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    SEC Form 10-Q filed by Maison Solutions Inc.

    9/22/25 4:36:11 PM ET
    $MSS
    Food Chains
    Consumer Staples
    Get the next $MSS alert in real time by email

     

     

    UNITED STATES

    SECURITIES AND EXCHANGE COMMISSION

    Washington, D.C. 20549

     

    FORM 10-Q

     

    (Mark One)

     

    ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

     

    For the quarterly period ended July 31, 2025

     

    ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

     

    For the transition period from __________ to ____________

     

    Commission File No. 001-41720

     

    Maison Solutions Inc.

    (Exact name of registrant as specified in its charter)

     

    Delaware   84-2498797
    (State or other jurisdiction of   (I.R.S. Employer
    incorporation or organization)   Identification No.)

     

    127 N Garfield Avenue    
    Monterey Park, CA   91754
    (Address of principal executive offices)   (Zip Code)

     

    (718) 673-6078
    (Registrant’s telephone number, including area code)

     

    N/A

    (Former name, former address and former fiscal year, if changed since last report)

     

    Securities registered pursuant to Section 12(b) of the Act:

     

    Title of each class   Trading Symbol(s)   Name of exchange on which registered
    Class A Common Stock, $0.0001 par value per share   MSS   The Nasdaq Stock Market LLC

     

    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. Yes ☒ No ☐

     

    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). Yes ☒ No ☐

     

    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
    ☒ Non-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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

     

    As of September 17, 2025, the number of shares of Class A common stock, $0.0001 par value, outstanding was 17,450,476 shares, and the number of shares of Class B common stock, $0.0001 par value, outstanding was 2,240,000 shares.

     

     

     

     

     

     

    TABLE OF CONTENTS

     

      Page
       
    PART I – FINANCIAL INFORMATION 1
         
    Item 1. Unaudited Financial Statements. 1
         
    Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. 35
         
    Item 3. Quantitative and Qualitative Disclosures about Market Risk. 50
         
    Item 4. Controls and Procedures. 50
         
    PART II – OTHER INFORMATION 52
         
    Item 1. Legal Proceedings. 52
         
    Item 1A. Risk Factors. 52
         
    Item 2. Unregistered Sales of Equity Securities. 52
         
    Item 3. Defaults Upon Senior Securities. 52
         
    Item 4. Mine Safety Disclosures. 52
         
    Item 5. Other Information. 52
         
    Item 6. Exhibits. 52
         
    SIGNATURES 53

     

    i

     

     

    PART I- FINANCIAL INFORMATION

     

    Item 1. Financial Statements.

     

    MAISON SOLUTIONS INC. AND SUBSIDIARIES
    CONSOLIDATED BALANCE SHEETS

     

       As of
    July 31,
    2025
    (Unaudited)
       As of
    April 30,
    2025
     
    ASSETS        
             
    CURRENT ASSETS        
    Cash  $1,070,802   $775,360 
    Accounts receivable   2,342,699    2,658,524 
    Accounts receivable - related parties   518,289    472,907 
    Inventories, net   5,890,473    5,324,268 
    Prepayments   2,640,046    2,423,684 
    Other receivables and other current assets   734,644    694,943 
    Other receivables - related parties   138,995    128,995 
    Total current assets   13,335,948    12,478,681 
               
    NON-CURRENT ASSETS          
    Property and equipment, net   1,566,072    1,646,056 
    Intangible assets, net   7,280,037    7,419,812 
    Security deposits   856,008    856,008 
    Investment under cost method   75,000    75,000 
    Investment under cost method - related parties   162,665    162,665 
    Investment under equity method   
    -
        848,493 
    Operating lease right-of-use assets, net   35,181,175    35,693,340 
    Goodwill   14,882,849    14,882,849 
    Total non-current assets   60,003,806    61,584,223 
               
    Assets from discontinued operations   
    -
        3,299,985 
               
    TOTAL ASSETS  $73,339,754   $77,362,889 
               
    LIABILITIES AND STOCKHOLDERS’ EQUITY          
               
    CURRENT LIABILITIES          
    Bank overdraft  $1,440,200   $1,446,647 
    Accounts payable   8,480,452    7,986,255 
    Accounts payable - related parties   568,969    536,373 
    Accrued expenses and other payables   2,003,203    1,708,304 
    Other payables - related parties   512,824    512,824 
    Income tax payable   1,065,488    661,408 
    Contract liabilities   675,428    701,929 
    Operating lease liabilities, current   3,425,836    3,403,852 
    Loan payable, current   65,247    62,212 
    Notes payable, current   4,882,060    4,887,094 
    Total current liabilities   23,119,707    21,906,898 
               
    NON-CURRENT LIABILITIES          
    Long-term loan payable   2,536,990    2,553,838 
    Security deposit from sub-tenants   130,028    131,228 
    Operating lease liabilities, non-current   34,756,278    35,180,573 
    Notes payable, non-current   -    754,966 
    Convertible note payable   1,018,670    584,199 
    Derivative liability   694,326    1,004,230 
    Deferred tax liability, net   1,100,377    1,183,914 
    Total non-current liabilities   40,236,669    41,392,948 
               
    Liabilities from discontinued operations   
    -
        2,423,014 
               
    TOTAL LIABILITIES   63,356,376    65,722,860 
               
    Commitment and contingencies (Note 17)   
     
        
     
     
               
    STOCKHOLDER’S EQUITY          
    Class A Common stock, $0.0001 par value, 97,000,000 shares authorized; 17,450,476 shares issued and outstanding as of July 31, 2025 and April 30, 2025   1,745    1,745 
    Class B Common stock, $0.0001 par value, 3,000,000 shares authorized; 2,240,000 shares issued and outstanding   224    224 
    Additional paid in capital   13,313,523    13,313,523 
    Accumulated deficit   (3,189,756)   (1,648,223)
               
    Total Maison Solutions, Inc. stockholders’ equity   10,125,736    11,667,269 
               
    Noncontrolling interest   (142,358)   (27,240)
               
    Total stockholders’ equity   9,983,378    11,640,029 
               
    TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY  $73,339,754    77,362,889 

     

    The accompanying notes are an integral part of these consolidated financial statements.

     

    1

     

     

    MAISON SOLUTIONS INC. AND SUBSIDIARIES

    CONSOLIDATED STATEMENTS OF OPERATIONS

    (UNAUDITED)

     

       Three Months Ended July 31, 
       2025   2024 
             
    Revenue  $27,165,134   $28,178,091 
               
    Cost of goods sold   20,606,000    20,040,443 
               
    Gross profit   6,559,134    8,137,648 
               
    Operating expenses          
    Selling expenses   4,767,089    4,469,804 
    General and administrative expenses   1,607,830    1,597,445 
               
    Total operating expenses   6,374,919    6,067,249 
               
    Income from operations   184,215    2,070,399 
               
    Non-operating income (expenses)          
    Interest expense, net   (652,409)   (179,056)
    Investment loss   (848,493)   (206,803)
    Change in fair value of derivative liability   309,904    - 
    Other income, net   496,174    9,571 
               
    Non-operating expenses, net   (694,824)   (376,288)
               
    Income (loss) before income taxes   (510,609)   1,694,111 
               
    Income tax expenses   320,543    628,780 
               
    Net income (loss) from continuing operation   (831,152)   1,065,331 
    Net loss from discontinued operations   (825,499)   (447,505)
               
    Net income (loss)   (1,656,651)   617,826 
               
    Net loss attributable to noncontrolling interests from continuing operation   (46,354)   (45,805)
    Net loss attributable to noncontrolling interests from discontinued operation   (68,764)   (37,277)
               
    Net loss attributable to noncontrolling interest   (115,118)   (83,082)
               
    Net income (loss) attributable to the Company from continuing operation   (784,798)   1,111,136 
    Net loss attributable to the Company from discontinued operation   (756,735)   (410,228)
               
    Net income (loss) attributable to Maison Solutions, Inc.  $(1,541,533)  $700,908 
               
    Net income (loss) per share attributable to Maison Solutions, Inc.          
    Basic *  $(0.08)  $0.04 
    Diluted *  $(0.08)  $0.04 
    Weighted average number of common stock outstanding - basic   

    19,690,476

        19,690,476 
    Weighted average number of common stock outstanding - diluted   21,864,389    

    19,690,476

     

     

    *Earnings per share for basic and diluted weighted average shares outstanding are the same due to anti-dilutive effect resulting from the net loss for the three months ended July 31, 2025.

