Maison Solutions (MSS) - 2025 Q4 - Annual Report

PART I SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS This section cautions readers about forward-looking statements in the 10-K, emphasizing inherent risks and uncertainties that may cause actual results to differ materially - The report contains forward-looking statements identifiable by words like 'anticipate,' 'expect,' 'plan,' and 'will,' which are subject to substantial risks and uncertainties[11] - Readers are cautioned not to unduly rely on forward-looking statements due to inherent risks and uncertainties that may cause actual results to differ materially[11][13] - The company does not undertake to publicly update or revise any forward-looking statement unless required by law[14] Risk Factor Summary This section summarizes principal risks across business, industry, regulatory, and stock ownership, including the unproven center-satellite model and growth challenges - The company's center-satellite store model is new, and its success is not guaranteed[19] - Challenges in implementing growth strategy include identifying suitable sites, negotiating leases, attracting and retaining personnel, managing inventory, securing financing, and addressing competitive challenges[19] - The company faces intense competition from various food retailers, including national and regional supermarkets, and online grocers, which may have greater resources[19] - Heavy reliance on perishable products (51.4% and 54.0% of total sales in FY2025 and FY2024, respectively) exposes the company to significant inventory losses from supply disruptions, natural disasters, and ordering errors[19] - Economic conditions impacting consumer spending, such as inflation and changes in disposable income, could materially affect the business by increasing costs and reducing sales[19] ITEM 1. BUSINESS Maison Solutions Inc. is a specialty Asian grocery retailer utilizing a center-satellite store model, multi-channel shopping, and a JD.com partnership for growth - Maison Solutions Inc. is a specialty grocery retailer providing traditional Asian food and merchandise to U.S. consumers, particularly Asian-American communities[26] - The company operates a 'center-satellite stores network' model, with six existing center stores (three in Los Angeles, CA, and three in Phoenix/Tucson, AZ) and plans for satellite stores to penetrate local communities with younger customers[26][27][49] - Merchandise includes fresh and unique Asian produce, meats, seafood, and specialty groceries not typically found in mainstream supermarkets[28] - The company offers multi-channel shopping options, including a third-party mobile app 'Freshdeals24' and a WeChat applet for home delivery or in-store pickups, aiming for a 100% cashier-less experience[29] - A strategic partnership with JD.com aims to improve store digital transformation, develop a new product-centric mobile app, implement cloud-based data management, and enhance smart warehousing and logistics[99] Our Company Maison Solutions Inc. is a specialty Asian grocery retailer operating center stores and developing satellite stores to serve diverse Asian-American communities - Maison Solutions Inc. is a fast-growing specialty grocery retailer offering traditional Asian food and merchandise to modern U.S. consumers, especially Asian-American communities[26] - The company operates six supermarkets as 'center stores' in Los Angeles, California, and the greater Phoenix and Tucson, Arizona metro areas, targeting traditional Asian-American family-oriented customers[26] - Maison acquired a 10% equity interest in the Alhambra Store, intended to be its first 'satellite store' to penetrate younger customer demographics[27] Market Opportunities Significant market opportunities exist due to the rapidly growing, affluent U.S. Asian population, increasing demand for Asian foods, and expanding online grocery sales - The U.S. Asian population increased by 203% from 1990 to 2020, becoming the fastest-growing racial/ethnic group, with a median household income exceeding the overall U.S. population[34] - Demand for Asian cuisines and cultural foods is increasing, driven by immigrant population growth and robust demand from native populations[35][37] - Modern Asian-American consumers are increasingly health-conscious and willing to pay a premium for healthy and fresh food[38] - Online grocery sales grew 54% in 2020 to $95.82 billion, projected to reach 20% of the market by 2026, indicating a significant opportunity for online Asian grocery platforms[45] Our History Maison Solutions Inc. was founded in 2019, reincorporated in 2021, and expanded through strategic acquisitions of supermarkets and wholesale interests, including the recent Lee Lee chain - Founded in July 2019 as Maison International, Inc. (Illinois), reincorporated in Delaware as Maison Solutions Inc. in September 2021[47] - Acquired majority equity interests in three retail Asian supermarkets in Los Angeles, CA (San Gabriel, Monrovia, El Monte) in 2019, rebranding them as 'HK Good Fortune Supermarkets'[47] - Acquired 10% equity interest in Dai Cheong Trading Company (wholesale business) in May 2021 and 10% in HKGF Market of Alhambra (Alhambra Store) in December 2021, both related party transactions[47] - Acquired 100% of GF Supermarket of MP, Inc. (Monterey Park) in June 2022 and 100% of Lee Lee Oriental Supermart, Inc. (three-store chain in Phoenix/Tucson, AZ) in April 2024[47] - The Maison El Monte store was shut down in June 2025 as a strategic decision to improve profitability and support sustainable growth[47] Our Center-Satellite Stores Model The center-satellite model leverages large hub stores for logistics and smaller community stores for curated products, aiming for cost efficiency and targeted market penetration - The model uses a center store as a central hub for logistics and distribution to smaller satellite/community stores in surrounding areas[50][51] - Satellite stores are smaller, located in residential areas with younger populations, offering a curated selection of products (e.g., convenient food, social media trending items) to meet specific community needs[52] - Expected advantages include cost efficiency, higher profit margins through precision marketing, easier setup, greater flexibility in inventory, and synergies in logistics and customer reach[53][57] Our Products The company offers a diverse product range, with perishables comprising over 50% of