Maison Solutions Inc 10-K/A for FY2023
Maison Solutions Inc. (MSS)
About this 10-K/A
Maison Solutions Inc filed this 10-K/A on August 1, 2023, covering the fiscal year ended April 30, 2023 (FY2023).
Headline figures
Fiscal year ended April 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $55.4M
- up 32.0% from $41.98M a year earlier
- Net loss
- $1.64M
- compared with net income of $655.03K a year earlier
- Diluted EPS
- $0.08
- compared with -$0.04 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Amendment No. 1)
(Mark One)
For the fiscal year ended
OR
For transition period from to
Commission File Number:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |
| | ||
| (Address of registrant’s principal executive offices) | (Zip Code) |
(Telephone number)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which class is to be registered | ||
| - | - |
Securities registered pursuant to Section 12(g) of the Act:
None.
Indicate by check mark if the registrant is a well-known seasoned issuer,
as defined in Rule 405 of the Securities Act. Yes ☐
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. Yes ☐
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 | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
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 has filed a report on
and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section
404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
If securities are registered pursuant to Section 12(b) of the Act,
indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to
previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Act): Yes ☐ No
As of October 31, 2022, the last business day of the registrant’s most recently completed second fiscal quarter, there was no established public trading market for the registrant’s equity securities.
As of July 31, 2023, the number of shares of Class
A common stock, $0.0001 par value, outstanding was
Explanatory Note
This Amendment No. 1 on Form 10-K/A (the “Amendment”) is being filed to correct a typographical error relating to the date of the report by Friedman, LLP, our Independent Registered Public Accounting Firm for the fiscal year ended April 30, 2022, that had appeared on page F-3 of the original Form 10-K of Maison Solutions Inc. (the “Company”) for the fiscal year ended April 30, 2023, as filed on July 31, 2023 (the “2023 Form 10-K”). The correct date of the report is December 22, 2022, and a copy of the report, with the corrected date, is included with this Amendment. The corrected report replaces in its entirety the report originally included on page F-3 under “Part II- Item 8. Financial Statements and Supplementary Data.” This Amendment also corrects the amounts listed for the year ended April 30, 2022 in the tables on pg. F-19 under Note 12 - “Related party balances and transactions - Related party transactions”. The corrected report replaces in its entirety the tables originally included on page F-19.
In addition, the Company is including in this Amendment currently dated certifications from its Chief Executive Officer and Chief Financial Officer as required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002, attached hereto as Exhibits 31.1 and 31.2 and Exhibits 32.1 and 32.2, respectively. The exhibits listed in Part IV-Item 15. Exhibits and Financial Statement Schedules are filed herewith in accordance with Rule 12b-15 of the Exchange Act.
Except as expressly set forth above, this Amendment does not, and does not purport to, amend, update or restate the information in any other item of the 2023 Form 10-K or reflect any events that have occurred after the filing of the 2023 Form 10-K.
Table of Contents
| Part II | ||
| Item 8. Financial Statements and Supplementary Data | F-1 | |
| Part IV | ||
| Item 15. Exhibits and Financial Statement Schedules | IV-1 |
i
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
MAISON SOLUTIONS INC.
INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS
F-1
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders
Maison Solutions Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Maison Solutions Inc. (the “Company”) as of April 30, 2023, and the related consolidated statements of operations, changes in shareholders’ equity, and cash flows for the year then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of April 30, 2023, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the company’s management. Our responsibility is to express an opinion on the company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/ Kreit & Chiu CPA LLP
We have served as the Company’s auditor since 2023.
Los Angeles, California
July 31, 2023
PCAOB Firm ID: 6651
F-2
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of
Maison Solutions Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Maison Solutions Inc. and Subsidiaries (collectively, the “Company”) as of April 30, 2022, and the related consolidated statements of operations, changes in stockholders’ deficit, and cash flows for the year ended April 30, 2022 and related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of April 30, 2022, and the results of its operations and its cash flows for the year ended April 30, 2022, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provide a reasonable basis for our opinion.