    The accompanying notes are an integral part of these consolidated financial statements.

     

    2

     

     

    MAISON SOLUTIONS INC. AND SUBSIDIARIES

    CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

    THREE MONTHS ENDED JULY 31, 2025 AND 2024

    (UNAUDITED)

     

       Class A
    Common Stock
       Class B
    Common Stock
       Additional
    Paid-in
       Accumulated   Noncontrolling   Total
    Stockholders’
     
       Shares   Amount   Share   Amount   Capital   Deficit   Interests   Equity 
    Balance at April 30, 2025   17,450,476   $1,745    2,240,000   $224   $13,313,523   $(1,648,223)  $(27,240)  $11,640,029 
    Net loss   -    
    -
        -    
    -
        
    -
        (1,541,533)   (115,118)   (1,656,651)
    Balance at July 31, 2025   17,450,476   $1,745    2,240,000   $224   $13,313,523   $(3,189,756)  $(142,358)  $9,983,378 

     

       Class A
    Common Stock
       Class B
    Common Stock
       Additional
    Paid-in
       Accumulated   Noncontrolling   Total
    Stockholders’
     
       Shares   Amount   Shares   Amount   Capital   Deficit   Interests   Equity 
    Balance at April 30, 2024   17,450,476   $1,745    2,240,000   $224   $13,313,523   $(2,817,496)  $221,124   $10,719,120 
    Net income   -    
    -
        -    
    -
        -    700,908    (83,082)   617,826 
    Balance at July 31, 2024   17,450,476   $1,745    2,240,000   $224   $13,313,523   $(2,116,588)  $138,042   $11,336,946 

     

    The accompanying notes are an integral part of these unaudited consolidated financial statements.

     

    3

     

     

    MAISON SOLUTIONS INC. AND SUBSIDIARIES

    CONSOLIDATED STATEMENTS OF CASH FLOWS

    (UNAUDITED)

     

       Three Months Ended July 31, 
       2025   2024 
    Cash flows from operating activities        
    Net income (loss)  $(1,656,651)  $617,826 
    Adjustments to reconcile net income (loss) to net cash provided by operating activities:          
    Depreciation and amortization   220,759    266,895 
    Inventory impairment   215,594    204,604 
    Investment loss   848,493    206,803 
    Loss from disposal of assets due to store closure   489,380    
    -
     
    Amortization of debt discount and debt issuance cost of convertible note   434,472    
    -
     
    Change in fair value of derivative liability   (309,904)   
    -
     
    Changes in deferred taxes   (83,537)   (17,458)
    Changes in operating assets and liabilities:          
    Accounts receivable   315,825    (10,831)
    Accounts receivable - related parties   (45,382)   (217,153)
    Inventories   (394,209)   (753,104)
    Prepayments   (216,362)   (105,091)
    Other receivables and other current assets   (39,701)   752,663 
    Accounts payable   494,196    2,091,840 
    Accounts payable - related parties   32,596    (899)
    Accrued expenses and other payables   294,899    (246,651)
    Income tax payable   404,080    713,504 
    Contract liabilities   (26,501)   (67,886)
    Operating lease liabilities   109,854    134,896 
    Other long-term payables   (1,200)   15,432 
    Net cash provided by operating activities   1,086,701    3,585,390 
               
    Cash flows from investing activities          
    Payment for equipment purchase   (1,000)   (102,631)
    Net cash used in investing activities   (1,000)   (102,631)
               
    Cash flows from financing activities          
    Bank overdraft   (6,447)   1,707,376 
    Borrowing from related parties   
    -
        413,738 
    Loan to related party   (10,000)   
    -
     
    Repayment of loan payable   (13,812)   (16,078)
    Repayment of notes payable arising from acquisition of Lee Lee   (760,000)   (5,000,000)
    Net cash used in financing activities   (790,259)   (2,894,964)
               
    Net changes in cash   295,442    587,795 
    Cash at the beginning of the period   775,360    1,101 
    Cash at the end of the period  $1,070,802   $588,896 
               
    Supplemental disclosure of cash flow information          
    Cash paid for interest  $182,893   $183,387 
    Cash paid for income taxes  $
    -
       $9,048 

     

    The accompanying notes are an integral part of these unaudited consolidated financial statements.

     

    4

     

     

    MAISON SOLUTIONS INC.

    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

    JULY 31, 2025 (UNAUDITED) AND APRIL 30, 2025

     

    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 91% of the equity interests in Good Fortune Supermarket San Gabriel, LP (“Maison San Gabriel”) and 85.25% of the equity interests in Good Fortune Supermarket of Monrovia, LP (“Maison Monrovia”), each of which owns a Good Fortune Supermarket.

     

      ● In October 2019, the Company purchased 91.67% of the equity interests in Super HK of El Monte, Inc. (“Maison El Monte”), which owns a Hong Kong Supermarket. The Company shut down the Maison El Monte store in June 2025. The strategic decision to close Maison El Monte store is part of the Company’s ongoing commitment to improve its profitability and support sustainable growth

     

      ● On June 30, 2022, the Company purchased 100% equity interest in GF Supermarket of MP, Inc. (“Maison Monterey Park”), the legal entity holding a supermarket in Monterey Park.

     

    On November 3, 2023, the Company incorporated a wholly-owned subsidiary AZLL LLC (“AZLL”) in Arizona. On April 8, 2024, AZLL closed an acquisition transaction and purchased 100% of the equity interests in Lee Lee Oriental Supermart, Inc (“Lee Lee”) for an aggregate purchase price of approximately $22.2 million, consisting of: (i) $7.0 million in cash paid immediately at the closing of the transaction, and (ii) a senior secured promissory note (the “Secured Note”) with an original principal amount of approximately $15.2 million pursuant to a senior secured note agreement dated April 8, 2024 and amended on October 21, 2024 (as amended, the “Senior Secured Note Agreement”). Lee Lee is a three-store supermarket chain operating in Arizona under the name Lee Lee International Supermarkets and specializing in South-East groceries.

     

    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

     

    Liquidity

     

    The Company plans to increase its revenue by strengthening its sales force, providing attractive sales incentive programs, recruiting experienced industry-related managerial personnel, increasing marketing and promotion activities, seeking suppliers with competitive price and good quality products, opening or acquiring additional specialty supermarkets in the locations that have less-competition. If deemed necessary, management could also seek to raise additional funds by way of admitting strategic investors, or private or public offerings, or by seeking to obtain loans from banks or others, to support the Company’s daily operation. While management of the Company believes in the viability of its strategy to generate sufficient revenues and its ability to raise additional funds on reasonable terms and conditions, there can be no assurances to that effect.

     

    The Company believes that its cash on hand and operating cash flows will be sufficient to fund its operations over at least the next 12 months from the date of issuance of these financial statements. However, the Company may need additional cash resources in the future if the Company experiences changed business conditions or other developments and may also need additional cash resources in the future if the Company wishes to pursue opportunities for investment, acquisition, strategic cooperation or other similar actions. If it is determined that the cash requirements exceed the Company’s amounts of cash on hand, the Company may seek to issue debt or equity securities or obtain a credit facility.