revenue, and is expanding ready-to-eat Asian foods through satellite stores and the Lee Lee acquisition - Perishable products (vegetables, seafood, fruit, meat) contributed approximately 50% and 54% to total net revenue in fiscal years 2025 and 2024, respectively[61] - Non-perishable groceries, including imported items from China, Thailand, and Taiwan, contributed approximately 48.40% and 45.97% to total net sales in fiscal years 2025 and 2024, with an average markup of 35.13% and 35.09%, respectively[62] - The Alhambra Store, intended as the first satellite store, focuses on ready-to-eat and ready-to-cook Asian foods under the 'Chili Point Land' brand, targeting young customers and social media trends[65][68] - The acquisition of Lee Lee Oriental Supermart, Inc. expanded operations into Arizona with three profitable stores, retaining the Lee Lee brand name to maintain its loyal customer base and offering similar product lines[69][70][71] Our Vertical Supply and Distribution Chain The company employs a vertically integrated supply chain, including an equity interest in a wholesale importer, and in-house cold chain logistics for efficient product delivery - The business model features a vertically integrated structure, including a 10% equity interest in Dai Cheong, a wholesale business importing Asian foods and groceries, to secure supply and preferred pricing[73] - The company works with three primary suppliers, accounting for approximately 19.0% and 48.0% of total purchases in fiscal years 2025 and 2024, respectively[73] - An in-house logistics team and cold chain systems ensure fast and reliable delivery of fresh produce and live seafood, with same-day delivery for online orders within a five-mile radius of the closest store[73][74] Integrated Online and Offline Services The company offers integrated online and offline shopping via mobile apps for delivery or pickup, leveraging center stores for fulfillment and partnering with JD.com for digital enhancements - Customers can place online orders via the 'Freshdeals24' mobile app and a WeChat applet, offering home delivery or in-store pickups for a cashier-less shopping experience[75] - The company integrates online and offline retail capabilities, using center stores as warehouses to fulfill online orders and manage inventory effectively[76] - JD.com is developing a new mobile app for future stores, aiming to enhance the online shopping experience with flash sales, daily promotions, and social platform elements[77][99] Pricing Strategy The pricing strategy balances premium products at reasonable prices with competitive pricing for high-traffic items and premium markups for imported groceries - The general pricing strategy is to provide premium products at reasonable prices, focusing on quality and shopping experience over promotional pricing[78] - Competitive pricing is used for best-sellers like seafood and core produce to attract traffic, while imported groceries with long shelf lives are priced at a premium (average 35% markup)[79] Marketing and Advertising Marketing leverages unique offerings and in-store promotions, with future plans for increased social media and influencer engagement to target younger demographics - Marketing relies on unique offerings, competitive prices, word-of-mouth, in-store promotions (tastings, cooking demonstrations), and local Chinese newspapers/radio[80] - Marketing and advertising expenses decreased from $208,000 in FY2024 to $79,360 in FY2025[80] - Future plans include significant increases in advertising, focusing on social media platforms (TikTok, YouTube, Instagram, WeChat) and collaborating with Internet influencers to target younger generations and promote satellite stores and the new mobile app[81] Competition The company operates in a highly competitive and fragmented Asian food retail market, competing with traditional supermarkets and online grocers, and emphasizes its comprehensive shopping experience - The food retail industry is highly competitive, with the Asian supermarket niche market being fragmented[82] - Principal competitors include 99 Ranch Market and HMart for traditional supermarkets, and Weee! for online groceries[83] - National and regional chains have greater resources, while online-only platforms like Weee! lack an offline presence, leading to higher costs and inability to offer in-store experiences[83] - Maison believes its business model offers a more comprehensive and holistic shopping experience at a competitive price point compared to online-only grocers[83] Our Competitive Strengths Competitive strengths include an experienced management team, performance-based incentives, a cost-efficient supply chain, stringent quality control, and agile product trend adaptation - The company boasts a strong management and operations team with extensive experience from leading market players like Yonghui Superstores and Freshippo[84] - A performance-based bonus system incentivizes store employees to meet or exceed Key Performance Indicators (KPIs), with monthly cash bonuses amounting to 1% of gross revenue for achieving goals[85] - Cost-efficient supply chain achieved through large purchasing power with two primary wholesale agents and a 10% equity interest in Dai Cheong, an importer of Asian specialty foods, reducing multi-layer intermediates[86][87] - Superior customer propositions are maintained through stringent quality control procedures (three daily checks for products), cold chain supply methods for perishables, and sourcing from greenhouses for produce[88] - The company targets popular product trends by continuously updating offerings based on social media monitoring and store data, in collaboration with suppliers[90] Employees The company had 378 non-unionized employees as of April 30, 2025, with payroll expenses significantly increasing due to minimum wage hikes and acquisitions - As of April 30, 2025, the company had approximately 378 employees, none of whom are unionized[91] - Payroll and payroll tax expenses increased significantly from $7.4 million in FY2024 to $15.0 million in FY2025, partly due to minimum wage increases in California and Arizona[91] Our Growth Strategy Growth strategy focuses on expanding the center-satellite store network through acquisitions, targeting younger demographics, and enhancing multi-channel shopping experiences with integrated solutions - The company plans to continue building its center-satellite stores network by acquiring