/s/
We served as the Company’s auditor from May 2021 through December 2022.
New York,
December 22, 2022
F-3
MAISON SOLUTIONS INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
| April 30, 2023 | April 30, 2022 | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash and equivalents | $ | $ | ||||||
| Accounts receivable | ||||||||
| Accounts receivable - related parties | ||||||||
| Inventories, net | ||||||||
| Prepayments | ||||||||
| Loan receivables | ||||||||
| 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 in equity securities – related parties | ||||||||
| 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 17) | ||||||||
| Stockholders’ Equity (Deficit) | ||||||||
| Class A Common stock, $ | ||||||||
| Class B Common stock, $ | ||||||||
| Accumulated retained earnings (deficit) | ( | ) | ||||||
| Total Maison Solutions, Inc. Stockholders’’ Equity (Deficit) | ( | ) | ||||||
| Noncontrolling interests | ( | ) | ||||||
| Total Stockholders’ Equity (Deficit) | ( | ) | ||||||
| Total Liabilities and Stockholders’ Equity | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-4
MAISON SOLUTIONS INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
| Years Ended April 30, | ||||||||
| 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 | ||||||||
| Income (Loss) from Operations | ( | ) | ||||||
| Other Income, net | ||||||||
| Interest Income, net | ||||||||
| Total other Income, net | ||||||||
| Income (Loss) Before Income Taxes | ( | ) | ||||||
| Income Tax Provisions | ||||||||
| Net Income (Loss) | ( | ) | ||||||
| Net Income (Loss) Attributable to Noncontrolling Interests | ( | ) | ||||||
| Net Income (Loss) Attributable to Maison Solutions Inc. | $ | $ | ( | ) | ||||
| Income (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.
F-5
MAISON SOLUTIONS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
| Class A | Class B | Additional | Retained Earnings | Non | Total Stockholders’ | |||||||||||||||||||||||||||
| Common Stock | Common Stock | Paid-in | (Accumulated | controlling | Equity | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit) | Interests | (Deficit) | |||||||||||||||||||||||||
| Balance at April 30, 2021 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||
| Balance at April 30,2022 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Net income | - | - | ||||||||||||||||||||||||||||||
| Balance at April 30, 2023 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-6
MAISON SOLUTIONS INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Years Ended April 30, | ||||||||
| 2023 | 2022 | |||||||
| Cash flows from operating activities | ||||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||
| Depreciation and amortization expenses | ||||||||
| Bad debt expense | ||||||||
| Provision for inventory shrinkage reserve | ( | ) | ||||||
| Change in deferred taxes | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Accounts receivable - related party | ||||||||
| Inventories | ( | ) | ||||||
| Prepayments | ( | ) | ( | ) | ||||
| Other receivables and other current assets | ( | ) | ||||||
| Security deposits | ||||||||
| 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 | ||||||||
| Repayments from other receivables – related parties | ||||||||
| Payments of equipment purchase | ( | ) | ( | ) | ||||
| Payment of intangible assets | ( | ) | ||||||
| Payment for acquisition of subsidiary | ( | ) | ||||||
| Loans repaid by (provided to) third parties | ( | ) | ||||||
| Net cash provided by (used in) investing activities | ( | ) | ||||||
| Cash flows from financing activities | ||||||||
| Bank overdraft | ( | ) | ||||||
| Proceeds from loans | ||||||||
| Repayments on loan payables | ( | ) | ||||||
| Payment to other receivables – related parties | ||||||||
| Repayments (to) 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 year | ||||||||
| Cash and restricted cash at the end of the year | $ | $ | ||||||
| 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 | $ | $ | ||||||
| Supplemental disclosure of non-cash investing and financing activities | ||||||||
| Purchase price of equity security investments included in other payables - related parties | $ | $ | ||||||
| Increase of right-of-use assets and lease liabilities | $ | |||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-7
MAISON SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2023 AND 2022
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”).
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 April 30, 2023 and 2022, the Company
had NCIs of $
F-8
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.
