Financial Performance - For the three months ended July 31, 2023, sales increased to $13.8 million, a $2.3 million increase from $11.4 million for the same period in 2022, representing a 20.18% growth [167]. - Gross profit for the three months ended July 31, 2023, was approximately $3.1 million, up from approximately $2.3 million in the same period in 2022, reflecting an increase of 34.78% [167]. - Net revenues for the three months ended July 31, 2023, were approximately $13.8 million, an increase of $2.3 million or 20.5% compared to $11.4 million for the same period in 2022 [194]. - Gross profit for the three months ended July 31, 2023, was approximately $3.1 million, representing a 34.8% increase from $2.3 million in the same period in 2022 [197]. - Total operating expenses increased to approximately $3.3 million for the three months ended July 31, 2023, up $0.5 million or 17.6% from $2.8 million in the same period in 2022 [198]. - Net loss attributable to the Company decreased to $104,939 for the three months ended July 31, 2023, a reduction of $492,101 or 82.4% from a net loss of $597,040 in the same period in 2022 [203]. - Other income for the three months ended July 31, 2023, was $355,493, a significant increase from $124 in the same period in 2022, primarily due to an employee retention credit [200]. - The net loss for the three months ended July 31, 2023, was $26,724, a decrease of $543,663 from a net loss of $570,387 in the same period of 2022 [214]. Expenses and Costs - The cost of revenues increased to approximately $10.6 million for the three months ended July 31, 2023, up $1.5 million or 16.9% from $9.1 million in the same period in 2022 [196]. - Payroll expenses for the three months ended July 31, 2023, were $1.7 million, consistent with the same period in 2022, despite rising minimum wage rates in California [170]. - Selling expenses for the three months ended July 31, 2023, were approximately $2.3 million, an increase of 4.4% from $2.2 million in the same period in 2022 [198]. - General and administrative expenses rose to approximately $1.1 million for the three months ended July 31, 2023, a 60.9% increase from $657,628 in the same period in 2022 [199]. - The company spent $80,274 on store maintenance and renovations for the three months ended July 31, 2023, a slight decrease from $84,967 in the same period in 2022 [172]. Investments and Expansion Plans - The company invested $1,440,000 for a 40% equity interest in HKGF Market of Arcadia, LLC, expanding its footprint in California [162]. - The company plans to acquire the remaining 90% equity interest in the Alhambra Store, funded by proceeds from its initial public offering [162]. - The company plans to invest approximately $35 million to $40 million for expansion, with $13 million to $16 million needed within the next 12 months for new store openings and acquisitions [207]. - The company aims to acquire up to five center stores on the East Coast and establish a new warehouse in New York City by the end of 2025 [206]. - The company plans to use part of the proceeds from its initial public offering to support its business expansion and may seek additional financing if necessary [208]. Cash Flow and Financial Position - As of July 31, 2023, the Company had cash, cash equivalents, and restricted cash of approximately $1.6 million, with a working capital deficit of approximately $1.4 million [204]. - The company reported a net cash inflow of approximately $596,541 for the three months ended July 31, 2023, an increase of $76,905 compared to $519,636 for the same period in 2022 [211]. - Net cash used in investing activities was approximately $1.5 million for the three months ended July 31, 2023, primarily for equipment purchases and a 40% investment in Good Fortune Arcadia supermarket [217]. - The company has total contractual obligations of $26.86 million as of July 31, 2023, with significant obligations due within one year [223]. - The company has a loan agreement with American First National Bank totaling $1.0 million, with an interest rate of 7.75% for the three months ended July 31, 2023 [220]. - The company’s cash flow from operating activities was primarily affected by a decrease in accounts receivable and inventories [212]. - The principal stockholder has committed to provide financial support to the company as needed, especially following the initial public offering [208]. Supply Chain and Market Conditions - The inflation rate for the U.S. was 3.2% for the three months ended July 31, 2023, impacting purchase, occupancy, and payroll costs, leading to increased product selling prices [165]. - The company experienced supply chain disruptions due to inflation and COVID-19, but managed to navigate these challenges, resulting in increased sales [167]. - Two suppliers accounted for 34% and 19% of total purchases for the three months ended July 31, 2023, indicating a reliance on major vendors [171]. - The contract liability related to gift cards was $370,836 as of July 31, 2023, down from $449,334 as of April 30, 2023 [180]. Loan Covenants - The coverage ratio for Maison Monrovia was 0.54 and for Maison San Gabriel was 0.88 as of July 31, 2023, indicating a violation of loan covenants [204].
Maison Solutions (MSS) - 2024 Q1 - Quarterly Report