     

    5

     

     

    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”). 

     

    The interim unaudited consolidated financial information as of July 31, 2025 and for the three months periods ended July 31, 2025 and 2024 have been prepared without audit, pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures, which are normally included in consolidated financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to such rules and regulations. The interim consolidated financial information should be read in conjunction with the Financial Statements and the notes thereto, included in the Company’s Annual Report on Form 10-K for the fiscal year ended April 30, 2025, previously filed with the SEC on August 14, 2025.

     

    In the opinion of management, all adjustments (which include all significant normal and recurring adjustments) necessary to present a fair statement of the Company’s interim consolidated financial position as of July 31, 2025, its interim consolidated results of operations and cash flows for the three months ended July 31, 2025 and 2024, as applicable, have been made. The interim results of operations are not necessarily indicative of the operating results for the full fiscal year or any future periods.

     

    Principles of consolidation

     

    The unaudited 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 the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) 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 July 31, 2025 and April 30, 2025, the Company had NCIs of $(142,358) and $(27,240), respectively, which represent 9% of the equity interest of Maison San Gabriel, 14.75% of the equity interest of Maison Monrovia and 8.33% of the equity interest of Maison El Monte. For the three months ended July 31, 2025 and 2024, the Company had net loss of $115,118 and $83,082 respectively, that were attributable to NCIs.  

     

    6

     

     

    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.

     

    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 $250,000 per depositor, per insured bank, for each account ownership category. The bank deposits exceeding the standard insurance amount will not be covered. As of July 31, 2025 and April 30, 2025, cash balances held in the banks, exceeding the standard insurance amount, are $373,137 and $91,692, respectively. The Company has not experienced any losses in accounts held in these financial institutions and believes it is not exposed to any risks on its cash held in these financial institutions.

     

    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 July 31, 2025 and April 30, 2025, the Company did not have any restricted cash.

     

    Credit losses

     

    On May 1, 2023, the Company adopted Accounting Standards Update 2016-13 “Financial Instruments — Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments,” which replaces the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (“CECL”) methodology.

     

    The Company’s account receivables, prepayments, other receivables and other current assets in the balance sheet are within the scope of ASC Topic 326. As the Company has limited customers and debtors, the Company uses the loss-rate method to evaluates the expected credit losses on an individual basis. When establishing the loss rate, the Company makes the assessment on various factors, including historical experience, creditworthiness of customers and debtors, current economic conditions, reasonable and supportable forecasts of future economic conditions, and other factors that may affect its ability to collect from the customers and debtors. The Company also provides specific provisions for allowance when facts and circumstances indicate that the receivable is unlikely to be collected.

     

    Expected credit losses are recorded as allowance for credit losses on the consolidated statements of operations. After all attempts to collect a receivable have failed, the receivable is written off against the allowance. In the event the Company recovers amount that is previously reserved for, the Company will reduce the specific allowance for credit losses.

     

    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.

     

    7

     

     

    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 July 31, 2025 and April 30, 2025, there was no allowance for credit losses.

     

    Accounts receivable — related parties

     

    Accounts receivable consists 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 July 31, 2025 and April 30, 2025, the allowance for credit losses was $29,493 and $29,493, respectively.

     

    Prepayments

     

    Prepayments 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 July 31, 2025 and April 30, 2025, the Company had made prepayments to its vendors of $2,640,046 and $2,423,684, respectively. 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, mainly the Company’s major vendors. 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. Management reviews the composition of other receivables and analyzes historical bad debts, and current economic trends to evaluate the adequacy of the reserves. Accounts considered uncollectable are written off against allowances after exhaustive efforts at collection are made. As of July 31, 2025 and April 30, 2025, the Company did not have any bad debt allowance for other receivables.

     

    Inventories, net

     

    Inventories consisting of finished goods and products available for sale are primarily accounted for using the first-in, first-out method. Merchandise inventories are valued at the lower of cost or 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 recorded inventory shrinkage based on the historical data and management’s estimates and provides a reserve for inventory shrinkage for the three months ended July 31, 2025 and 2024. The Company provided a reserve for inventory shrinkage of $215,594 and $204,604 during the three months ended July 31, 2025 and 2024.

     

    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   5 – 10 years
    Leasehold improvements   Shorter of the lease term or estimated useful life of the assets
    Equipment   5 –10 years
    Automobiles   5 years

     

    8

     

     

    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 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. 

     

    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 three months ended July 31, 2025 and 2024.

     

    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.

     

    Long-term investment

     

    Cost method investment

     

    The Company accounts for investments with less than 20% of the voting shares and does not have the ability to exercise significant influence over operating and financial policies of the investee using the cost method. The Company elects the measurements alternative and records investment in equity securities at the historical cost in its consolidated financial statements and subsequently records any dividends received from the net accumulated earrings of the investee as income. Dividends received in excess of earnings are considered a return of investment and are recorded as reduction in the cost of the investments.

     

    In May 2021, the Company purchased a 10% equity interest in Dai Cheong Trading Company Inc. (“Dai Cheong”), a grocery trading company, for $162,665 from DC Holding CA, Inc. DC Holding CA, Inc. is 100% owned by John Xu, the Chief Executive Officer, Chairman and President of the Company. See Note 13 — “Related party balances and transactions”.

     

    9

     

     

    In December 2021, the Company purchased a 10% equity interest in HKGF Market of Alhambra, Inc. (“HKGF Alhambra”), the legal entity holding the store for $40,775 from Ms. Grace Xu, the sole shareholder of HKGF Market of Alhambra, Inc. and a related party as the spouse of Mr. John Xu, the Chief Executive Officer, Chairman and President of the Company. See Note 13 — “Related party balances and transactions”. HKGF Alhambra was temporarily shut down at the end of September 2024 as a result of a strategic operating decision by its management but was later reopened on December 15, 2024. Accordingly, the Company recorded an investment loss of $40,775 during the year ended April 30, 2025.

     

    Effective on December 14, 2023, the Company purchased 10% equity interest in TMA Liquor Inc. (“TMA”), a liquor wholesale company, for $100,000. The Company paid $75,000 as of July 31, 2025.

     

    Equity method investment

     

    During the year ended April 30, 2024, the Company invested $1,862,000 for 49% equity interest in HKGF Market of Arcadia, LLC (“HKGF Arcadia”). See Note 7 — “Equity method investment”. The Company has determined that HKGF Arcadia is not a variable interest entity (“VIE”) and has evaluated its consolidation analysis under the voting interest model with the facts that the Company does not own greater than 50% of the outstanding voting shares, either directly or indirectly; the Management team of HKGF Arcadia was appointed by the 51% shareholder despite Maison and the 51% shareholder each appointed one director to the Board of Directors of HKGF Arcadia, the Company concluded that it should account for its investment in HKGF Arcadia under the equity method of accounting. Under this method, the investor (“Maison”) recognizes its share of the profits and losses of the investee (“HKGF Arcadia”) in the periods when these profits and losses are also reflected in the accounts of the investee. Any profit or loss recognized by the investor appears in its income statement, any recognized profit increases the investment recorded by the investor, while a recognized loss decreases the investment.

     

    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 (i) the 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. During the three months ended July 31, 2025, the Company recorded $848,493 impairment charges for its investments in HKGF Market of Arcadia due to the Company’s plan of closing the supermarket business at this location.

     

    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.

     

    In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment (“ASU 2017-04”). ASU 2017-04 requires only a one-step quantitative impairment test, whereby a goodwill impairment loss is measured as the excess of a reporting unit’s carrying amount over its fair value (not to exceed the total goodwill allocated to that reporting unit). The Company did not record any impairment loss during the three months ended July 31, 2025 and 2024.