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 April 30, 2023 and 2022, 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 April 30, 2023 and 2022, there was no allowance for the doubtful accounts.
F-9
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 April 30, 2023 and 2022, 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 years ended April 30, 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 April 30, 2023 and 2022, the Company had made prepayment to its vendors and its insurance provider. 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 April 30, 2023 and 2022, 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:
| 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.
F-10
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 years ended April 30, 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.
Investment in equity securities
The Company accounts for investments with less
than
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 year ended April 30, 2023.
In May 2021, the Company purchased a
In December 2021, the Company purchased a
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.
F-11
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 year ended 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 13 — “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.
F-12
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 $
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.
| Years ended April 30, | ||||||||
| 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.
Concentrations of risks
(a) Major customers
For each of the years ended April 30, 2023 and 2022, the
Company did not have any customers that accounted for more than
F-13
(b) Major vendors
The following table sets forth information as to the Company’s
suppliers that accounted for
Year
Ended | Year
Ended | |||||||||||
| Supplier | Percentage of Total Purchases | Supplier | Percentage of Total Purchases | |||||||||
| A | % | A | % | |||||||||
| B | % | B | % | |||||||||
| C | % | C | % | |||||||||
| D | % | D | % | |||||||||
(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.
F-14
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 years ended April 30, 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 12 — “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 May 2019, the FASB issued ASU 2019-05, which is an update to ASU Update No. 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which introduced the expected credit losses methodology for the measurement of credit losses on financial assets measured at amortized cost basis, replacing the previous incurred loss methodology. The amendments in Update 2016-13 added Topic 326, Financial Instruments — Credit Losses, and made several consequential amendments to the Codification. Update 2016-13 also modified the accounting for available-for-sale debt securities, which must be individually assessed for credit losses when fair value is less than the amortized cost basis in accordance with Subtopic 326-30, Financial Instruments — Credit Losses — Available-for-Sale Debt Securities. The amendments in this Update address those stakeholders’ concerns by providing an option to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost basis. For those entities, the targeted transition relief will increase comparability of financial statement information by providing an option to align measurement methodologies for similar financial assets. Furthermore, the targeted transition relief also may reduce the costs for some entities to comply with the amendments in Update 2016-13 while still providing financial statement users with decision-useful information. In November 2019, the FASB issued ASU No. 2019-10 to update the effective date of ASU No. 2016-02 for private companies, not-for-profit organizations, and certain smaller reporting companies applying for credit losses, leases, and hedging standard. The new effective date for these preparers is for fiscal years beginning after December 15, 2022. The Company has not early adopted this update and it became effective on May 1, 2023. The Company is currently evaluating the impact of ASU 2019-05 will have on the Company’s consolidated financial statements.
F-15
In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes”. The amendments in this update simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. For public business entities, the amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2021 and interim periods within fiscal years beginning after December 15, 2022. Early adoption of the amendments is permitted, including adoption in any interim period for (1) public business entities for periods for which financial statements have not yet been issued and (2) all other entities for periods for which financial statements have not yet been made available for issuance. An entity that elects to early adopt the amendments in an interim period should reflect any adjustments as of the beginning of the annual period that includes that interim period. Additionally, an entity that elects early adoption must adopt all the amendments in the same period. The Company elected early adoption for this policy on May 1, 2021 and did not have a material impact on the Company’s consolidated financial statements.
No other new accounting pronouncements issued or effective had, or are expected to have, a material impact on the Company’s consolidated financial statements.
