Maison Solutions Inc

Previous wording

We are a fast-growing, specialty grocery retailer offering traditional Asian food and merchandise to modern U.S. consumers, in particular to members of Asian-American communities. We are committed to providing Asian fresh produce, meat, seafood, and other daily necessities in a manner 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 we operate. To achieve this, we are developing a center-satellite stores network. Since our formation in July 2019, we have acquired equity interests in four (4) traditional Asian supermarkets in Los Angeles, California. Since April 30, 2022, we have been operating these supermarkets as center stores. The center stores target traditional Asian-American, family-oriented customers with a variety of meat, fresh produce and other merchandise, while additionally stocking items which appeal to the broader community. We are operating these traditional Asian-American, family-oriented supermarkets with our management’s deep cultural understanding of our consumers’ unique consumption habits. In addition to the traditional supermarkets, on December 31, 2021, we acquired a 10% equity interest in a new grocery store located in Alhambra, California, a young and active community (the “Alhambra Store”). The Alhambra store is 100% owned by Mrs. Grace Xu, the spouse of Mr. John Xu, our chief executive officer (“CEO”), Chairman and President. We intend to acquire the remaining 90% equity interest in the Alhambra Store with a portion of the net proceeds from our initial public offering. Our intention is that the Alhambra Store will serve as our first satellite store. The investment in the Alhambra Store is considered a related party transaction because Mrs. Xu is the spouse of Mr. Xu, our CEO, Chairman and President. Please refer to “Certain Relationships and Related Party Transactions” for further explanation. In May 2021, the Company acquired 10% of the equity interests in Dai Cheong, a wholesale business which mainly supplies foods and groceries imported from Asia, which is owned by John Xu, our CEO, Chairman and President. We intend to acquire the controlling ownership of Dai Cheong with a portion of the net proceeds of our initial public offering. By adding Dai Cheong to our portfolio, we will take the first step toward creating a vertically integrated supply-retail structure. Having an importer as a part of our portfolio will allow us the opportunity to offer a wider variety of products and to reap the benefits of preferred wholesale pricing. On June 27, 2023, we invested $1,440,000 for 40% equity interest in HKGF Market of Arcadia, LLC (“HKGF Arcadia”), a supermarket in the city of Arcadia, California, to further expands our footprint to new neighborhood. On December 6, 2023, we invested additional $360,000 for another 10% equity interest in HKGF Arcadia.

Current wording

We are a fast-growing, specialty grocery retailer offering traditional Asian food and merchandise to modern U.S. consumers, in particular to members of Asian-American communities. We are committed to providing Asian fresh produce, meat, seafood, and other daily necessities in a manner 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 we operate. To achieve this, we are developing a center-satellite stores network. Since our formation in July 2019, we have acquired equity interests in four (4) traditional Asian supermarkets in Los Angeles, California. Since April 30, 2022, we have been operating these supermarkets as center stores. The center stores target traditional Asian-American, family-oriented customers with a variety of meat, fresh produce and other merchandise, while additionally stocking items which appeal to the broader community. We are operating these traditional Asian-American, family-oriented supermarkets with our management’s deep cultural understanding of our consumers’ unique consumption habits. In addition to the traditional supermarkets, on December 31, 2021, we acquired a 10% equity interest in a new grocery store located in Alhambra, California, a young and active community (the “Alhambra Store”) from Mrs. Grace Xu, the spouse of Mr. John Xu, our chief executive officer (“CEO”), Chairman and President. Our intention is to acquire the remaining 90% equity interest in the Alhambra Store and operate it as our first satellite store. The investment in the Alhambra Store is considered a related party transaction because Mrs. Xu is the spouse of Mr. Xu, our CEO, Chairman and President. Please refer to “Certain Relationships and Related Party Transactions” for further explanation. In May 2021, the Company acquired 10% of the equity interests in Dai Cheong, a wholesale business which mainly supplies foods and groceries imported from Asia, which is owned by John Xu, our CEO, Chairman and President. We intend to acquire the controlling ownership of Dai Cheong. By adding Dai Cheong to our portfolio, we will take the first step toward creating a vertically integrated supply-retail structure. Having an importer as a part of our portfolio will allow us the opportunity to offer a wider variety of products and to reap the benefits of preferred wholesale pricing. On June 27, 2023, we invested $1,440,000 for 40% equity interest in HKGF Market of Arcadia, LLC (“HKGF Arcadia”), a supermarket in the city of Arcadia, California, to further expand our footprint to new neighborhood. On December 6, 2023, we invested an additional $360,000 for another 10% equity interest in HKGF Arcadia. On February 1, 2024, the Company and JC Business Guys, Inc., the only other member of HKGF Arcadia (“JC Business Guys”), entered into a third amendment to the operating agreement of HKGF Arcadia to decrease our …