     

    Leases

     

    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, right-of-use (“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 assets also include 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. 

     

    10

     

     

    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.

     

    Derivative liability

     

    A derivative is an instrument whose value is “derived” from an underlying instrument or index such as a future, forward, swap, option contract, or other financial instrument with similar characteristics, including certain derivative instruments embedded in other contracts and for hedging activities.

     

    The Company does not invest in separable financial derivatives or engage in hedging transactions. However, the Company entered into certain debt financing transactions as disclosed in Note 11 containing certain conversion features that have resulted in the instruments being deemed derivatives. The Company evaluates such derivative instruments to properly classify such instruments within equity or as liabilities in the financial statements.

     

    The classification of a derivative instrument is reassessed at each reporting date. If the classification changes as a result of events during a reporting period, the instrument is reclassified as of the date of the event that caused the reclassification. There is no limit on the number of times a contract may be reclassified.

     

    Instruments classified as derivative liability is remeasured using the Black-Scholes model at each reporting period (or upon reclassification) and the change in fair value is recorded on the consolidated statement of operations. The Company had derivative liability of $694,326 and $1,004,230 as of July 31, 2025 and April 30, 2025, respectively.

     

    Fair value of financial instruments

     

    The Company’s financial instruments include 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. Fair value measurements of nonfinancial assets and non-financial liabilities are primarily used in the impairment analysis of intangible assets and long-lived assets. 

     

    The Company applies the fair value measurement accounting standard in accordance with ASC 820-10, “Fair Value Measurements and Disclosures,” whenever other accounting pronouncements require or permit fair value measurements. Fair value is an exit price, representing the amount that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. Fair value measurements are required to be disclosed by level within the following fair value hierarchy:

     

    Level 1 – Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.

     

    11

     

     

    Level 2 – Inputs (other than quoted prices included in Level 1) are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life. As of July 31, 2024 and April 30, 2025, the Company has level 2 fair value calculations on derivative liability.

     

    Level 3 – Inputs lack observable market data to corroborate management’s estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.

     

    When determining fair value, whenever possible the Company uses observable market data, and relies on unobservable inputs only when observable market data is not available.

     

    The following is the change in derivative liability for the three months ended July 31, 2025:

     

    Balance, May 1, 2025  $1,004,230 
    Issuance of new derivative liability   
    —
     
    Conversions   
    —
     
    Change in fair market value of derivative liability   (309,904)
    Balance, April 30, 2025  $694,326 

     

    Revenue recognition

     

    The Company adopted ASC Topic 606, Revenue from Contracts with Customers (“ASC Topic 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 Topic 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 $675,428 and $701,929 as of July 31, 2025 and April 30, 2025, respectively. 

     

    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.

     

       Three Months ended
    July 31,
     
       2025   2024 
    Perishables  $14,148,985   $14,441,407 
    Non-perishables   13,016,149    13,736,684 
    Total revenue *  $27,165,134   $28,178,091 

     

    * Total revenue did not include the revenue of Maison El Monte due to closure of the supermarket in June 2025. For the three months ended July 31, 2025 and 2024, Maison El Monte has sales of $753,579 and $1,471,289, respectively.

     

    12

     

     

    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 reduction in 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 excluding Maison El Monte were $23,247 and $30,648 for the three months ended July 31, 2025 and 2024, respectively . The Company’s advertising expenses for Maison EL Monte were $nil and $6,219 for the three months ended July 31, 2025 and 2024.

     

    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 the three months ended July 31, 2025 and 2024, the Company did not have any customers that accounted for more than 10% of consolidated total net sales. 

      

    (b) Major vendors

     

    The following table sets forth information as to the Company’s suppliers that accounted for 10% or more of the Company’s total purchases for the three months ended July 31, 2025 and 2024.

      

    Three Months Ended
    July 31, 2025
      Three Months Ended
    July 31, 2024
    Supplier  Percentage of
    Total
    Purchases
       Supplier  Percentage of
    Total
    Purchases
     
    A   11%  A   11%
    B   3%  B   11%

      

    (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 credit losses 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.

     

    13

     

     

    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 credit losses 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 Topic 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 50% likely of being realized upon ultimate settlement. The Company considers many factors when evaluating our tax positions and estimating its tax benefits, which may require periodic adjustments, and which may not accurately forecast actual outcomes. The Company includes interest and penalties related to its tax contingencies in income tax expense.

     

    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.

     

    Earnings (loss) per common stock

     

    Basic earnings (loss) per common stock is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted EPS is computed similar to basic net income (loss) per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if all the potential common shares pertaining to warrants, stock options, and similar instruments had been issued and if the additional common shares were dilutive. Diluted earnings (loss) per share are based on the assumption that all dilutive convertible shares and stock options and warrants were converted or exercised. Dilution is computed by applying the treasury stock method for the outstanding unvested restricted stock, options and warrants, and the if-converted method for the outstanding convertible instruments. Under the treasury stock method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later) and as if funds obtained thereby were used to purchase common stock at the average market price during the period. Under the if-converted method, outstanding convertible instruments are assumed to be converted into common stock at the beginning of the period (or at the time of issuance, if later). Potential common stock that has an anti-dilutive effect (i.e., those that increase income per common stock or decrease loss per common stock) are excluded from the calculation of diluted loss per share.

     

    14

     

     

    The following table sets forth the computation of basic and diluted net loss per share for the three months ended July 31, 2025 and 2024:

     

       For the three months ended
    July 31,
     
       2025   2024 
    Net income (loss) attributable to the Company from continuing operation  $(784,798)  $1,111,136 
    Net loss attributable to the Company from discontinued operation   (756,735)   (410,228)
    Weighted average common stock outstanding - basic   

    19,690,476

        

    19,690,476

     
    Convertible note   2,173,913    
    -
     
    Weighted average common stock outstanding - diluted   

    21,864,389

        

    19,690,476

     
    Net income (loss) per share of common stock from continuing operation - basic  $(0.04)  $0.06 
    Net loss per share of common stock from discontinued operation -basic  $(0.04)  $(0.02)
    Net loss per share of common stock from continuing operation – diluted  $(0.04)*  $0.06 
    Net loss per share of common stock from discontinued operation -diluted  $(0.04)*  $(0.02)

     

    * Earnings per share for basic and diluted weighted average shares outstanding are the same due to anti-dilutive effect resulting from the net loss for the three months ended July 31, 2025.

     

    Statement of Cash Flows

     

    In accordance with ASC 230, “Statement of Cash Flows,” cash flows from the Company’s operations are formulated based upon the local currencies using the average exchange rate in the period. As a result, amounts related to assets and liabilities reported on the unaudited consolidated statements of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheets.

     

    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 13 — “Related party balances and transactions”.

     

    Segment Information

     

    On May 1, 2024, the Company adopted ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” The Company applies the “management approach” to identify operating segments, as required by ASC 280-10-50. Under this approach, operating segments are components of the business whose operating results are regularly reviewed by the chief operating decision maker (“CODM”) to assess performance and allocate resources. The Company’s CODM is the senior executive committee, which includes the Chief Executive Officer and the Chief Financial Officer.

     

    The CODM manages the Company’s operations as a single operating and reportable segment, which is to sell grocery products, general merchandise, health and beauty care products, pharmacy and other items and services in its supermarket stores. The CODM assesses segment performance and allocates resources based on net income, which is also reported in the Company’s consolidated statements of income.

     

    15

     

     

    Net income is used by the CODM to evaluate the return on segment assets and determine whether to reinvest profits in the business, fund acquisitions, or return capital to shareholders. Net income is also used to compare actual performance against budget and to benchmark the Company’s performance against industry peers. These evaluations form the basis for internal performance assessments and management compensation decisions.