additional supermarkets on both the West and East Coasts[92] - Satellite stores will target younger and diverse customer populations in local communities, including college towns, offering ready-to-eat and ready-to-cook foods[93] - Multi-channel initiatives include improving in-store shopping, enhancing mobile ordering with delivery/pickup, and broadening social media presence[94] - Multi-channel solutions aim for integration across user, product, price, inventory, marketing, and order management to provide a seamless customer experience and optimize operations[94][97] Partnership with JD.com A strategic partnership with JD.com aims to digitally transform stores, develop a new mobile app, enhance supply chain efficiency, and co-brand retail operations in California - A collaboration agreement with JD US (U.S. subsidiary of JD.com) was signed in April 2021 to improve business through store digital transformation, a newly-designed product-centric app, cloud-based data management, smart warehousing/logistics, and introduction of popular Asian products[98][99] - JD US provides consultancy, initialization, implementation, and platform services, including store digitalization, online retailing solutions, and supply chain configuration[103] - An Intellectual Property License Agreement grants Maison a ten-year limited, non-exclusive license to use JD.com's marks in a co-brand for retail supermarket operations in California[100][104] Trademarks The company owns the 'HK GOOD FORTUNE SUPERMARKET' trademark, registered in December 2022, for its California retail operations - The company's self-owned trademark, 'HK GOOD FORTUNE SUPERMARKET' and stylized 'GOOD FORTUNE', was registered on December 20, 2022, and is used for its California retail supermarkets[101] Insurance The company manages risks through a combination of insurance and self-insurance for various liabilities, continuously evaluating coverage against evolving market conditions - The company uses a combination of insurance and self-insurance for worker's compensation, general liability, product liability, employee health care, and property risks[102] - Insurance requirements are evaluated ongoing to ensure adequate coverage, with potential impacts from changes in legal trends, inflation, claims settlement, and carrier insolvency[102] Regulation The company is subject to extensive health and safety regulations from various agencies, with non-compliance risking increased costs, recalls, litigation, and reputational damage - As a supermarket retailer, the company is subject to numerous health and safety laws and regulations from agencies like the FDA, USDA, FTC, OSHA, CPSC, and EPA[105] - The FDA Food Safety Modernization Act (FSMA) grants the FDA greater authority over food safety, requiring risk-based preventive controls, minimum standards for produce, and enhanced tracking/tracing[106][107] - Non-compliance with regulations or false advertising claims could lead to increased costs, product recalls, litigation, damage to reputation, and adverse effects on business operations[109] - The company relies on suppliers to comply with regulatory requirements and seeks certifications, warranties, and indemnification, but claims of non-compliance could still damage reputation[112] Corporate Information Maison Solutions Inc., founded in 2019 and headquartered in Monterey Park, California, operates six retail supermarkets across California and Arizona as a smaller reporting company - Maison Solutions Inc. was founded in July 2019, reincorporated in Delaware in September 2021, with headquarters in Monterey Park, California[114] - The company operates six retail supermarkets across San Gabriel, Monrovia, Monterey Park (California), and Chandler, Peoria, Tucson (Arizona)[114] - Maison is a 'smaller reporting company' and takes advantage of scaled disclosure available under the Exchange Act[115] Information About Our Executive Officers This section outlines the biographical information and extensive experience of the company's executive officers and directors, including the CEO, CFO, and COO Executive Officers and Directors | Name | Age | Position(s) | | :--------------- | :-- | :---------------------------------------------- | | John Xu | 48 | President, Chief Executive Officer, and Chairman of the Board | | Alexandria M. Lopez | 40 | Chief Financial Officer and Director | | Mark Willis | 68 | Director | | Bin Wang | 67 | Director | | Dr. Xiaoxia Zhang | 55 | Director | | Tao Han | 51 | Chief Operating Officer | - John Xu, President, CEO, and Chairman, has extensive experience in business operations, investment, strategic management, and retail enterprises[119] - Alexandria M. Lopez, CFO and Director, has over 10 years of financial and accounting experience[121] - Tao Han, COO since October 2023, has over 10 years of managerial experience in retail supermarkets, including roles at Hema Fresh and Yonghui Supermarket[129] ITEM 1A. RISK FACTORS This section details significant business, industry, regulatory, and stock ownership risks, including the unproven center-satellite model, growth challenges, and concentrated CEO control - The center-satellite store model is new and its success is not guaranteed, posing a risk to business operations[133] - Failure to successfully implement growth strategies, including new store openings and integration, could adversely affect financial performance and strain existing resources[134][139][140] - The company faces intense competition from various retailers, including national chains and online grocers, which could lead to loss of sales, market share, and reduced margins[143] - High reliance on perishable products (over 50% of sales) makes the company vulnerable to supply disruptions, natural disasters, and ordering errors, impacting profitability[152] - John Xu, CEO, holds approximately 90.34% of the total voting power, giving him substantial control over corporate matters and limiting other stockholders' influence[205][206] - The company does not intend to pay cash dividends on Class A common stock, meaning investment return depends solely on stock price appreciation[207] Risks Related to Our Business Business risks include the unproven center-satellite model, challenges in growth and new store integration, debt financing restrictions, related party transactions, and cybersecurity threats - The center-satellite model is new and its success cannot be guaranteed[133] - Growth strategy implementation