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Previous wording

The inflation rate for the United States was 3.1% for the nine months ended January 31, 2024, 4.9% for the year ended April 30, 2023 and 8.3% for the year ended April 30, 2022 according to Bureau of Labor Statistics. Inflation increased our purchase costs, occupancy costs, and payroll costs. To offset inflationary pressures for the nine months ended January 31, 2024, we have increased our products’ selling price to cover these increased costs.

Current wording

The inflation rate for the United States was 2.9% for the three months ended July 31, 2024, 3.4% for the year ended April 30, 2024 and 4.9% for the year ended April 30, 2023 according to Bureau of Labor Statistics. Inflation increased our purchase costs, occupancy costs, and payroll costs.

Previous wording

As of January 31, 2024, we had approximately 175 employees. Our employees are not unionized nor, to our knowledge, are there any plans for them to unionize. We have never experienced a strike or significant work stoppage. We consider our employee relations to be good. Minimum wage rates in some states have recently increased. For example, in California, the minimum wage rose from $13 to $14 per hour from 2020 to 2021 and increased to $15.50 per hour in 2023. According to the California Department of Industrial Relations, the minimum hourly wage in California will increase to $16 on January 1, 2024. Our payroll and payroll tax expenses were $1.8 million and $2.2 million for the three months ended January 31, 2024 and 2023, respectively. Our payroll and payroll tax expenses were $5.2 million and $5.0 million for the nine months ended January 31, 2024 and 2023, respectively.

Current wording

As of July 31, 2024, we had approximately 363 employees including employees from our newly acquired subsidiary, Lee Lee, which is based in the State of Arizona. Our employees are not unionized nor, to our knowledge, are there any plans for them to unionize. We have never experienced a strike or significant work stoppage. We consider our employee relations to be good. Minimum wage rates in some states have recently increased. For example, in California, the minimum wage was $15.50 per hour in 2023 and increased to $16 per hour starting from January 1, 2024; in Arizona, the minimum wage was $13.85 per hour in 2023, and increased to $14.35 per hour starting from January 1, 2024. Our payroll and payroll tax expenses were $3.7 million and $1.7 million for the three months ended July 31, 2024 and 2023, respectively.

Previous wording

Maison believes that a centralized and efficient vendor and supply management system is the key to profitability. Maison has major vendors, including Drop in The Ocean, Inc., ONCO Food Corp., GF Distribution, Inc., and XHJC Holding Inc. For the three months ended January 31, 2024, two suppliers accounted for 25%, and 16% of the Company’s total purchases, respectively. For the three months ended January 31, 2023, three suppliers accounted for 46%, 27% and 25% of the Company’s total purchases, respectively. For the nine months ended January 31, 2024, three suppliers accounted for 30%, 18% and 9% of the Company’s total purchases, respectively. For the nine months ended January 31, 2023, three suppliers accounted for 20%, 18% and 18% of the Company’s total purchases, respectively. Maison believes that its centralized vendor management enhances its negotiating power and improves its ability to manage vendor payables.

