory Rate on Income (Loss) before Income Taxes [Abstract] | ||
| Federal statutory rate (in Dollars) | $ 21,000 | $ (21,000) |
| State statutory rate, net of effect of state income tax deductible to federal income tax | 7.02% | (5.99%) |
| Permanent difference – penalties, interest, and others | (7.62%) | 1.11% |
| Utilization of net operating losses (“NOL”) | (12.89%) | |
| Valuation allowance | 121.48% | 29.13% |
| Effective tax rate | 129.00% | 3.25% |
Income Taxes (Details) - Schedule of Deferred Tax Assets and Liabilities - USD ($) |
3 Months Ended | |
|---|---|---|
Jul. 31, 2023 |
Apr. 30, 2023 |
|
| Deferred tax assets: | ||
| Bad debt expense | $ 40,550 | $ 70,929 |
| Lease liabilities, net of ROU | 524,149 | 441,997 |
| NOL | 730,181 | 583,490 |
| Valuation allowance | (1,283,162) | (1,085,551) |
| Deferred tax assets, net | 11,718 | 10,865 |
| Deferred tax liability: | ||
| Trademark acquired at acquisition of Maison Monterey Park | 50,367 | 51,273 |
| Deferred tax liability, net of deferred tax assets | $ 38,648 | $ 40,408 |
Other Income (Details) |
3 Months Ended |
|---|---|
|
Jul. 31, 2023
USD ($)
| |
| Other Income [Abstract] | |
| Other income | $ 380,000 |
| Investment loss | $ 28,456 |
Commitments and Contingencies (Details) - USD ($) |
1 Months Ended | 3 Months Ended | 12 Months Ended | ||
|---|---|---|---|---|---|
Jun. 30, 2022 |
Apr. 19, 2021 |
Jul. 31, 2023 |
Apr. 30, 2022 |
Apr. 30, 2023 |
|
| Commitments and Contingencies (Details) [Line Items] | |||||
| Litigation payment to plaintiff | $ 98,500 | ||||
| Loss contingency | $ 98,500 | ||||
| Accrued additional | $ 40,000 | ||||
| Consultancy and initialization fee | $ 220,000 | ||||
| Consultancy and initialization fee percentage | 40.00% | ||||
| Gross merchandise value rate | 1.20% | ||||
| Consultancy and initialization, additional commitment amount | $ 50,000 | ||||
| Collaboration agreement initial term descriptions | The Collaboration Agreement has an initial term of 10 years and customary termination and indemnification provisions. Simultaneously with the effectiveness of the Collaboration Agreement, JD US and Maison entered into an Intellectual Property License Agreement (the “IP Agreement”) outlining certain trademarks, logos and designs, and other intellectual property rights used in connection with the retail supermarket operations outlined in the Collaboration Agreement, which includes an initial term of 10 years and customary termination provisions. | ||||
| Maximum [Member] | |||||
| Commitments and Contingencies (Details) [Line Items] | |||||
| Consultancy and initialization fee percentage | 40.00% | ||||
| Minimum [Member] | |||||
| Commitments and Contingencies (Details) [Line Items] | |||||
| Consultancy and initialization fee percentage | 20.00% | ||||
Acquisition of Subsidiary (Details) - USD ($) $ in Millions |
Feb. 21, 2023 |
Jun. 30, 2022 |
|---|---|---|
| Acquisition of Subsidiary (Details) [Line Items] | ||
| Company purchased equity interest | 100.00% | |
| Purchase consideration (in Dollars) | $ 1.5 | |
| Purchase price (in Dollars) | $ 2.5 | |
| GF Supermarket of MP Inc [Member] | ||
| Acquisition of Subsidiary (Details) [Line Items] | ||
| Ownership percentage | 49.00% | |
| DNL Management Inc [Member] | ||
| Acquisition of Subsidiary (Details) [Line Items] | ||
| Ownership percentage | 51.00% |
Acquisition of Subsidiary (Details) - Schedule of Indicative of Future Consolidated Results |
3 Months Ended |
|---|---|
|
Jul. 31, 2022
USD ($)
| |
| Schedule of indicative of future consolidated results [Abstract] | |
| Revenue | $ 14,232,869 |
| Operating costs and expenses | 14,469,401 |
| Loss from operations | (236,532) |
| Other income | 8,386 |
| Income tax expense | (17,926) |
| Net loss | $ (246,072) |