faces risks such as identifying suitable sites, negotiating leases, attracting/retaining personnel, managing inventory, securing financing, and addressing competitive challenges[134][135] - Debt financing arrangements may restrict operations and ability to respond to business changes[136] - New or acquired stores may negatively impact short-term financial results and may not achieve sales/operating levels consistent with mature stores[139][140] - Significant related party transactions create risks of conflicts of interest and terms not reflecting arm's-length negotiations[141] - Security incidents and cyber-attacks on IT systems could lead to significant costs, disruptions, and harm to business and reputation[142] Risks Related to Our Industry Industry risks encompass intense competition, inability to maintain comparable store sales, commodity price volatility, reliance on perishables, product liability, geographic concentration, and supplier disruptions - The food retail industry is highly competitive, with competition from national, regional, and local supermarkets, superstores, and online retailers[143] - Inability to maintain or improve comparable store sales could cause stock price decline, influenced by economic conditions, competition, and consumer preferences[144] - Increased commodity prices and availability issues may impact profitability by raising costs and potentially deterring customers with price increases[145] - Heavy reliance on perishable products (51.4% and 54.0% of total sales in FY2025 and FY2024, respectively) makes the company vulnerable to supply disruptions and inventory losses[152] - Products causing unexpected side effects, illness, or injury could lead to discontinuance, lawsuits, and reputational damage[154] - Geographic concentration of stores in Los Angeles and Phoenix/Tucson metro areas exposes the business to local economic downturns, severe weather, or catastrophic occurrences[157] - Disruption of significant supplier relationships (three primary suppliers accounted for 40% of inventory in FY2025 and 34% in FY2024) could negatively affect business operations[162][163] - High fixed lease obligations require significant cash flow and could adversely impact financial performance and ability to obtain future financing[166] Risks Related to Regulatory Compliance and Legal Matters Regulatory and legal risks include changes in trade and immigration policies, extensive health and safety compliance, significant litigation exposure, and potential impacts from climate change - Changes in U.S. trade policies, such as tariffs on goods from China, could materially impact business by affecting product costs and demand[180] - Changes in immigration laws could increase costs and adversely affect the ability to attract and retain qualified store-level employees[182] - Compliance with numerous federal, state, and local health and safety laws and regulations (FDA, USDA, FTC, OSHA, EPA) may increase costs, limit product sales, and raise enforcement risks[183] - Legal proceedings, including class action lawsuits, product liability claims, and employment-related actions, carry significant litigation risk and potential for substantial costs and reputational damage[168][169] - The effects of global climate change, including extreme weather and transition to alternative energy, could present risks to supply chains, physical assets, and operating costs[192] Risks Related to Ownership of Our Class A Common Stock Risks for Class A common stock owners include market volatility, future sales impact, increased public company costs, CEO's concentrated voting control, no cash dividends, and material weaknesses in internal controls - The market for Class A common stock is new (IPO in October 2023) and may experience volatility or inactivity, making it difficult for investors to sell shares[193] - Future sales or the perception of future sales of Class A common stock could depress its price and make it harder to raise additional equity capital[198] - Operating as a public company incurs increased legal, accounting, and compliance costs, and management must devote substantial time to public company regulations[202] - CEO John Xu has substantial control (approximately 90.34% voting power) over the company, limiting other stockholders' ability to influence corporate matters[205] - The company does not intend to pay cash dividends on Class A common stock, so investment return depends solely on stock price appreciation[207] - The company identified material weaknesses in internal control over financial reporting for FY2025 and FY2024, including insufficient accounting expertise, lack of related party transaction monitoring, and inadequate inventory control systems[227] - The dual-class common stock structure concentrates voting power with CEO John Xu, which may depress Class A common stock market value and limit influence over important transactions[234][235][236] ITEM 1B. UNRESOLVED STAFF COMMENTS There are no unresolved staff comments from the SEC ITEM 1C. CYBERSECURITY The company manages cybersecurity risks through IT policies, monitoring, training, and Board oversight, with the CFO responsible for risk assessment and quarterly updates - The company uses policies and processes, including monitoring, anti-malware, employee training, and quality audits, to mitigate cybersecurity risks[239] - The Board of Directors has specific oversight responsibility for cybersecurity, reviewing policies, practices, and risks with management[240] - The Chief Financial Officer is primarily responsible for assessing, monitoring, and managing cybersecurity risks and provides quarterly updates to the Board[240] - The company plans to engage a third-party consultant to assist with designing controls and its cybersecurity risk management framework[239] ITEM 2. PROPERTIES The company leases its executive office and all seven retail supermarket properties under long-term agreements, deeming current facilities sufficient - The company leases its executive office and all seven retail supermarket operating spaces[241][242] Leased Properties Overview | Store Name | Location | Gross Sq. Ft. | Lease End Date (including all renewal options) | | :----------------------------------- | :---------------------------------------- | :------------ | :--------------------------------------------- | | Good Fortune Supermarket of San Gabriel, LP | 137 S. San Gabriel Blvd., San Gabriel, CA, 91776 | 25,638 | 11/30/2030 | | Good Fortune Supermarket of Monrovia, LP | 935 W. Duarte Road, Monrovia, CA, 91016 | 25,320 | 8/31/2055 | | GF Supermarket of MP, Inc. | 127 N. Garfield Avenue, Monterey Park, CA 91732 | 31,716 | 5/1/2028 | | Lee Lee – Peoria Store | 7575 W. Cactus Road, Peoria, AZ 85381 | 60,080 | 1/31/2044 | | Lee Lee – Chandler Store | 2025 N. Dobson Road, Chandler, AZ 85224 | 52,224 | 2/8/2049 | | Lee Lee – Tucson Store | 1990 Orange Grove Road, Tucson, AZ 85704 | 51,422 | 12/31/2050 | - The company believes its current facilities are sufficient for its needs and operations[242] ITEM 3. LEGAL PROCEEDINGS Detailed information on legal proceedings is incorporated by reference from Note 18 of the consolidated financial statements - Information regarding legal proceedings is detailed in Note 18 — 'Commitments and Contingencies' to the consolidated financial statements[243] ITEM 4. MINE SAFETY DISCLOSURES This item is not applicable to the company PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Class A common stock trades on Nasdaq under 'MSS', with six stockholders of record as of August 12, 2025; the company retains earnings and has not paid dividends - Class A common stock is listed on the Nasdaq Stock Market LLC under the trading symbol 'MSS'[246] - As of August 12, 2025, there were six stockholders of record for Class A common stock[246] - The company has never declared or paid cash dividends and intends to retain future earnings for business operations and expansion[247] - No sales of unregistered securities occurred during the fiscal year ended April 30, 2025, and no Class A common stock was repurchased during the fourth quarter of FY2025[248][249] ITEM 6. [RESERVED] This item is reserved and contains no information ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management discusses financial condition and results for FY2025 and FY2024, highlighting a shift to net income of $1.17 million in FY2025 driven by revenue growth and improved margins - The company is a fast-growing specialty grocery retailer focusing on traditional Asian food for Asian-American communities, developing a center-satellite stores network[253] - The acquisition of Lee Lee Oriental Supermart, Inc. in April 2024 significantly expanded operations into Arizona, contributing $78.2 million in revenue in FY2025[258][289] - The company reported a net income of $1,169,273 for the year ended April 30, 2025, a substantial increase from a net loss of $3,340,206 in the prior year[298] - Net revenues increased by 114.0% to $124.2 million in FY2025 from $58.0 million in FY2024, primarily due to the Lee Lee acquisition[289] - Gross margin improved to 21.3% in FY2025 from 20.0% in FY2024, mainly due to higher gross profit from the newly acquired Lee Lee stores[291] - The company had a negative working capital of $9.82 million and an accumulated deficit of approximately $1.65 million as of April 30, 2025, raising substantial doubt about its ability to continue as a going concern[268][299] Cautionary Note Regarding Forward-Looking Statements This section reiterates that the report contains forward-looking statements subject to risks and uncertainties, advising readers that actual results may differ materially - This section reiterates that the report contains forward-looking statements based on current expectations and projections, subject to known and unknown risks and uncertainties[252] - Readers are advised that actual results may differ materially from forward-looking statements due to factors discussed in 'Risk Factors' and other SEC filings[251][252] Overview Maison Solutions Inc. is a specialty Asian grocery retailer expanding its center-satellite network through acquisitions like Lee Lee, closing underperforming stores, and partnering with JD.com for digital transformation - Maison Solutions Inc. is a specialty grocery retailer targeting Asian-American communities with traditional Asian food and merchandise, developing a center-satellite stores network[253] - The company operates four traditional Asian supermarkets in Los Angeles, California, as center stores and acquired a 10% equity interest in the Alhambra Store, intended as its first satellite store[254][255] - Strategic investments include a 10% equity interest in Dai Cheong (wholesale business) for vertical integration and a 100% acquisition of Lee Lee Oriental Supermart, Inc. (three-store chain in Arizona) for $22.2 million in April 2024[256][258] - The Maison El Monte store was closed in June 2025 to improve profitability and support sustainable growth[259] - A collaboration with JD.com aims to upgrade store management systems, improve product inventory sourcing, and co-brand new stores, with an initial 10-year term[260] Key Factors that Affect Operating Results Operating results are affected by inflation, increased post-IPO costs, intense competition, rising payroll expenses, centralized vendor management, and higher store maintenance investments - Inflation rates of 2.3% (FY2025) and 3.4% (FY2024) increased purchase, occupancy, and payroll costs[261] - Operating costs increased after the IPO in October 2023 due to Nasdaq listing, SEC reporting, audit, legal, and consulting expenses[262] - Intense competition from various food retailers, including 99 Ranch Market, H-Mart, and Weee!, can negatively impact sales, market share, and margins[263][264] - Payroll and payroll tax expenses increased from $7.4 million in FY2024 to $15.0 million in FY2025 due to higher minimum wages and increased employee count from the Lee Lee acquisition[265] - The company's centralized vendor management system, with five major suppliers accounting for 11%, 7%, 7%, 5%, and 4% of total purchases in FY2025, enhances negotiating power[266] - Store maintenance and renovation expenses increased to $0.86 million in FY2025 (including $0.48 million for Lee Lee) from $0.20 million in FY2024, aiming to attract more customers[267] Going Concern The company's going concern is uncertain due to an accumulated deficit and negative working capital, necessitating revenue growth strategies and potential external financing - As of April 30, 2025, the company had a net income of $1,169,273 but an accumulated deficit of approximately $1.65 million and negative working capital of $9.82 million[268] - The company needs approximately $5.64 million cash to repay Lee Lee's acquisition price by May 2026[268] - These conditions raise substantial doubt about the company's ability to continue as a