Current wording

Maison believes that a centralized and efficient vendor and supply management system is the key to profitability. Maison has major vendors, including Lap international, Lawrence Wholesale, BRC International Inc, ONCO Food Corp., GF Distribution, Inc., and XHJC Holding Inc. For the three months ended July 31, 2024, these five suppliers accounted for 9%, 11%, 3%, 5% and 11% of the Company’s total purchases, respectively. For the three months ended July 31, 2023, these five suppliers accounted for 0%, 0%, 19%, 9%, and 34% of the Company’s total purchases, respectively. Maison believes that its centralized vendor management enhances its negotiating power and improves its ability to manage vendor payables.

Previous wording

From time to time, Maison conducts maintenance on the fixtures and equipment for its stores. Any maintenance or renovations could interrupt the operation of our stores and result in a decline in customer volume. Significant maintenance or renovation would affect our operations and operating results. Meanwhile, improving the store environment can also attract more customers and lead to an increase in sales. Maison focused on improving stores for the three and nine months ended January 31, 2024 and 2023. We spent $0.35 million for the three months ended January 31, 2024 for repairs and maintenance and supermarket renovation, an increase of $0.29 million compared to $55,338 for the three months ended January 31, 2023. We spent $0.44 million for the nine months ended January 31, 2024 for repairs and maintenance and supermarket renovation, an increase of $0.25 million compared to $196,980 for the nine months ended January 31, 2023.

Current wording

From time to time, Maison conducts maintenance on the fixtures and equipment for its stores. Any maintenance or renovations could interrupt the operation of our stores and result in a decline in customer volume. Significant maintenance or renovation would affect our operations and operating results. Meanwhile, improving the store environment can also attract more customers and lead to an increase in sales. Maison focused on improving and renovating our stores for the three months ended July 31, 2024 and 2023. We spent $295,872 for the three months ended July 31, 2024 for repairs and maintenance and supermarket renovation, an increase of $215,598 compared to $80,274 for the three months ended July 31, 2023 mainly due to the acquisition of our new subsidiary Lee Lee.

Previous wording

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 us 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, or liquidations, and expected recoverable values of each disposition category. The Company records inventory shrinkage based on historical data and management’s estimates and provided a reserve for inventory shrinkage for the three and nine months ended January 31, 2024 and 2023.

Current wording

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 us 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, or liquidations, and expected recoverable values of each disposition category. The Company records inventory shrinkage based on historical data and management’s estimates and provided a reserve for inventory shrinkage for the three months ended July 31, 2024 and 2023.

Previous wording

The Company’s contract liability related to gift cards was $308,326 and $449,334 as of January 31, 2024 and April 30, 2023, respectively.

Current wording

The Company’s contract liability related to gift cards was $897,810 and $965,696 as of July 31, 2024 and April 30, 2024, respectively.

Previous wording

Our net revenues were approximately $13.6 million for the three months ended January 31, 2024, a decrease of approximately $2.0 million or 13.0%, from approximately $15.6 million for the three months ended January 31, 2023. The decrease in net revenues was mainly due to increased competition from two newly opened Asian supermarkets near Maison San Gabriel, effect from ending of certain Covid-9 pandemic-era relief programs in fall such as losing access to foods stamps due to resume of work requirement for food stamps, as well as temporary slow-down of Maison El Monte store due to renovation.** We spent $0.3 million for Maison El Monte store renovation in the three months ended January 31 ,2024. **

Current wording

Our net revenues were approximately $29.6 million for the three months ended July 31, 2024, an increase of approximately $15.9 million or 115.6%, from approximately $13.8 million for the three months ended July 31, 2023. The increase in net revenues was driven by the inclusion of revenues from our newly acquired subsidiary, Lee Lee (acquired in April 2024), of $18.2 million, which was partly offset by decreased sales of Maison Monterey Park by $0.3 million, decreased sales of Maison San Gabriel by $0.9 million, decreased sales of Maison Monrovia by $0.6 million and decreased sales of Maison El Monte by $0.5 million, as compared to the three months ended July 31, 2023. Our four California-based supermarkets contributed $11.5 million in revenue during the three months ended July 31, 2024, a decrease of approximately $2.3 million, as compared to the three months ended July 31, 2023. The $2.3 million decrease was mainly due to increased competition from newly opened Asian supermarkets near Maison San Gabriel, the effect of certain COVID-19 pandemic-era relief programs ending in fall 2023 such as losing access to foods stamps due to resume of work requirement for food stamps, as well as the temporary slow-down of the Maison El Monte store due to renovation.