     

    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 supermarket 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

     

    In October 2023, the FASB issued ASU No. 2023-06, “Disclosure Improvements — Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative.” The ASU amends the disclosure or presentation requirements related to various subtopics in the FASB ASC. The ASU was issued in response to the SEC’s August 2018 final amendments in Release No. 33-10532, Disclosure Update and Simplification that updated and simplified disclosure requirements that the SEC believed were duplicative, overlapping, or outdated. The guidance in ASU 2023-06 is intended to align GAAP requirements with those of the SEC and to facilitate the application of GAAP for all entities. The amendments introduced by ASU 2023-06 are effective if the SEC removes the related disclosure or presentation requirement from its existing regulations by June 30, 2027. If, by June 30, 2027, the SEC has not removed the applicable requirements from its existing regulations, the pending content of the associated amendment will be removed from the ASC and will not become effective for any entities. Early adoption is permitted. The adoption of ASU 2023-06 is not expected to have a material impact on the Company’s consolidated financial statements or related disclosures.

     

    In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”), which requires the disaggregation of certain expense captions into specified categories in disclosures within the notes to the consolidated financial statements to provide enhanced transparency into the expense captions presented on the face of the statement of income and comprehensive income. ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026, with early adoption permitted, and may be applied either prospectively or retrospectively to financial statements issued for reporting periods after the effective date of ASU 2024-03 or retrospectively to any or all prior periods presented in the financial statements. On January 6, 2025, FASB issued ASU 2025-01 that clarifies for non-calendar year-end entities the interim effective date of Accounting Standards Update No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. Public business entities are required to adopt the guidance in Update 2024-03 in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. The Company is currently evaluating the impact that the adoption of ASU 2024-03 will have on its related disclosures.

     

    In January 2025, the FASB issued ASU 2025-01 Income Statement-Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40). The FASB issued ASU 2024-03 on November 4, 2024-03 states that the amendments are effective for public business entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Following the issuance of ASU 2024-03, the FASB was asked to clarify the initial effective date for entities that do not have an annual reporting period that ends on December 31 (referred to as non-calendar year-end entities). Because of how the effective date guidance was written, a non-calendar year-end entity may have concluded that it would be required to initially adopt the disclosure requirements in ASU 2024-03 in an interim reporting period, rather than in annual reporting period. The FASB’s intent in the basis for conclusions of ASU 2024-03 is clear that all public business entities should initially adopt the disclosure requirements in the first annual reporting period beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027.

     

    16

     

     

    In March 2025, the FASB issued ASU 2025-02—Liabilities (405): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 122. The amendments in this Update are effective immediately and on a fully retrospective basis to annual periods beginning after December 15, 2024. The Company is currently evaluating the effect of adoption of this standard to its consolidated financial statements and disclosures.

     

    The Company’s management does not believe that any other recently issued, but not yet effective, authoritative guidance, if currently adopted, would have a material impact on the Company’s financial statement presentation or disclosures.

     

    3. Inventories, net

     

    A summary of inventories, net was as follows:

     

       July 31,
    2025
       April 30,
    2025
     
             
    Perishables  $1,965,073   $508,568 
    Non-perishables   4,454,684    5,122,223 
    Reserve for inventory shrinkage   (529,284)   (306,523)
    Inventories, net  $5,890,473   $5,324,268 

     

    As of April 30, 2025, inventory from Maison EL Monte was $430,656.

     

    Movements of reserve for inventory shrinkage were as follows:

     

       Three Months Ended
    July 31,
    2025
       Three Months Ended
    July 31,
    2024
     
             
    Beginning balance  $313,690   $36,790 
    Provision for inventory shrinkage reserve   215,594    204,604 
    Ending Balance  $529,284   $241,394 

     

    For the three Months ended July 31, 2024, inventory shrinkage reverse from Maison EL Monte was $778.

     

    4. Prepayments

     

    Prepayments consisted of the following:

     

       July 31,
    2025
       April 30,
    2025
     
             
    Prepayment for inventory purchases  $2,171,111   $1,954,748 
    Prepaid directors and officers (“D&O”) insurance   96,730    116,731 
    Prepaid income tax   196,900    196,900 
    Prepaid professional service   25,902    25,902 
    Prepaid rent   129,403    129,403 
    Total prepayments  $2,640,046   $2,423,684 

     

    As of July 31, 2025, the prepayment for inventory purchases mainly consisted of $1,102,266 paid to GF Distribution, Inc., one of the Company’s major vendors; and $1,058,845 paid to XHJC Holdings Inc., which is the Company’s new centralized vendor, and prepayment to other vendors of $10,000.

     

    17

     

     

    As of April 30, 2025, the prepayment for inventory purchases mainly consisted of $981,446 paid to GF Distribution, Inc., one of the Company’s major vendors; and $963,302 paid to XHJC Holdings Inc., which is the Company’s new centralized vendor, and prepayment to other vendors of $10,000.

     

    As of April 30, 2025, $15,798 Maison El Monte’s prepayment was disposed due to store closure. 

     

    5. Property and equipment, net

     

    Property and equipment consisted of the following:

     

       July 31,
    2025
       April 30,
    2025
     
             
    Furniture & Fixtures  $3,180,365   $3,180,365 
    Equipment   4,122,982    4,121,982 
    Leasehold Improvement   1,930,236    1,930,236 
    Automobile   699,019    699,019 
    Total property and equipment   9,932,602    9,931,602 
    Accumulated depreciation   (8,366,530)   (8,285,546)
    Property and equipment, net  $1,566,072   $1,646,056 

     

    Depreciation expenses included in the general and administrative expenses for the three months ended July 31, 2025 and 2024 were $7,362 and $11,556, respectively. Depreciation expense included in the cost of sales for the three months ended July 31, 2025 and 2024 were $73,622 and $115,563, respectively.

     

    Depreciation expenses included in the general and administrative expenses for Maison El Monte for the three months ended July 31, 2025 and 2024 were $975 and $3,327, respectively. Depreciation expenses included in the cost of sales for Maison El Monte for the three months ended July 31, 2025 and 2024 were $9,754 and $33,265, respectively.

     

    As of April 30, 2025, the net property and equipment for Maison El Monte was $387,876.

     

    6. Intangible assets

     

    Intangible assets consisted of the following:

     

       July 31,
    2025
       April 30,
    2025
     
             
    Liquid license  $17,482   $17,482 
    Software systems (a)   2,950,000    2,950,000 
    Trademark (b)   5,194,000    5,194,000 
    Total intangible assets   8,161,482    8,161,482 
    Accumulated amortization   881,445    741,670 
    Intangible assets, net  $7,280,037   $7,419,812 

     

      (a) Software systems

     

    On October 30, 2023, the Company entered a System Purchase and Implementation Consulting Agreement with Drem Consulting Pte. Ltd. for purchasing a merchandise display planning and management system for $1.5 million. The system uses advanced technology such as artificial intelligence, IoT (Internet of Things), client computing, etc. to optimize shelf display and planning, inventory control and customer services. The system is amortized over 10 years.

     

    On November 22, 2023, the Company entered a Supply Chain Management System Purchase Agreement with WSYQR Limited to purchase a supply chain management system for $1.45 million. The system has the necessary software and hardware that was specifically designed for supermarkets application for the key units of 1) data synchronization across the entire supply chain, 2) centralized order processing and fulfillment, 3) refund and return processing, 4) customer complaints handling, and 5) distribution and delivery management and optimization. The system is amortized over 10 years.

     

    18

     

     

    On March 30, 2025, the Company sold software license of above two software to four licensees for a total of $2.6 million.