going concern[268] - Management plans to increase revenue through sales force strengthening, incentive programs, experienced personnel recruitment, marketing, competitive sourcing, and opening/acquiring new supermarkets[268] - Additional funds may be sought through strategic investors, public/private offerings, or bank loans if necessary[268] Critical Accounting Policy Critical accounting policies cover related party transactions, management estimates for assets and inventory, revenue recognition at point of sale, and lease accounting under ASC Topic 842 - The company identifies, accounts for, and discloses related party transactions in accordance with ASC Topic 850[269] - Consolidated financial statements require management estimates and assumptions for items like useful lives of assets, inventory reserves, and contract liabilities, which are more challenging given the global economic climate[270] - Inventories are valued at the lower of cost (first-in, first-out method) and net realizable value, with a reserve for inventory shrinkage of $276,900 in FY2025 (reversal of $5,961 in FY2024)[271] - Revenue is recognized upon transfer of goods at the point of sale, net of discounts, sales taxes, and returns; gift card sales are recorded as contract liability and recognized as revenue upon redemption or remote likelihood of redemption[273][274] - Leases are accounted for under ASC Topic 842, recognizing Right-of-Use (ROU) assets and liabilities based on the present value of lease payments, using the incremental borrowing rate[276] How to Assess Our Performance Performance is assessed using key metrics including net revenue, gross profit (net of cost of revenues and occupancy costs), and selling, general, and administrative expenses - Management assesses performance using measures such as net revenue, gross profit, and selling, general and administrative expenses[282] - Net revenues are gross revenues minus returns and discounts, excluding sales taxes[283] - Gross profit is net revenues less cost of revenues and occupancy costs (store rent, depreciation, inventory shrinkage, store supplies)[284] - Selling, general, and administrative expenses include retail operational expenses, administrative salaries, marketing, advertising, and corporate overhead[286][287] Results of Operations for the Years Ended April 30, 2025 and 2024 Results show a shift from a $3.34 million net loss in FY2024 to a $1.17 million net income in FY2025, driven by 114.0% revenue growth from the Lee Lee acquisition Consolidated Statements of Income Summary | Metric | FY2025 ($) | FY2024 ($) | Change ($) | Percentage Change (%) | | :----------------------------------------- | :------------ | :------------ | :------------ | :-------------------- | | Net revenues | 124,217,480 | 58,043,161 | 66,174,319 | 114.0 | | Cost of revenues | 97,874,929 | 46,422,064 | 51,452,865 | 110.8 | | Gross profit | 26,342,551 | 11,621,097 | 14,721,454 | 126.7 | | Total operating expenses | 27,607,557 | 14,325,103 | 13,282,454 | 92.7 | | Loss from operations | (1,265,006) | (2,704,006) | 1,439,000 | 53.2 | | Other income (expenses), net | 3,527,799 | (118,201) | 3,646,000 | 3,084.6 | | Interest expense, net | (1,167,895) | (124,260) | (1,043,635) | 839.9 | | Income (loss) before income taxes | 1,094,898 | (2,946,467) | 4,041,365 | 137.2 | | Income tax provisions | 173,989 | 440,562 | (266,573) | (60.5) | | Net income (loss) attributable to Maison Solutions Inc. | 1,169,273 | (3,340,206) | 4,509,479 | 135.0 | Revenue Breakdown | Category | FY2025 ($) | FY2024 ($) | Change ($) | Percentage Change (%) | | :------------ | :----------- | :----------- | :----------- | :-------------------- | | Perishables | 63,789,150 | 31,358,590 | 32,430,560 | 103.4 | | Non-perishables | 60,428,330 | 26,684,571 | 33,743,759 | 126.5 | | Net revenue | 124,217,480 | 58,043,161 | 66,174,319 | 114.0 | - Net revenues increased by 114.0% to $124.2 million in FY2025, primarily due to $78.2 million from the newly acquired Lee Lee subsidiary, partially offset by decreased sales from California-based supermarkets due to high competition[289] - Cost of revenues increased by $51.5 million (110.8%) to $97.9 million in FY2025, mainly driven by the Lee Lee acquisition[290] - Gross profit increased by 126.7% to $26.3 million in FY2025, with gross margin improving to 21.3% from 20.0% in FY2024, largely due to Lee Lee's contribution[291] - Total operating expenses increased by $13.3 million (92.7%) to $27.6 million in FY2025, primarily due to increased payroll ($7.6 million), utility ($0.9 million), and merchant service charges ($1.1 million) from the Lee Lee acquisition, and higher professional fees and amortization expenses[292][293] - Other income significantly increased to $3.5 million in FY2025 (from an expense of $0.12 million in FY2024), mainly from $2.6 million software license sales, $0.8 million change in fair value of derivative liability, and $0.45 million consulting income[294] - Interest expense increased by $1.04 million (839.9%) to $1.17 million in FY2025, primarily due to SBA loans and the note payable from the Lee Lee acquisition[295] - Net income attributable to the company was $1,169,273 in FY2025, a $4.5 million improvement from a net loss of $3,340,206 in FY2024[298] Liquidity and Capital Resources Liquidity is constrained by a working capital deficit and accumulated deficit, despite improved operating cash flow, with significant capital investment planned for expansion - As of April 30, 2025, cash and cash equivalents were approximately $775,360, with a working capital deficit of $9.82 million and an accumulated deficit of $1.65 million[299] - Outstanding debt includes approximately $2.62 million in SBA loans, $5.64 million in senior secured notes payable (due May 2026 for Lee Lee acquisition), and $3.00 million in convertible notes payable[299] - Net cash provided by operating activities was $4.8 million in FY2025, a significant improvement from net cash used of $3.5 million in FY2024[307][308][310] - Net cash used in investing activities decreased to $237,355 in FY2025 from $10.1 million in FY2024, with FY2024 including $7.0 million for the Lee Lee acquisition and $2.95 million for intangible assets[307][312][313] - Net cash used in financing activities was $5.8 million in FY2025, primarily due to $9.48 million repayment of the Lee Lee acquisition note, partially offset by $2.34 million from convertible notes[307][314] - The company plans $35-40 