3. Inventories, net
A summary of inventories, net is as follows:
| April 30, 2023 | April 30, 2022 | |||||||
| Perishables | $ | $ | ||||||
| Non-perishables | ||||||||
| Reserve for inventory shrinkage | ( | ) | ( | ) | ||||
| Inventories, net | $ | $ | ||||||
Movements of reserve for inventory shrinkage are as follows:
| April 30, 2023 | April 30, 2022 | |||||||
| Beginning balance | $ | $ | ||||||
| GF Supermarket of MP, Inc. Inventory shrinkage reserve at July 1, 2022 | ||||||||
| Provision for (Reverse of) inventory shrinkage reserve | ( | ) | ||||||
| Ending Balance | $ | $ | ||||||
4. Prepayments
| April 30 2023 | April 30, 2022 | |||||||
| Prepayment for inventory purchases | $ | $ | ||||||
| Prepaid expense – services provider | — | |||||||
| Total prepayments | $ | $ | ||||||
As of April 30, 2023, the prepayment mainly consists
of $
As of April 30, 2022, the $
F-16
5. Loan receivables
A summary of the Company’s loan receivables is listed as follows:
| Borrower | Relationship | April 30, 2023 | April 30, 2022 | |||||||
| Drop in the Ocean, Inc. | $ | $ | ||||||||
| XHJC Holding Inc. | ||||||||||
| Total 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 $
Interest income for the years ended April 30,
2023 and 2022 amounted to $
6. Property and equipment, net
| April 30, 2023 | April 30, 2022 | |||||||
| 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 years ended April 30, 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. 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 18 — “Acquisition
of subsidiary” for additional information. As of April 30, 2023, the Company had goodwill of $
F-17
9. Accrued expenses and other payables
| April 30, 2023 | April 30, 2022 | |||||||
| Accrued payroll | $ | $ | ||||||
| Accrued interest expense | ||||||||
| Accrued loss for legal matter | ||||||||
| Other payables | ||||||||
| Due to third parties | ||||||||
| Accrued consulting expense payable | ||||||||
| Sales tax payable | ||||||||
| Total accrued expenses and other payables | $ | $ | ||||||
10. Note payable
As of April 30, 2023, the Company had an outstanding
note payable of $
11. Loan payables
A summary of the Company’s loans is listed as follows:
| Lender | Due date | April 30, 2023 | April 30, 2022 | |||||||
| 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 $
U.S. Small Business Administration (the “SBA”)
| Borrower | Due date | April 30, 2023 | April 30, 2022 | |||||||
| Maison Monrovia | $ | $ | ||||||||
| Maison San Gabriel | ||||||||||
| Maison El Monte | ||||||||||
| Total SBA loan payables | $ | $ | ||||||||
F-18
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 April 30, 2023 and 2022, the Company’s aggregate balance on the
three SBA loans was $
As of April 30, 2023, the future minimum principal amount of loan payments to be paid by year are as follows:
| Year Ending April 30, | Amount | |||
| 2024 | $ | |||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| Thereafter | ||||
| Total | $ | |||
12. Related party balances and transactions
Related party transactions
Sales to related parties
| Name of Related Party | Nature | Relationship | Year ended April 30, 2023 | Year ended April 30, 2022 | ||||||||
| The United Food LLC | $ | $ | ||||||||||
| GF Supermarket of MP, Inc. (acquired all the assets from Hong Kong Supermarket of Monterey Park, Ltd on August 1, 2021) | ||||||||||||
| Hong Kong Supermarket of Monterey Park, Ltd | ||||||||||||
| HKGF Market of Alhambra, Inc. | ||||||||||||
| Total | $ | $ | ||||||||||
Purchases from related parties
| Name of Related Party | Nature | Relationship | Year ended April 30, 2023 | |||||
| The United Food LLC | $ | |||||||
| Dai Cheong Trading Co Inc | ||||||||
| HKGF Market of Alhambra, Inc. | ||||||||
| Total | $ | |||||||
F-19
Investment in equity securities purchased from related parties
| Name of Investment Company | Nature of Operation | Investment percentage | Relationship | As of April 30, 2023 | As of April 30, 2022 | |||||||||||
| Dai Cheong Trading Co Inc. | % | $ | $ | |||||||||||||
| HKGF Market of Alhambra, Inc. | % | |||||||||||||||
| Total | $ | $ | ||||||||||||||
In May 2021, the Company purchased a
In December 2021, the Company purchased a