Previous wording

Cost of revenues includes cost of supermarket product sales and occupancy costs, which are store rent expense, depreciation for store property and equipment, inventory shrinkage costs and store supplies. The depreciation expense comes from machinery & equipment, such as refrigerators, water heaters, forklifts, and freezers and furniture & fixtures, such as metal shelves, shopping carts, and LED lights. Shrinkage costs are different for different types of products. For example, fruits and vegetables have a high allowance rate during the receiving and display process. The seafood and meat departments have a low allowance rate because the non-fresh products can freeze and sell for the same price or even higher price after being cut. The cost of revenues decreased by $115,668, from $31.8 million for the nine months ended January 31, 2023, to approximately $31.7 million for the nine months ended January 31, 2024. The slight decrease in cost of revenues was mainly due to slight decrease in our revenue.

Current wording

Cost of revenues includes cost of supermarket product sales and occupancy costs, which are store rent expense, depreciation for store property and equipment, inventory shrinkage costs and store supplies. The depreciation expense comes from machinery & equipment, such as refrigerators, water heaters, forklifts, and freezers and furniture & fixtures, such as metal shelves, shopping carts, and LED lights. Shrinkage costs are different for different types of products. For example, fruits and vegetables have a high allowance rate during the receiving and display process. The seafood and meat departments have a low allowance rate because the non-fresh products can freeze and sell for the same price or even higher price after being cut. The cost of revenues increased by $10.7 million, from $10.6 million for the three months ended July 31, 2023, to approximately $21.4 million for the three months ended July 31, 2024. The increase in cost of revenues was mainly from our newly acquired subsidiary, Lee Lee (acquired in April 2024), by $12.3 million, which was partly offset by decreased cost of revenues from our four California-based supermarkets by $1.6 million.

Previous wording

Gross profit was approximately $9.4 million and $9.4 million for the nine months ended January 31, 2024 and 2023, respectively. Gross margin was 22.9% and 22.8% for the nine months ended January 31, 2024 and 2023, respectively. Our supermarkets’ sales profit margins slightly increased by 0.1% for the nine months ended January 31, 2024 compared to the nine months ended January 31, 2023, which was within normal range of our profit margin.

Current wording

Gross profit was approximately $8.3 million and $3.1 million for the three months ended July 31, 2024 and 2023, respectively. Gross margin was 27.9% and 22.6% for the three months ended July 31, 2024 and 2023, respectively. Our supermarkets’ sales profit margins increased by 5.3% for the three months ended July 31, 2024 compared to the three months ended July 31, 2023. The increase in our gross profit was mainly due to the higher gross profit from our new acquired subsidiary Lee Lee.

Previous wording

Total operating expenses were approximately $9.7 million for the nine months ended January 31, 2024, an increase of approximately $0.4 million, compared to approximately $9.3 million for the nine months ended January 31, 2023. Total operating expenses as a percentage of revenues were 23.6% and 22.6% for the nine months ended January 31, 2024 and 2023, respectively. The increase in operating expenses was primarily attributable to the increase in selling expenses, which included the increase in payroll expense, utility expense, merchant service charges. Payroll expense increased by $127,220 in the nine months ended January 31, 2024, as compared to the nine months ended January 31, 2023 due to the increase of hourly rate. Utility expense increased by $83,110 in the nine months ended January 31, 2024, as compared to the nine months ended January 31, 2023. Merchant eservice charges increased by $140,130 in the nine months ended January 31, 2024, as compared to the nine months ended January 31, 2023 due to increased sales from Maison Monterey Park store.