     

      (b) Trademark

     

    Trademark mainly consisted of 1) a trademark acquired through the acquisition of Maison Monterey Park on June 30, 2022. The fair value of the trademark from the acquisition of Maison Monterey Park at acquisition date was $194,000, to be amortized over 15 years; 2)) a trademark acquired through the acquisition of Lee Lee on April 7, 2024. The fair value of the trademark from the acquisition of Lee Lee at acquisition date was $5,000,000, to be amortized over 20 years.

     

    The amortization expense for the three months ended July 31, 2025 and 2024 was $139,775 and $139,775, respectively. The amortization expense for Maison El Monte for the three months ended July 31, 2025 and 2024 was $291 and 291, respectively. Estimated amortization expense for each of the next five years from July 31, 2025 is as follows: $559,099, $559,099, $559,099, $559,099 and $559,099.

     

    7. Equity method investment

     

    During the year ended April 30, 2024, the Company invested $1,862,000 for 49% equity interest in HKGF Market of Arcadia, LLC (“HKGF Arcadia”). As of April 30, 2025, the carrying amount of the investment in HKGF Arcadia was $848,493, which was before the impairment charge discussed as follows. During the three months ended July 31, 2025, the Company recorded $848,493 impairment charges for its investments in HKGF Market of Arcadia due to the Company’s plan of closing the supermarket business in this location. The Company recorded $166,028 investment loss for the three months ended July 31, 2024. As of July 31, 2025, the Company incurred accumulated investment loss of $1,862,000. 

     

    The following table shows the unaudited condensed balance sheet of HKGF Arcadia as of July 31, 2025.

     

       July 31,
    2025
    (Unaudited)
     
    ASSETS    
    Current Assets    
    Cash and equivalents  $13,090 
    Accounts receivable   10,032 
    Inventories, net   55,658 
    Total Current Assets   78,780 
    Property and equipment, net   1,005,116 
    Intangible asset, net   27,731 
    Goodwill   1,680,000 
    Security deposits   167,402 
    Total Assets  $2,959,029 
          
    LIABILITIES AND STOCKHOLDERS’ DEFICIT     
    Current Liabilities     
    Accounts payable  $1,445,410 
    Other payables   38,294 
    Bank overdraft   388,145 
    Contract liabilities   20,108 
    Loan from shareholder   137,000 
    Total Current Liabilities   2,028,957 
          
    Total Liabilities   2,028,957 
          
    Stockholders’ Equity     
    Paid in Capital   3,800,000 
    Subscription receivable   (254,933)
    Accumulated deficit   (2,614,995)
    Total Stockholders’ Equity   930,072 
    Total Liabilities and Stockholders’ Equity  $2,959,029 

     

    19

     

     

    The following table shows the unaudited condensed statement of operations of HKGF Arcadia for the three months ended July 31, 2025 and 2024.

     

       For the
    three months
    ended
    July 31,
    2025 (unaudited)
       For the
    three months
    ended
    July 31,
    2024 (unaudited)
     
    Net Revenues        
    Supermarket  $1,523,712   $1,567,323 
    Total Revenues, Net   1,523,712    1,567,323 
               
    Cost of Revenues          
    Supermarket   1,401,768    1,226,784 
    Total Cost of Revenues   1,401,768    1,226,784 
               
    Gross Profit   121,944    340,539 
               
    Operating Expenses   670,144    682,855 
    Total Operating Expenses   670,144    682,855 
    Loss from Operations   (548,200)   (342,316)
               
    Other income   7,200    3,484 
    Loss Before Income Taxes   (541,000)   (338,832)
               
    Income Taxes   
    —
        
    —
     
    Net Loss   (541,000)   (338,832)
               
    Net Loss Attributable to Maison Solutions Inc.  $(265,090)  $(166,028)

      

    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 Monterey Park and Lee Lee, including an assembled workforce, which cannot be sold or transferred separately from the other assets in the business. See Note 19 — “Acquisition of subsidiary” for additional information. As of July 31, 2025 and April 30, 2025, the Company had goodwill of $14,882,849 , consisting of $2,222,211 arising from Maison Monterey Park and $12,660,638 arising from the Lee Lee acquisition. The Company concluded there was no impairment to the goodwill for the three months ended July 31, 2025 and 2024.

     

    9. Accrued expenses and other payables

     

    Accrued expenses and other payables consisted of the following:

     

       July 31,
    2025
       April 30,
    2025
     
             
    Accrued payroll  $1,255,150   $1,023,151 
    Accrued interest expense   225,775    186,076 
    Accrued loss for legal matters (Note 17)   5,128    5,128 
    Other payables   254,533    193,907 
    Due to third parties, non-interest bearing, payable upon demand   145,774    145,774 
    Sales tax payable   116,843    154,268 
    Total accrued expenses and other payables  $2,003,203   $1,708,304 

     

    20

     

     

    10. Note payable

     

    On April 8, 2024, AZLL closed an acquisition transaction and purchased 100% of the equity interests in Lee Lee for an aggregate purchase price of approximately $22.2 million, consisting of: (i) $7.0 million in cash paid immediately at the closing of the transaction, and (ii) the Secured Note with an original principal amount of approximately $15.2 million pursuant to the Senior Secured Note Agreement entered into on April 8, 2024.

     

    Under the Senior Secured Note Agreement, the Secured Note will accrue interest on the outstanding principal amount at an annual interest rate of five percent (5%). The payment schedule of the principal amount of the Secured Note is as follows: (i) $2.5 million due and immediately payable on each of May 8, 2024 and June 8, 2024; (ii) $1.5 million due and payable on each of September 8, 2024, October 8, 2024 and November 8, 2024; (iii) $1.0 million due and immediately payable on December 8, 2024; and (iv) approximately $4.7 million due and immediately payable on February 8, 2025. Additionally, pursuant to the terms and conditions of the Senior Secured Note Agreement, the principal amount may be adjusted to include certain Premium Guarantees (as defined in the Senior Secured Note Agreement) if certain conditions, as set forth in the Senior Secured Note Agreement and the Stock Purchase Agreement (as defined below), are not met.

     

    Upon an “Event of Default” under the Senior Secured Note Agreement, the holders of the Secured Note will have certain rights, including the right to (i) declare all of the obligations, as defined in the Senior Secured Note Agreement to be immediately due and payable, and (ii) resume daily operational control of Lee Lee’s operations until such time as the Obligations, as defined in the Senior Secured Note Agreement, have been satisfied. Additionally, if an “Event of Default” occurs, the outstanding principal amount will bear interest at the simple interest rate of 10 percent (10%) per annum, from the date of such Event of Default until all such sum are fully paid. 

     

    On June 10, 2024, Lee Lee filed a Statement of Conversion with the Arizona Corporation Commission (the “ACC”) converting Lee Lee Oriental Supermart, Inc. into Lee Lee Oriental Supermart, LLC, an Arizona limited liability company (the “Conversion”). Following the Conversion, AZLL filed a Statement of Merger with the ACC, pursuant to which Lee Lee merged into AZLL, effective August 28, 2024 (the “Merger”). On September 9, 2024, AZLL filed a Statement of Division with the ACC resulting in the restoration of both Lee Lee and AZLL as separate legal entities (the “Division”). The Conversion, the Merger and the Division are herein referred to collectively as the “Lee Lee Reorganization.”

     

    On October 21, 2024, Lee Lee, AZLL, the Company and the Holders entered into the First Amendment to Senior Secured Note Agreement (the “First Amendment”), which amends that certain Senior Secured Note Agreement, dated as of April 8, 2024. Among other things, the First Amendment amends the Secured Note to (i) reflect the Lee Lee Reorganization, (ii) modify certain cure periods pursuant to an “Event of Default” under the Secured Note, and (iii) include certain covenants and representations with respect to the Lee Lee Reorganization. Additionally, pursuant to the First Amendment, Lee Lee, AZLL and the Company irrevocably waive and forfeit any and all defenses, causes or remedies which may have arisen or may arise as a result of the Lee Lee Reorganization in relation to any action or enforcement of any rights, remedies or provisions of the Secured Note, the Security Agreement and/or otherwise at law taken by the Holders.

