Overview

Maison Solutions Inc. is a fast-growing, specialty grocery retailer offering traditional Asian food and merchandise to modern U.S. consumers, particularly members of Asian-American communities. The company is committed to providing Asian fresh produce, meat, seafood, and other daily necessities in a way that caters to traditional Asian-American family values and cultural norms, while also accounting for the new and faster-paced lifestyle of younger generations and the diverse makeup of the communities in which it operates. To achieve this, Maison is developing a center-satellite stores network.

Since its formation in July 2019, Maison has acquired equity interests in four traditional Asian supermarkets in Los Angeles, California, which it has been operating as center stores. The company also acquired a 10% equity interest in a new grocery store located in Alhambra, California, with the intention of acquiring the remaining 90% equity interest and operating it as its first satellite store. Additionally, Maison acquired a 40% equity interest in HKGF Market of Arcadia, LLC, a supermarket in Arcadia, California, to further expand its footprint.

In May 2021, Maison acquired a 10% equity interest in Dai Cheong, a wholesale business that mainly supplies foods and groceries imported from Asia, with the intention of acquiring a controlling ownership. This is the first step toward creating a vertically integrated supply-retail structure.

On April 8, 2024, Maison’s wholly-owned subsidiary, AZLL LLC, acquired 100% of the equity interests in Lee Lee Oriental Supermart, Inc., a three-store supermarket chain operating in Arizona under the name Lee Lee International Supermarkets and specializing in ethnic groceries.

Collaboration with JD.com

In April 2021, Maison entered into a Collaboration Agreement with JD E-commerce America Limited, the U.S. subsidiary of JD.com, to provide services focused on updating in-store technology, developing a new mobile app, and revising store layouts to promote efficiency.

Key Factors that Affect Operating Results

Inflation: The inflation rate in the United States was 3.0% for the nine months ended January 31, 2025, 3.4% for the year ended April 30, 2024, and 4.9% for the year ended April 30, 2023, which increased Maison’s purchase costs, occupancy costs, and payroll costs.

Operating Cost Increase After Initial Public Offering: As a public company, Maison is subject to increased operating costs related to its listing on Nasdaq, including increased costs related to compliance with Securities Act and Exchange Act periodic reporting, annual audit expenses, legal service expenses, and related consulting service expenses.

Competition: Maison faces competition from national, regional, and local conventional supermarkets, national superstores, alternative food retailers, natural foods stores, smaller specialty stores, farmers’ markets, supercenters, online retailers, mass or discount retailers, and membership warehouse clubs. The company’s principal competitors include 99 Ranch Market, H-Mart, and Weee!.

Payroll: As of January 31, 2025, Maison had approximately 376 employees, including employees from its newly acquired subsidiary, Lee Lee. Minimum wage rates have recently increased in some states, which has impacted the company’s payroll and payroll tax expenses.

Vendor and Supply Management: Maison believes that a centralized and efficient vendor and supply management system is key to profitability. The company has major vendors, and its centralized vendor management enhances its negotiating power and improves its ability to manage vendor payables.

Store Maintenance and Renovation: Maison focuses on improving and renovating its stores, which can attract more customers and lead to an increase in sales, but can also interrupt the operation of its stores and result in a decline in customer volume.

Liquidity: As of January 31, 2025, Maison had a net income of $1,456,662 for the nine months ended January 31, 2025, an accumulated deficit of approximately $1.36 million, and negative working capital of $11.50 million. The company plans to increase its revenue and manage its working capital requirements to fund its operations and expansion plans.

Critical Accounting Policies

Related Parties: Maison identifies and accounts for related party transactions in accordance with ASC Topic 850 “Related Party Disclosures” and other relevant ASC standards.

Use of Estimates: The preparation of Maison’s consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses.

Inventories: Maison accounts for its inventories using the first-in, first-out method and values them at the lower of cost and net realizable value. The company records inventory shrinkage based on historical data and management’s estimates.