Current wording

Total operating expenses were approximately $6.6 million for the three months ended July 31, 2024, an increase of approximately $3.3 million, compared to approximately $3.3 million for the three months ended July 31, 2023. Total operating expenses as a percentage of revenues were 22.4% and 24.2% for the three months ended July 31, 2024 and 2023, respectively. The increase in operating expenses was primarily attributable to the increase in selling expenses, which included the increase in payroll expense, utility expense, advertising and promotion expense, postage & delivery expense and merchant service charges as result of the acquisition of Lee Lee. Payroll expense increased by $2.0 million in the three months ended July 31, 2024, as compared to the three months ended July 31, 2023 due to the increase of hourly rate and increased number of employees due to the acquisition of Lee Lee. Utility expenses increased by $0.3 million in the three months ended July 31, 2024, as compared to the three months ended July 31, 2023. Merchant service charges increased by $0.2 million in the three months ended July 31, 2024, as compared to the three months ended July 31, 2023 due to increased sales as describe above.

Previous wording

Other expense was $50,306 for the three months ended January 31, 2024 and $1,277,741 for the three months ended January 31, 2023. For the three months ended January 31, 2024, other expenses mainly consisted of investment loss of $51,204 from HKGF Arcadia, which was partially offset by other income of $898. For the three months ended January 31, 2023, other income mainly consisted of $1.3 million employee retention credit (“ERC”) received in January 2023. The ERC is a refundable tax credit for businesses that continued to pay employees while shut down due to the COVID-19 pandemic or had significant declines in gross receipts from March 13, 2020 to December 31, 2021.

Current wording

Other expenses were $197,434 for the three months ended July 31, 2024 compare to other income of $355,493 for the three months ended July 31, 2023. For the three months ended July 31, 2024, other expenses mainly consisted of investment loss of $206,803 ($166,028 investment loss from HKGF Arcadia and $40,775 from Alhambra Store), which was partly offset by other income of $9,369. For the three months ended July 31, 2023, other income mainly consisted of $0.4 million ERC received for the three months ended July 31,2023, which was partly offset by investment loss from HKGF Arcadia of $28,456. The ERC is a refundable tax credit for businesses that continued to pay employees while shut down due to the COVID-19 pandemic or had significant declines in gross receipts from March 13, 2020 to December 31, 2021.

Previous wording

Interest expense was $19,425 for the three months ended January 31, 2024, an increase of $95,477, from interest income of $76,052 for the three months ended January 31, 2023. The interest expense was for the SBA Loans and the AFNB Loans. The interest income in the three months ended January 31, 2023 was from the loan receivables from Drop in the Ocean, Inc, which was repaid in full as of January 31, 2023.

Current wording

Interest expense was $183,387 for the three months ended July 31, 2024, an increase of $136,821 from $46,566 for the three months ended July 31, 2023. For the three months ended July 31, 2024, the interest expense was for the SBA Loans and note payable arising from the acquisition of Lee Lee. For the three months ended July 31, 2023, the interest expense was for the SBA Loans and the loans with American First National Bank (the “AFNB Loans”). The AFNB Loans were repaid in full as of April 30, 2024.

Previous wording

Income tax expense was $424,722 for the nine months ended January 31, 2024, an increase of $235,571, from income taxes expense of $189,151 for the nine months ended January 31, 2023. The increase was mainly due to increased taxable income from our stores for the nine months ended January 31, 2024 compared to the nine months ended January 31, 2023, despite we had significant taxable loss for our parent company.

Current wording

Income tax expense was $636,228 for the three months ended July 31, 2024, an increase of $517,322 from income taxes expense of $118,906 for the three months ended July 31, 2023. The increase was mainly due to increased taxable income from our stores for the three months ended July 31, 2024 compared to the three months ended July 31, 2023.

Previous wording

Net loss attributable to the Company was $548,954 for the three months ended January 31, 2024, a decrease of $1,537,428, or 155.5%, from a $988,474 net income attributable to the Company for the three months ended January 31, 2023. This was mainly attributable to the reasons discussed above, which included an approximately $822,577 decrease in gross profit, increased non-operating expenses of approximately $1.4 million and increased income tax expense of $59,586, but partly offset by decreased operating expenses by $563,660.