     

    On October 21, 2024, following the execution of the First Amendment, Lee Lee, AZLL and the Holders entered into the Second Amendment to the Senior Secured Note Agreement (the “Second Amendment”). Among other things, the Second Amendment: (i) increases the annual interest rate on the outstanding Principal Amount, effective as of October 8, 2024, to ten percent (10%); (ii) amends the payment schedule of the principal and interest amounts to be due every Monday of each week starting on October 14, 2024, as set forth in Exhibit A of the Second Amendment; (iii) amends the definition of “Events of Default”; and (iv) increases the Default Rate to fourteen percent (14%) per annum. Additionally, pursuant to the Second Amendment, upon execution of the Second Amendment, the Company paid a restructuring fee of $40,000 to the Holders.

     

    On March 12, 2025, the Company entered into a note modification agreement dated March 12, 2025 (the “Modification Agreement”) with AZLL, Lee Lee, Holders of the Secured Note, John Xu and Grace Xu (together with the Company, the “Parties”) to modify certain terms of the Note, Security Agreement and Guarantees. Pursuant to the Modification Agreement, the Parties agreed to revise the payment schedule of the Note and extend the maturity date of the Note to May 11, 2026 (the “Extended Maturity Date”). The Modification Agreement also provides for an additional extension fee interest to accrue on the outstanding principal balance of the Note as of January 15, 2025 at an annual rate of eight percent (8%), which shall become payable and immediately due on the earliest of (i) the Extended Maturity Date or (ii) immediately upon the occurrence of any “Event of Default” under any of the Loan Documents or the Modification Agreement, as such term is defined under the applicable Loan Document. Furthermore, the Modification Agreement includes additional “Events of Default” and remedies under the Loan Documents, and additional covenants of the Company, among other things. The Modification Agreement increases the annual interest rate on the outstanding Principal Amount, effective as of February 24, 2024, to twelve percent (12%). Additionally, the amount of each Guaranty Premium shall be added to the outstanding Principal Amount of the Note as of the date Issuer’s liability for payment of the Guaranty Premium becomes fixed and shall accrue interest at the rate set forth in the Note until paid in full. The Modification stated that no new debt or encumbrances without holders’ approval. Absent Holders’ prior, express written authorization, Issuer shall not: (i) pay or incur any indebtedness outside the ordinary course of business; or (b) grant, permit or suffer the attachment of any liens or security interests in or to any Collateral; or (c) enter into any single or series of contracts, agreements or commitments requiring cumulative payments in excess of $10,000.00. Moreover, pursuant to the Modification Agreement, issuer shall not make any distributions to Parent, Grantor, Guarantors or any other related party, company or entity related to the Parent, Grantor or Guarantors through any direct or indirect ownership or control or any other financial arrangement (together, the “Related Parties”). Upon execution of the Modification Agreement, the Company paid the Holders a $35,000 documentation fee pursuant to the terms of the Modification Agreement.

     

    21

     

     

    During the three months ended July 31, 2025, the Company repaid $760,000 on this note and recorded $157,676 interest expense. As of July 31, 2025 and April 30, 2025, the Company had an outstanding note payable of $4,882,060 and $5,642,060, respectively, to the sellers of Lee Lee. The Company repay the full amount of this note on September 8, 2025.

     

    11. Convertible notes payable

     

    Unsecured promissory note entered on March 12, 2025

     

    On March 12, 2025, the Company entered into a note purchase agreement with an investor, pursuant to which the Company issued the Investor i) an unsecured promissory note in the principal amount of $3,000,000 (the “initial Note”), for $2,335,000 in gross proceeds and ii) a note purchase warrant, which is exercisable for one or more Notes in the aggregate original principal amount of up to $6,500,000 (the “Incremental Warrant”) with an original issue discount of 8.5% and termination date on March 12, 2028. The Note included an original issue discount (“OID”) of $255,000 along with debt issuance cost $410,000 for investor’s fees, costs and other transaction expenses in connection with the issuance of the note. In addition, the Company valued the conversion feature of this promissory note on the date of issuance resulting in an initial fair value of $1,806,218 and was recorded as a discount to the note with corresponding account credit to derivative liability (see further discussion below). The OID, debt issuance cost and the fair value of conversion feature at note issuance date were recognized as debt discounts and are amortized over the term of the note using the straight-line method.

     

       July 31,
    2025
       April 30,
    2025
     
    Convertible note, principal  $3,000,000   $3,000,000 
    Debt discount   (2,471,218)   (2,471,218)
    Amortization of debt discount   489,888    55,417 
    Convertible note, net  $1,018,670   $584,199 

      

    The Initial Note is a senior unsecured obligation of the Company and has a maturity date of March 12, 2027, which may be extended at the option of the Holder with the express written consent of the Company pursuant to the terms of the Initial Note. The Initial Note bears interest at a rate to 5.25% per annum and may increase to a rate of 18.00% per annum upon the occurrence of an Event of Default (as defined in the Initial Note), for so long as such event remains uncured. Accrued interest will be paid on a monthly basis and, at the Company’s option, will either be paid in cash or paid-in-kind in shares of Common Stock, subject to certain terms and conditions as set forth in the Initial Note. During the three months ended July 31, 2025, the Company recorded interest expense of $39,699 on this note.

     

    The holder of the Initial Note has the right to elect at any time to convert the Initial Note into shares of Class A common stock, so long as the aggregate number of shares of Class A common stock then beneficially owned by the holder (together with its affiliates) would not exceed 4.99% (the “Beneficial Ownership Limitation”) of the number of shares of Class A Common Stock outstanding immediately after giving effect to the conversion, as such percentage ownership is determined in accordance with the terms of the Initial Note. The number of shares of Class A common stock issuable upon conversion of the Initial Note will be determined by dividing (x) the portion of the principal, interest, or other amounts outstanding under the Initial Note to be converted (the “Conversion Amount”) by (y) the Conversion Price. The Conversion Price of the Initial Note is initially $1.38 per share of Class A common stock (the “Fixed Price”). Beginning on the effective date of the initial Registration Statement and on the same day of each successive month thereafter (each, a “Fixed Price Reset Date”), the Conversion Price will be reduced to the lower of (i) the then-effective Fixed Price and (ii) 95% of the lowest daily VWAP during the ten (10) consecutive trading days immediately prior to such Fixed Price Reset Date (the “Variable Price”). Additionally, on any trading day on which the aggregate trading value of the Class A common stock (as reported on Bloomberg) is equal to or greater than $500,000 between 4:00 a.m. and 11:00 a.m., New York time, the Conversion Price on such trading day (and only for such trading day) will be reduced to the lowest of (i) the then effective Variable Price, (ii) the lowest price traded on such trading day until the earlier of (A) 11:00 a.m., New York time, (B) the time a conversion notice is delivered pursuant to the Initial Note, subject to the Floor Price then in effect, and (C) the then effective Conversion Price. Upon the occurrence of an Event of Default, with respect to any Event of Default, the Alternate Conversion Price (as defined in the Initial Note) will be equal to the lower of (i) the then effective Conversion Price and (ii) 85% of the lowest daily VWAP during the ten (10) consecutive trading days immediately prior to the date that the Selling Stockholder delivers a conversion notice any time after the occurrence of an Event of Default.

     

    The promissory note requires the Company to maintain, or cause to be maintained, as of the end of each Fiscal Quarter (and/or Fiscal Year, as applicable) a balance of available cash in an aggregate amount equal to or exceeding $500,000 (the “Financial Test” or “Financial Covenants”). The Company did not meet this test as of July 31, 2025.