million in capital investment for expansion, with $13-16 million needed within the next 12 months for new stores and acquisitions[303] Contractual Obligations as of January 31, 2025 | Contractual Obligations | Total ($) | Less than 1 year ($) | 1–3 years ($) | 3–5 years ($) | Thereafter ($) | | :----------------------------- | :----------- | :------------------- | :------------ | :------------ | :------------- | | Senior secured note payable | 5,642,060 | 4,887,094 | 754,966 | — | — | | SBA loans | 2,616,050 | 62,212 | 124,424 | 124,424 | 2,304,990 | | Convertible note payable | 3,000,000 | — | 3,000,000 | — | — | | Operating lease obligations and others | 38,648,721 | 3,471,193 | 7,009,955 | 5,431,238 | 22,736,335 | | Total | 49,906,831 | 8,420,499 | 10,889,345| 5,555,662 | 25,041,325 | Contingencies The company faces ongoing class action lawsuits and shareholder derivative actions, vigorously defending against allegations while having settled recent employee and disability access claims - The company is involved in various legal proceedings, including class action complaints (Ilsan Kim v. Maison Solutions Inc., Rick Green and Evgenia Nikitina v. Maison Solutions Inc.) alleging securities law violations, and shareholder derivative actions[337][338][340] - The company and defendants believe the allegations are without merit and intend to vigorously defend each suit; the possible range of losses is not reasonably estimable at the current stage[339][340] - A former employee's wrongful termination and labor law violation claim against Maison San Gabriel was confidentially settled for $25,000 on August 4, 2025[341] - A claim against Maison El Monte for Unruh Civil Rights Act and California Disabled Persons Act violations was settled for $6,000 on April 8, 2025[342] - A complaint was filed on October 17, 2024, against several Maison entities for $115,388.39 in unpaid seafood invoices; the outcome is not estimable[343] Off-Balance Sheet Arrangements The company has guaranteed all its loans, with CEO John Xu personally guaranteeing SBA loans, and has no other material off-balance sheet arrangements - The company has guaranteed all its loans, and CEO John Xu has personally guaranteed the SBA loans[344] - There are no other off-balance sheet arrangements that are reasonably likely to have a material effect on its financial condition[344] ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As a smaller reporting company, Maison Solutions Inc. is exempt from providing quantitative and qualitative market risk disclosures ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Report of Independent Registered Public Accounting Firm Kreit & Chiu CPA LLP issued an unqualified opinion on the financial statements but noted a going concern uncertainty and a restatement of 2024 financials for acquisition accounting error - Kreit & Chiu CPA LLP issued an unqualified opinion on the consolidated financial statements for FY2025 and FY2024[351] - An explanatory paragraph on going concern was included due to the company's negative working capital of approximately $9.8 million and accumulated deficit of $1.6 million as of April 30, 2025[352] - The 2024 consolidated financial statements were restated to correct an error in acquisition accounting, specifically an increase of cash balance and a decrease in goodwill by $2,074,298[356][537] - The audit did not include an opinion on the effectiveness of internal control over financial reporting, as the company is not required to have one[354] Consolidated Balance Sheets The consolidated balance sheets show total assets of $77.36 million in FY2025, with negative working capital of $9.82 million and an accumulated deficit of $1.65 million Consolidated Balance Sheet Summary | Metric | April 30, 2025 ($) | April 30, 2024 (Restated) ($) | | :--------------------------- | :----------------- | :---------------------------- | | ASSETS | | | | Total current assets | 12,925,135 | 13,986,566 | | Total non-current assets | 64,437,754 | 68,410,577 | | TOTAL ASSETS | 77,362,889 | 82,397,143 | | LIABILITIES | | | | Total current liabilities | 22,746,598 | 28,769,196 | | Total non-current liabilities| 42,976,262 | 42,908,827 | | TOTAL LIABILITIES | 65,722,860 | 71,678,023 | | STOCKHOLDERS' EQUITY | | | | Accumulated deficit | (1,648,223) | (2,817,495) | | Total stockholders' equity | 11,640,029 | 10,719,120 | - Cash balance decreased from $2,074,298 in FY2024 to $775,360 in FY2025[359] - Accounts receivable significantly increased from $111,874 in FY2024 to $2,658,524 in FY2025[359] - Notes payable (current) decreased substantially from $15,126,065 in FY2024 to $4,887,094 in FY2025[359] - The company reported a negative working capital of $9.82 million and an accumulated deficit of $1.65 million as of April 30, 2025[372] Consolidated Statements of Income Consolidated statements of income reflect a shift from a $3.34 million net loss in FY2024 to a $1.17 million net income in FY2025, driven by revenue and gross profit growth Consolidated Statements of Income | Metric | FY2025 ($) | FY2024 ($) | | :----------------------------------------- | :------------ | :------------ | | Revenue | 124,217,480 | 58,043,161 | | Cost of goods sold | 97,874,929 | 46,422,064 | | Gross profit | 26,342,551 | 11,621,097 | | Selling expenses | 19,718,836 | 10,155,828 | | General and administrative expenses | 7,888,721 | 4,169,275 | | Total operating expenses | 27,607,557 | 14,325,103 | | Loss from operations | (1,265,006) | (2,704,006) | | Non-operating income (expenses), net | 2,359,904 | (242,461) | | Income (loss) before income taxes | 1,094,898 | (2,946,467) | | Income tax expenses | 173,989 | 440,562 | | Net income (loss) attributable to Maison Solutions, Inc. | 1,169,273 | (3,340,206) | | Basic EPS | 0.07 | (0.19) | | Diluted EPS | 0.07 | (0.19) | - Net revenues increased by 114.0% from $58.0 million in FY2024 to $124.2 million in FY2025[362] - Gross profit increased by 126.7% from $11.6 million in FY2024 to $26.3 million in FY2025[362] - The company achieved a net income of $1,169,273 in FY2025, a significant improvement from a net loss of $3,340,206 in FY2024[362] - Basic and diluted EPS improved from $(0.19) in FY2024 to $0.07 in FY2025[362] Consolidated Statement of Stockholders' Equity Stockholders' equity increased to $11.64 million in FY2025, driven by net income reducing the accumulated deficit and prior year common stock issuance Consolidated Statements of Changes in