Current wording

Net income attributable to the Company was $700,908 for the three months ended July 31, 2024, an increase of $805,847, or 767.9%, from a $104,939 net loss attributable to the Company for the three months ended July 31, 2023. This was mainly attributable to the reasons discussed above, which included an increase in gross profit by $5,159,543, increased net loss attribute to noncontrolling interest by $161,297, which was partly offset by decreased other income by $374,580, increased investment loss of $178,347, increased interest expenses by $136,821, increased operating expenses by $3,307,923 and increased income tax expense by $517,322.

Previous wording

Cash Flows for the Nine Months Ended January 31, 2024 Compared to the Nine Months Ended January 31, 2023

Current wording

Cash Flows for the Three Months Ended July 31, 2024 Compared to the Three Months Ended July 31, 2023

Previous wording

On November 22, 2023, we entered into certain securities purchase agreements (the “Securities Purchase Agreements”) with certain investors (the “Investors”). Pursuant to the Securities Purchase Agreements, we sold an aggregate of 1,190,476 shares of the Company’s Class A common stock, par value $0.0001 per share, to the Investors at a per share purchase price of $4.20 (the “PIPE Offering”). The PIPE Offering closed on November 22, 2023. We received net proceeds of approximately $4.35 million, after deducting investment banker’s discounts and commissions and offering expenses payable by the Company.

Current wording

On November 22, 2023, we entered into certain securities purchase agreements (the “Securities Purchase Agreements”) with certain investors (the “PIPE Investors”). Pursuant to the Securities Purchase Agreements, we sold an aggregate of 1,190,476 shares of the Company’s Class A common stock, par value $0.0001 per share, to the PIPE Investors at a per share purchase price of $4.20 (the “PIPE Offering”). The PIPE Offering closed on November 22, 2023. We received net proceeds of approximately $4.60 million, after deducting investment banker’s discounts and commissions and offering expenses payable by the Company.

Previous wording

To accomplish such expansion plan, we estimate the total related capital investment and expenditures to be approximately $35 million to $40 million, among which approximately $13 million to $16 million will be required within the next 12 months to support our preparation and opening of new stores in Southern and Northern California and acquiring additional supermarkets on the East Coast. This is based on management’s best estimate as of the date of this Report. We will also need approximately $57k to fully settle our loan from American First National Bank.

Current wording

We plan to acquire and open additional supermarkets, satellite stores and warehouses to expand our footprint to both the West Coast and the East Coast. To accomplish such expansion plan, we estimate the total related capital investment and expenditures to be approximately $35 million to $40 million, among which approximately $13 million to $16 million will be required within the next 12 months to support our preparation and opening of new stores in Southern and Northern California and acquiring additional supermarkets on the East Coast. This is based on the management’s best estimate as of the date of this Report.

Previous wording

We believe that our current cash and cash flows provided by operating activities will be sufficient to meet our working capital needs for our existing business in the next 12 months from the date of the issuance date of the financial statements. However, we plan to use part of the proceeds from our IPO to support our business expansion described above. We may also seek additional financing, to the extent needed, and there can be no assurance that such financing will be available on favorable terms, or at all. Such financing may include the use of additional debt or the sale of additional equity securities. Any financing which involves the sale of equity securities or instruments that are convertible into equity securities could result in immediate and possibly significant dilution to our existing shareholders. If it is determined that the cash requirements exceed the Company’s amounts of cash on hand, the Company may also seek to issue additional debt or obtain financial support from shareholders. The principal stockholder of the Company has made a commitment to provide financial support to the Company whenever necessary.

Current wording

We used part of the proceeds from our IPO to support our business expansion described above. We may also seek additional financing, to the extent needed, and there can be no assurance that such financing will be available on favorable terms, or at all. Such financing may include the use of additional debt or the sale of additional equity securities. Any financing which involves the sale of equity securities or instruments that are convertible into equity securities could result in immediate and possibly significant dilution to our existing shareholders. If it is determined that the cash requirements exceed the Company’s amounts of cash on hand, the Company may also seek to issue additional debt or obtain financial support from shareholders.

Previous wording

The following table summarizes our cash flow data for the nine months ended January 31, 2024 and 2023.