Related party balances
Accounts receivable — sales to related parties
| Name of Related Party | Nature | Relationship | April 30, 2023 | April 30, 2022 | ||||||||
| GF Supermarket of MP, Inc.* | $ | $ | ||||||||||
| HKGF Market of Alhambra, Inc* | ||||||||||||
| United Food LLC* | ||||||||||||
| Total | $ | $ | ||||||||||
| * | The accounts receivables as of April 30, 2022 have been repaid by the related parties on July 28, 2022. |
Accounts payable — purchase from related parties
| Name of Related Party | Nature | Relationship | April 30, 2023 | April 30, 2022 | ||||||||
| Hong Kong Supermarket of Monterey Park, Ltd | non-interest bearing | $ | $ | — | ||||||||
| Dai Cheong Trading Co Inc. | — | |||||||||||
| Total | $ | $ | — | |||||||||
F-20
Other receivables — related parties
| Name of Related Party | Nature | Relationship | April 30, 2023 | April 30, 2022 | ||||||||
| Good Fortune CA3, LP* | ||||||||||||
| Ideal Investment | non-interest bearing | |||||||||||
| Ideal City Capital | non-interest bearing | — | ||||||||||
| Total | $ | $ | ||||||||||
| * | This receivable had been repaid by the related party on July 29, 2022. During the year ended April 30, 2023, the Company incurred new short-term borrowing from related parties of $33,995. |
Other payables — related parties
| Name of Related Party | Nature | Relationship | April 30, 2023 | April 30, 2022 | ||||||||
| John Xu | non-interest bearing | $ | $ | |||||||||
| Grace Xu | non-interest bearing | |||||||||||
| J&C Int’l Group LLC | non-interest bearing | — | ||||||||||
| Ideal City Capital | non-interest bearing | — | ||||||||||
| Total | $ | $ | ||||||||||
13. 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:
| Store | Lease Term Due | |
| Maison Monrovia * | ||
| Maison San Gabriel | ||
| Maison El Monte | ||
| Maison Monterey Park |
| * |
F-21
As of April 30, 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 April 30, 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 $
The Company’s operating ROU assets and lease liabilities were as follows:
| April 30, 2023 | April 30, 2022 | |||||||
| Operating ROU: | ||||||||
| ROU assets – supermarket leases | $ | $ | ||||||
| ROU assets – copier leases | ||||||||
| Total operating ROU assets | $ | $ | ||||||
| April 30, 2023 | April 30, 2022 | |||||||
| Operating lease obligations: | ||||||||
| Current operating lease liabilities | $ | $ | ||||||
| Non-current operating lease liabilities | ||||||||
| Total lease liabilities | $ | $ | ||||||
As of April 30, 2023, the five-year maturity of the Company’s operating lease liabilities is as follow:
| Years Ending April 30, | Operating lease liabilities | |||
| 2024 | $ | |||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| Thereafter | ||||
| Total lease payments | ||||
| Less: interest | ( | ) | ||
| Present value of lease liabilities | $ | |||
F-22
14. Stockholder’s Equity (Deficit)
Common stock
Maison was initially authorized to issue
15. 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 years ended April 30, 2023 and 2022.
Income Tax Provision
The provision for income taxes provisions consists of the following components:
| Year ended April 30, 2023 | Year ended April 30, 2022 | |||||||
| Current: | ||||||||
| Federal income tax expense | $ | $ | ||||||
| State income tax expense | ||||||||
| Deferred: | ||||||||
| Federal income tax benefit | ( | ) | ||||||
| State income tax benefit | ( | ) | ||||||
| Total | $ | $ | ||||||
F-23
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:
| Year ended April 30, 2023 | Year ended April 30, 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 | % | % | ||||||
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:
| April 30, 2023 | April 30, 2022 | |||||||
| Deferred tax assets: | ||||||||
| Inventory reserve | $ | $ | ||||||
| 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 April 30, 2023 and 2022, Maison and Maison
El Monte had approximately $
F-24
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 years ending April 30, 2023 and 2022 and as of April 30, 2023 and 2022 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 April 30, 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.