Revenue Recognition: Maison adopted ASC Topic 606, Revenue from Contracts with Customers, and recognizes revenue when the performance obligation is satisfied upon the transfer of goods to the customer.

Leases: Maison determines if an arrangement contains a lease at the inception of a contract under ASC Topic 842 and classifies leases as either operating or finance leases.

How to Assess Maison’s Performance

Maison’s performance is assessed based on several key measures, including:

Net Revenue: Maison’s net revenues comprise gross revenues net of returns and discounts.

Gross Profit: Maison calculates gross profit as net revenues less cost of revenues and occupancy costs. Gross margin represents gross profit as a percentage of net revenues.

Selling, General and Administrative Expenses: These expenses primarily consist of retail operational expenses, administrative salaries and benefits costs, marketing costs, advertising costs, and corporate overhead.

Results of Operations for the Three Months Ended January 31, 2025 and 2024

Revenues: Maison’s net revenues were approximately $34.1 million for the three months ended January 31, 2025, an increase of approximately $20.6 million or 151.1%, from approximately $13.6 million for the three months ended January 31, 2024. The increase was driven by the inclusion of revenues from the newly acquired subsidiary, Lee Lee, which offset decreases in sales at Maison’s four California-based supermarkets.

Cost of Revenues: Cost of revenues increased by $16.2 million, from $10.4 million for the three months ended January 31, 2024, to approximately $26.6 million for the three months ended January 31, 2025, primarily due to the inclusion of costs from the Lee Lee acquisition.

Gross Profit and Gross Margin: Gross profit was approximately $7.5 million and $3.2 million for the three months ended January 31, 2025 and 2024, respectively. Gross margin was 22.1% and 23.4% for the three months ended January 31, 2025 and 2024, respectively, with the decrease mainly due to decreased gross profit from Maison Monterey Park resulting from increased competition.

Total Operating Expenses: Total operating expenses were approximately $6.4 million for the three months ended January 31, 2025, an increase of approximately $2.9 million, compared to approximately $3.5 million for the three months ended January 31, 2024. The increase was primarily attributable to the increase in selling expenses, including payroll, utilities, advertising, and merchant service charges, due to the acquisition of Lee Lee.

Other Income (Expenses), Net: Other income was $158,176 for the three months ended January 31, 2025, compared to other expense of $50,306 for the three months ended January 31, 2024.

Interest Income (Expense), Net: Interest expense was $269,059 for the three months ended January 31, 2025, an increase of $249,634 from $19,425 for the three months ended January 31, 2024, primarily due to the SBA Loans and note payable arising from the acquisition of Lee Lee.

Income Taxes Provisions: Income tax expense was $8,416 for the three months ended January 31, 2025, a decrease of $150,240 from income taxes expense of $158,656 for the three months ended January 31, 2024, mainly due to the utilization of NOL from the subsidiaries.

Net Income (Loss): Net income attributable to the Company was $1,011,763 for the three months ended January 31, 2025, an increase of $1,560,717, or 284.3%, from a $548,954 net loss attributable to the Company for the three months ended January 31, 2024.

Results of Operations for the Nine Months Ended January 31, 2025 and 2024

The results for the nine-month period ended January 31, 2025 and 2024 follow a similar trend to the three-month period, with significant increases in revenue, gross profit, and net income attributable to the Company, primarily driven by the acquisition of Lee Lee.

Liquidity and Capital Resources

As of January 31, 2025, Maison had cash and cash equivalents of approximately $445,357 and outstanding loan facilities of approximately $2.51 million SBA loan and $8.29 million secured senior note payable due to the acquisition of Lee Lee. The company plans to use the proceeds from its IPO and PIPE offering, as well as additional financing if needed, to fund its expansion plans, which include acquiring and opening additional supermarkets, satellite stores, and warehouses.

Commitments and Contingencies

Maison is involved in various legal proceedings, including class action lawsuits and a shareholder derivative action, related to its initial public offering. The company believes the allegations are without merit and intends to defend the suits vigorously, but it is reasonably possible that a loss may be incurred, though the possible range of losses is not reasonably estimable at this time.