Stockholders' Equity | Metric | April 30, 2025 ($) | April 30, 2024 ($) | | :----------------------------------------- | :----------------- | :----------------- | | Class A Common Stock (Amount) | 1,745 | 1,745 | | Class B Common Stock (Amount) | 224 | 224 | | Additional Paid-in Capital | 13,313,523 | 13,313,523 | | Accumulated Deficit | (1,648,223) | (2,817,496) | | Noncontrolling Interests | (27,240) | 221,124 | | Total Stockholders' Equity | 11,640,029 | 10,719,120 | - Total stockholders' equity increased by $920,909 from $10,719,120 in FY2024 to $11,640,029 in FY2025[363] - The accumulated deficit decreased from $(2,817,496) in FY2024 to $(1,648,223) in FY2025 due to net income[363] - Issuance of common stock in FY2024 contributed $13,313,523 to additional paid-in capital[363] Consolidated Statements of Cash Flows Cash flows show a shift to $4.8 million net cash inflow from operations in FY2025, with reduced investing outflows and a financing outflow due to debt repayments Consolidated Statements of Cash Flows Summary | Cash Flow Activity | FY2025 ($) | FY2024 (Restated) ($) | | :--------------------------------------- | :------------ | :-------------------- | | Net cash provided by (used in) operating activities | 4,756,130 | (3,503,146) | | Net cash used in investing activities | (237,355) | (10,132,834) |\ | Net cash (used in) provided by financing activities | (5,818,814) | 13,140,512 | | Net change in cash and restricted cash | (1,300,039) | (495,468) | | Cash and restricted cash at end of year | 775,360 | 2,075,399 | - Operating activities generated $4.8 million in cash in FY2025, a substantial improvement from a $3.5 million outflow in FY2024[308][365] - Investing activities used $237,355 in FY2025, significantly less than the $10.1 million used in FY2024 (which included the Lee Lee acquisition and intangible asset purchases)[312][313][365] - Financing activities resulted in a $5.8 million cash outflow in FY2025, primarily due to $9.48 million repayment of the Lee Lee acquisition note, contrasting with a $13.1 million inflow in FY2024 from common stock issuance[314][315][365] - Cash paid for interest increased from $104,451 in FY2024 to $1,032,962 in FY2025[366] Notes to Consolidated Financial Statements Notes detail organization, accounting policies, going concern, related party transactions, Lee Lee acquisition, restatement of prior financials, and subsequent events like the El Monte store closure - The company's ability to continue as a going concern is uncertain due to an accumulated deficit of $1.65 million and negative working capital of $9.82 million as of April 30, 2025[372] - Inventories are valued at the lower of cost (FIFO) and net realizable value, with a reserve for inventory shrinkage of $276,900 in FY2025[390] - The company holds investments under the cost method (Dai Cheong, TMA Liquor Inc.) and equity method (HKGF Market of Arcadia, LLC), recognizing investment losses of $40,775 and $474,965 respectively in FY2025[398][399][400][401][464] - Goodwill of $14,882,849 as of April 30, 2025, resulted from the acquisitions of Maison Monterey Park ($2,222,211) and Lee Lee ($12,660,638), with no impairment recorded[469] - The company restated its FY2024 consolidated financial statements to correct an error in acquisition accounting, increasing cash by $2,074,298 and decreasing goodwill by the same amount[536][537] - The Maison El Monte store lease was terminated on June 7, 2025, for a payment of $100,000, as part of a strategic decision to improve profitability[541] 1. Organization Maison Solutions Inc., founded in 2019 and re-domiciled in 2021, is a specialty Asian grocery retailer that expanded through acquisitions, including the Lee Lee chain in Arizona - Maison Solutions Inc. was founded in July 2019 as an Illinois corporation, re-domiciled in Delaware in September 2021[368] - The company acquired three retail Asian supermarkets in Los Angeles, California, in 2019, rebranding them as 'HK Good Fortune Supermarkets'[369] - In April 2024, through its wholly-owned subsidiary AZLL LLC, the company acquired 100% of Lee Lee Oriental Supermart, Inc., a three-store supermarket chain in Arizona, for approximately $22.2 million[370] - The company operates as a fast-growing specialty grocery retailer offering traditional Asian food and merchandise to U.S. consumers, particularly Asian-American communities[371] 2. Summary of significant accounting policies Significant accounting policies cover U.S. GAAP compliance, going concern, noncontrolling interests, inventory valuation, revenue recognition, lease accounting (ASC 842), credit losses (CECL), goodwill impairment, and single-segment reporting - The financial statements are prepared in accordance with U.S. GAAP and SEC rules, consolidating the company and its controlled subsidiaries[374][375] - A going concern uncertainty exists due to an accumulated deficit of $1.65 million and negative working capital of $9.82 million as of April 30, 2025[372] - Noncontrolling interests are treated as a separate component of equity, with losses allocated even if resulting in a deficit balance[376][377][378] - Inventories are valued at the lower of cost (FIFO) and net realizable value, with a reserve for inventory shrinkage of $276,900 in FY2025[390] - Revenue is recognized when goods are transferred to the customer at the point of sale, net of discounts and returns[419] - Leases are accounted for under ASC Topic 842, recognizing ROU assets and liabilities based on the present value of lease payments using the incremental borrowing rate[405] - The company adopted ASU 2016-13 (CECL methodology) for credit losses on May 1, 2023, and evaluates expected credit losses on an individual basis using a loss-rate method[382][383] - Goodwill is tested for impairment annually or more frequently, with no impairment recorded in FY2025 or FY2024[403][404] - The company operates as a single operating and reportable segment, selling grocery products and general merchandise in its supermarket stores[443][445] 3. Inventories, net Net inventories decreased to $5.75 million in FY2025, while the reserve for inventory shrinkage significantly increased to $313,690 Inventories, Net | Category | April 30, 2025 ($) | April 30, 2024 ($) | | :---------------------- | :----------------- | :----------------- | | Perishables | 597,993 | 2,406,500 | | Non-perishables | 5,470,621 | 4,432,545 | | Reserve for inventory shrinkage | (313,690) | (36,790) | | **Invento