Current wording

The following table summarizes our cash flow data for the three months ended July 31, 2024 and 2023.

Previous wording

The net cash provided by operating activities was mainly offset by an increase of outstanding accounts receivable of approximately $0.9 million for the nine months ended January 31, 2023; increase of outstanding other receivables and other current assets of approximately $0.2 million; increased payment for accounts payable of $1.3 million; increased payment for accrued liability and other payables of $0.2 million; and increased payment for contract liabilities of $0.1 million.

Current wording

The net cash provided by operating activities for the three months ended July 31, 2023 was mainly offset by non-cash adjustments to net loss including bad debt reversal of $105,322, provision for inventory shrinkage reversal of $3,237, an increase of accounts receivable of $76,974, an increase of payment for accrued expenses and other payables of $58,795, an increase of payment to accounts payable of $154,894, and an increase of payment for contract liabilities of $78,499.

Previous wording

We had a net loss of $470,802 for the nine months ended January 31, 2024, a decrease of $1,699,083 compared with a net income of $1,228,281 for the nine months ended January 31, 2023. Our cash outflow of $887,439 for the nine months ended January 31, 2024 represented an increase of $1,251,664 cash outflow, compared with a $364,225 cash inflow in the nine months ended January 31, 2023. The increased net cash outflow for the nine months ended January 31, 2024 was mainly due to increased cash outflow from accounts payable of $160,830, increased cash outflow from accounts receivable from related parties of $305,241, increased cash outflow from inventories on hand of $282,707, which were partially offset by decreased cash outflow from outstanding accounts receivable of $439,967, increased cash inflow from prepayments of $362,220, increased cash inflow from other receivables and other current assets of $362,657, and decreased cash outflow from payments for accrued expenses and other payables of $147,350.

Current wording

We had a net income before noncontrolling interest of $617,826 for the three months ended July 31, 2024, an increase of $644,550 compared with a net loss of $26,724 for the three months ended July 31, 2023. Our cash inflow of $3,585,390 for the three months ended July 31, 2024 represented an increase of $2,988,849 cash inflow, compared with a $596,541 cash inflow in the three months ended July 31, 2023. The increased net cash inflow for the three months ended July 31, 2024 was mainly due to increased cash inflow from net income by $644,550 with change of non-cash adjustments by $675,470, increased cash onflow from other receivables and other current assets by $551,909, increased cash inflow from accounts payable by $2,246,734, and increased cash inflow from outstanding income tax payable by $592,839, which was partly offset by increased cash outflow from accounts receivable – related parties by $239,764, increased cash outflow from prepayments by $568,514, increased cash outflow from inventories by $864,278, and increased cash outflow from other payables by $187,856.

Previous wording

Net cash used in investing activities was approximately $5.1 million for the nine months ended January 31, 2024, which mainly consisted of store renovation and purchase of equipment of $317,083, payment of intangible assets of $2.95 million, payment for investment into TMA Liquor Inc of $75,000, and payment for 50% investment into Good Fortune Arcadia supermarket of approximately $1.8 million.

Current wording

Net cash used in investing activities was approximately $1.5 million for the three months ended July 31, 2023, which mainly consisted of the purchase of equipment of $12,809, and payment for investment into Good Fortune Arcadia supermarket of $1.4 million.

Previous wording

Net cash used in financing activities was approximately $0.6 million for the nine months ended January 31, 2023, which mainly consisted of bank overdraft of $281,941, repayment on loan payable of $261,923, payments on other receivables from related parties of $62,932, and repayment to other payables of related parties of $34,600.

Current wording

Net cash used in financing activities was approximately $2.9 million for the three months ended July 31, 2024, which mainly consisted of repayment for a note payable arising from the acquisition of Lee Lee of $5,000,000 and repayment on SBA loan payable of $16,078, which was partially offset by increase of bank overdraft of $1,707,376 and increase borrowing from related parties $413,738.

