Revenue Performance - Total revenues for the three months ended July 31, 2025, decreased by $498,649 or 17.54% to $2,343,959 compared to $2,842,608 for the same period in 2024[164]. - Revenues for the three months ended July 31, 2025, were $2,343,959, a decrease of $498,649 or 17.54% compared to $2,842,608 in 2024, primarily due to decreased sales in food imports and indoor home improvement products[176]. - Revenue from consulting services decreased by $6,989 or 14.49% to $41,250 in Q1 2025, representing 1.76% of total revenues[168]. - Sales of food and beverage accounted for nil in Q1 2025, a decrease of $44,886 or 100% from $44,886 in Q1 2024, primarily due to the cessation of purchase orders from Costco[166]. - Sales of indoor home improvement products decreased by $446,774 or 16.25% to $2,302,709 in Q1 2025, accounting for 98.24% of total sales[167]. Cost and Profitability - Cost of revenues decreased by $94,940 or 6.57%, from $1,444,553 in 2024 to $1,349,613 in 2025, attributed to a 100% decrease in food and beverage sales costs and a 3.27% decrease in indoor home improvement products costs[180]. - Gross profit for the three months ended July 31, 2025, was $994,346, a decrease of $403,709 or 28.88% from $1,398,055 in 2024, with a gross margin of 42.42% compared to 49.18% in 2024[183]. - The company reported a 100% decrease in gross profit from food and beverage sales due to no sales to Costco in 2025[183]. Expenses - Selling expenses surged to $1,436,730 in 2025, an increase of $1,279,001 or 810.89% from $157,729 in 2024, primarily due to increased advertising and marketing expenses[184]. - General and administrative expenses rose to $2,271,863, reflecting an increase of $801,701 or 54.53% from $1,470,162 in 2024, driven by higher professional fees and insurance expenses[185]. Net Loss and Financial Health - The net loss for the three months ended July 31, 2025, was $2,719,753, an increase of $2,391,222 or 727.85% from a net loss of $328,531 in 2024, mainly due to decreased revenue and increased expenses[190]. - The company reported a net loss of approximately $2.72 million for the three months ended July 31, 2025, with cash outflow from operating activities of approximately $0.10 million[196]. - There is substantial doubt about the company's ability to continue as a going concern for the next 12 months due to potential cash requirements exceeding available cash[197]. Cash Flow and Liquidity - The liquidity assessment indicates that the company has funded its operations through equity financing, borrowing, and cash flow from operations[191]. - As of July 31, 2025, the company had a cash balance of approximately $0.21 million and accounts receivable net balance of approximately $1.09 million, with 28.1% or approximately $0.3 million collected[192][195]. - The company's working capital amounted to approximately $0.95 million as of July 31, 2025, with plans to improve liquidity through operational cash flows and potential equity financing[195]. - Net cash used in operating activities decreased by $891,460 for the three months ended July 31, 2025, compared to the same period in 2024, primarily due to a decrease in cash outflow on inventory and prepaid expenses[200]. - Net cash used in investing activities was $690,000 for the three months ended July 31, 2025, compared to $5,000 for the same period in 2024, mainly due to loans made to Bio Essence[201]. - Net cash used in financing activities was $952,754 for the three months ended July 31, 2025, compared to $71,469 for the same period in 2024, primarily due to increased repayment to related parties[202]. Strategic Initiatives - The company is actively pursuing alternative sourcing strategies for food and beverage products due to increased tariffs, including domestic suppliers and international partners in lower-risk regions[154]. - Increased tariffs on imports from Vietnam and other Southeast Asian countries may lead to higher product prices and operational costs for indoor home improvement products[155]. - The company is negotiating with vendors to absorb some of the increased tariff costs and is considering raising product prices to cover these costs[155]. - The company plans to diversify its markets and expand sales through ethnic supermarket chains and customized products, particularly targeting southern California[196]. Contractual and Accounting Matters - FuAn's revenue from food and beverage sales is recognized on a gross basis, with all contracts being fixed price contracts[216]. - Revenue from sales of indoor home improvement products is recognized at the point of sale, with control transferred either at pickup or delivery[218]. - Consulting services revenue is recognized over the service period, primarily consisting of supply chain and brand management services[219]. - The Company estimates future sales returns based on historical data, with the allowance for sales returns as of July 31, 2025, amounting to $205,988[221]. - The Company accounts for shipping and handling as fulfillment activities, not as a separate performance obligation[218]. - The Company utilizes a two-step approach for recognizing uncertain income tax positions, evaluating if the position is likely to be sustained on audit[224]. - The Company is currently evaluating the impact of ASU 2024-03, which requires disaggregation of certain expense captions in financial statements, effective after December 15, 2026[228]. - The Company does not believe that any recently issued guidance will have a material impact on its financial statements[230]. - The Company’s contracts for consulting services are fixed-price contracts, indicating a principal role in establishing prices[219]. - The Company’s revenue from food products is reported net of sales returns and allowances, ensuring accurate financial reporting[217].
Marwynn Holdings Inc(MWYN) - 2026 Q1 - Quarterly Report