16. Other income
For the year ended April 30, 2023, other
income mainly consists of $
17. 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 $
F-25
18. Acquisition of subsidiary
On June 30, 2022, the Company purchased
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:
| 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 years ended April 30, 2023 and 2022 present the results of operations of the Company and Maison Monterey Park as if the acquisitions occurred on May 1, 2022 and 2021, respectively.
F-26
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.
| For the Year Ended April 30, 2023 | ||||
| (Unaudited) | ||||
| Revenue | $ | |||
| Operating costs and expenses | ||||
| Income from operations | ||||
| Other income | ||||
| Income tax expense | ( | ) | ||
| Net income | $ | |||
| For the Year Ended April 30, 2022 | ||||
| (Unaudited) | ||||
| Revenue | $ | |||
| Operating costs and expenses | ||||
| Loss from operations | ( | ) | ||
| Other income | ||||
| Income tax expense | ( | ) | ||
| Net loss | $ | ( | ) | |
19. 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 the following major subsequent event that need to be disclosed.
Purchase
On June 27, 2023, the Company invested $
F-27
Part IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) We have filed the following documents as part of this Annual Report on Form 10-K:
1. The financial statements listed in the “Index to Financial Statements” on page F-1 are filed as part of this report.
2. Financial statement schedules are omitted because they are not applicable, or the required information is shown in the financial statements or notes thereto.
3. Exhibits included or incorporated herein: See below.
| Exhibit No. | Description | |
| 31.1 | Certification pursuant to Section 302 of the Sarbanes-Oxley Act. | |
| 31.2 | Certification pursuant to Section 302 of the Sarbanes-Oxley Act. | |
| 32.1** | Certification pursuant to Section 906 of the Sarbanes-Oxley Act. | |
| 32.2** | Certification pursuant to Section 906 of the Sarbanes-Oxley Act. | |
| 101.INS | Inline XBRL Instance Document. | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema. | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase. | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase. | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase. | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase. | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
| ** | Furnished herewith. |
IV-1
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| DATE: July 31, 2023 | MAISON SOLUTIONS INC. | |
| By: | /s/ John Xu | |
| John Xu | ||
| Chief Executive Officer, Chairman and President | ||
| (Principal Executive Officer) | ||
| By: | /s/ Alexandria M. Lopez | |
| Alexandria M. Lopez | ||
| Chief Financial Officer | ||
| (Principal Financial Officer and | ||
| Principal Accounting Officer) | ||
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
| Signature | Title | Date | ||
| /s/ John Xu | Chief Executive Officer, Chairman and President | July 31, 2023 | ||
| John Xu | (Principal Executive Officer) | |||
| /s/ Alexandria M. Lopez | Chief Financial Officer | July 31, 2023 | ||
| Alexandria M. Lopez | (Principal Financial Officer and Principal Accounting Officer) | |||
| /s/ Bin Wang | Director | July 31, 2023 | ||
| Bin Wang | ||||
| /s/ Mark Willis | Director | July 31, 2023 | ||
| Mark Willis | ||||
| /s/ Dr. Xiaoxia Zhang | Director | July 31, 2023 | ||
| Dr. Xiaoxia Zhang |
IV-2
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 Annual Report on Form 10-K 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. |
| July 31, 2023 | By: | /s/ John Xu |
|
John Xu Chief Executive Officer, Chairman and President (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION OF THE CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Alexandria M. Lopez, certify that:
| (1) | I have reviewed this Annual Report on Form 10-K 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. |
| July 31, 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 Annual Report on Form 10-K of Maison Solutions Inc. (the "Company") for the year ended April 30, 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. |
| July 31, 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 Annual Report on Form 10-K of Maison Solutions Inc. (the "Company") for the year ended April 30, 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. |
| July 31, 2023 | By: | /s/ Alexandria M. Lopez |
| Alexandria M. Lopez | ||
Chief Financial Officer Principal Accounting Officer) |