Previous wording

U.S. Small Business Administration

Current wording

U.S. Small Business Administration (the “SBA”)

Previous wording

On June 15, 2020, Maison Monrovia entered into a $150,000 Business Loan Agreement with the SBA at 3.75% annual interest rate and the maturity date on June 15, 2050. On June 15, 2020, Maison San Gabriel entered into a $150,000 Business Loan Agreement with the SBA at 3.75% annual interest rate and the maturity date on June 15, 2050. On June 15, 2020, Maison El Monte, entered into a $150,000 Business Loan Agreement with the SBA at 3.75% annual interest rate and the maturity date on June 15, 2050. Per the SBA loan agreement, all these three loans’ interest payments were deferred to December 2022.

Current wording

On June 15, 2020, Maison Monrovia entered into a $150,000 Business Loan Agreement with the SBA at 3.75% annual interest rate and the maturity date on June 15, 2050. On June 15, 2020, Maison San Gabriel entered into a $150,000 Business Loan Agreement with the SBA at 3.75% annual interest rate and the maturity date on June 15, 2050. On June 15, 2020, Maison El Monte entered into a $150,000 Business Loan Agreement with the SBA at 3.75% annual interest rate and the maturity date on June 15, 2050. Per the SBA loan agreements, the interests payments on all three SBA loans were deferred to December 2022.

Previous wording

On January 12, 2022, Maison San Gabriel received an extra $1,850,000 fund from the SBA at 3.75% annual interest rate and the maturity date on June 15, 2050. Maison El Monte received an extra $350,000 from the SBA at 3.75% annual interest rate and the maturity date on June 15, 2050.

Current wording

On January 12, 2022, Maison San Gabriel received an extra $1,850,000 loan from the SBA at 3.75% annual interest rate and the maturity date on June 15, 2050. Maison El Monte received an extra $350,000 loan from the SBA at 3.75% annual interest rate and the maturity date on June 15, 2050.

Previous wording

On January 2, 2024, the Company and our executive officers and directors, as well as Joseph Stone Capital LLC, and AC Sunshine Securities LLC, the underwriters in the Company’s initial public offering (together, the “Defendants”), were named in a class action complaint filed in the Supreme Court of the State of New York alleging violations of Sections 11 and 15 of the Securities Act of 1933, as amended (Ilsan Kim v. Maison Solutions Inc., et. al, Index No. 150024/2024). As relief, the plaintiffs are seeking, among other things, compensatory damages.

Current wording

On January 2, 2024, the Company and our executive officers and directors, as well as Joseph Stone Capital LLC, and AC Sunshine Securities LLC, the underwriters in the Company’s initial public offering (together, the “Defendants”), were named in a class action complaint filed in the Supreme Court of the State of New York alleging violations of Sections 11 and 15 of the Securities Act of 1933, as amended (Ilsan Kim v. Maison Solutions Inc., et. al, Index No. 150024/2024). As relief, the plaintiffs are seeking, among other things, compensatory damages. On or about April 17, 2024, the parties agreed to stay the action in favor of the Rick Green matter described immediately below.

Previous wording

The Company and Defendants believe the allegations in both complaints are without merit and intend to defend each suit vigorously.

Current wording

The Company and Defendants believe the allegations in both complaints are without merit and intend to defend each suit vigorously. It is reasonably possible that a loss may be incurred; however, the possible range of losses is not reasonably estimable given the pending status of both cases.

Previous wording

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 and for the period ended January 31, 2024 related to this case.

Current wording

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. It is reasonably possible that a loss may be incurred; however, the possible range of losses is not reasonably estimable given the pending status of the case. As such, the Company has not made any accruals of possible loss for the year ended April 30, 2023 and 2024 related to this case.

Previous wording

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 $98,500 to plaintiff in full settlement of all claims in the case. As a result of the settlement agreement, the Company accrued $98,500 as a loss relating to the case for the fiscal year ended April 30, 2022. During the year ended April 30, 2023, the Company accrued additional $40,000 litigation loss.

Current wording

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 $245,000 to plaintiff in full settlement of all claims in the case. As a result of the settlement agreement, the Company accrued $245,000 as a loss relating to the case as of April 30, 2024.