     

    22

     

     

    The Note Holder may exercise the Incremental Warrant, in whole or in part, in increments of up to $1,500,000, but subject to a minimum increment of $250,000, at any time prior to March 12, 2028. The Incremental Warrant also provides that the Company may request that the Holder exercise the Incremental Warrant if certain terms and conditions are satisfied as set forth in the Incremental Warrant. The aggregate exercise price to purchase the maximum aggregate principal amount of Additional Notes issuable under the Incremental Warrant is $5,947,500, which gives effect to an original issue discount of eight and a half percent (8.5%) for each such Additional Note issued upon the exercise of the Incremental Warrant. The Note Holder is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the ninetieth (90) Trading Day following the effective date of the initial Registration Statement (the “Initial Exercise Date”) and on or prior to 5:00 p.m. (New York City time) on March 12, 2028 (the “Termination Date”) but not thereafter, to subscribe for and purchase from Maison. The incremental warrant is contingent for exercise upon effectiveness of the initial registration statement, as of July 31, 2025, the initial registration statement was not effective yet and is under SEC review, however, the Company expects it will meet the registration effectiveness deadline described below.

     

    On March 12, 2025, the Company also entered into a registration rights agreement (the “Registration Rights Agreement”) with the Investor pursuant to which the Company agreed to register the resale of the Conversion Shares issued or issuable upon conversion of the Initial Note and any Additional Notes. The Registration Rights Agreement requires, among other things, the Company to file an initial resale registration statement covering the Conversion Shares with the SEC within 30 calendar days after the Closing Date. The Company is obligated to use its best efforts to have the registration statement declared effective by the SEC as soon as practicable, but in no event later than the 60th calendar day following the Closing Date (the “Effectiveness Deadline”). However, in the event the Company is notified by SEC that the registration statement will not be reviewed or is no longer subject to further review and comments, the Effectiveness Deadline will be accelerated to the fifth business day following the date on which the Company is so notified if such date precedes the initial Effectiveness Deadline. In the event the registration statement is subject to a full SEC review, or the Company is required to update the financial statements therein, which causes the registration statement not to be declared effective by the Effectiveness Deadline, the Effectiveness Deadline will automatically be deemed to be extended for so long as necessary, provided that the Company is using its best efforts to promptly respond to and satisfy the requests of the SEC. During any such period, the Company will not be in default of satisfying the Effectiveness Deadline.

     

    Derivative liability

     

    The convertible promissory note is convertible into a variable number of shares of common stock. Based on the requirements of ASC 815 Derivatives and Hedging, the conversion feature represented an embedded derivative that is required to be bifurcated and accounted for as a separate derivative liability. The derivative liability is originally recorded at its estimated fair value and is required to be revalued at each conversion event and reporting period. Changes in the derivative liability fair value are reported in operating results for each reporting period.

     

    The Company valued the conversion feature of the convertible note on the date of issuance resulting in an initial liability of $1,806,218. Upon issuance, the Company valued the conversion feature using the Black-Scholes option pricing model with the following assumptions: the initial conversion prices of $1.38, the closing stock price of the Company’s common stock on the date of valuation of $1.49, an expected dividend yield of 0%, expected volatility of 100%, risk-free interest rate ranging of 4.01%, and an expected term of two years.

     

    During the three months ended July 31, 2025, there was no conversion for the convertible note. On July 31, 2025, the derivative liability on the outstanding convertible note were revalued at $694,326 resulting in a gain of $309,904 for the three months ended July 31, 2025, related to the change in fair value of the derivative liability. The derivative liability was revalued using the Black-Scholes option pricing model with the following assumptions: exercise prices of $1.38, the closing stock price of the Company’s common stock on the date of valuation of $1.00, an expected dividend yield of 0%, expected volatility of 100%, risk-free interest rate of 4.01%, and an expected term of 1.61 years.

     

    23

     

     

    12. Loan payables

     

    A summary of the Company’s loans was listed as follows:

     

    Lender  Due date  July 31,
    2025
       April 30,
    2025
     
                
    U.S. Small Business Administration  June 15, 2050   2,602,237    2,616,050 
    Total loan payables      2,602,237    2,616,050 
    Current portion of loan payables      (65,247)   (62,212)
    Non-current loan payables     $2,536,990   $2,553,838 

     

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

     

    Borrower  Due date  July 31,
    2025
       April 30,
    2025
     
                  
    Maison Monrovia  June 15, 2050  $150,000   $150,000 
    Maison San Gabriel  June 15, 2050   1,956,846    1,967,874 
    Maison El Monte  June 15, 2050   495,391    498,176 
    Total SBA loan payables     $2,602,237   $2,616,050 

     

    On June 15, 2020, Maison Monrovia entered into a $150,000 Business Loan Agreement with the SBA at 3.75% annual interest rate and a 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 a maturity date on June 15, 2050. On January 12, 2022, Maison San Gabriel entered into an additional $1,850,000 Business Loan Agreement with the SBA at 3.75% annual interest rate and a maturity date on June 15, 2050.

     

    On June 15, 2020, Maison El Monte entered into a $150,000 Business Loan Agreement with SBA at 3.75% annual interest rate and a maturity date on June 15, 2050. On January 6, 2022, Maison El Monte entered into an additional $350,000 Business Loan Agreement with the SBA at 3.75% annual interest rate and a maturity date on June 15, 2050.

     

    During the three months ended July 31, 2025 and 2024, the Company made aggregate repayment of the SBA loans of $39,030 and $39,030 (which includes principal of and interest expense).

     

    As of July 31, 2025, the future minimum principal amount of loan payments to be paid by year were as follows:

     

    Year Ending April 30,  Amount 
         
    2026  $65,247 
    2027   65,247 
    2028   65,247 
    2029   65,247 
    2030   65,247 
    Thereafter   2,276,002 
    Total  $2,602,237 

     

    24

     

     

    13. Related party balances and transactions

     

    Related party transactions

     

    Sales to related parties

     

    Name of Related Party  Nature  Relationship  Three Months ended
    July 31,
    2025
       Three Months ended
    July 31,
    2024
     
                   
    HKGF Market of Arcadia, LLC  Supermarket product sales  Maison owns 49% equity interest   121,118    36,012 
    Grantstone, Inc.  Supermarket product sales  John Xu, indirectly owns this entity with 100% ownership   
    -
        1,232 
    HKGF Market of Alhambra, Inc.  Supermarket product sales  Grace Xu, spouse of John Xu, controls this entity with 90% ownership, Maison owns the remaining 10%   
    -
        76,399 
    Total        $121,118   $113,643 

     

    For the three Months ended July 31, 2025 and 2024, sales to related parties for Maison El Monte was $9,447 and $12,835, respectively.

     

    Purchases from related parties

     

    Name of Related Party  Nature  Relationship  Three Months Ended
    July 31,
    2025
       Three Months Ended
    July 31,
    2024
     
                   
    United Food, LLC  Supermarket product sales  John Xu, the Company’s Chief Executive Officer, Chairman and President, ultimately owns 24% of United Food, LLC  $2,764   $1,162 
    HKGF Market of Arcadia, LLC  Supermarket product sales  Maison owns 49% equity interest   54,366    14,387 
    Dai Cheong Trading Co Inc.  Import and wholesales of groceries  John Xu, controls this entity with 90% ownership through DC Holding CA, Inc., Maison owns the remaining 10%   274,703    33,716 
    HKGF Market of Alhambra, Inc.  Supermarket product sales  Grace Xu, spouse of John Xu, controls this entity with 90% ownership, Maison owns the remaining 10%   
    -
        12,776 
    Total        $331,833   $62,041 

     

    For the three Months ended July 31, 2025 and 2024, purchase from related parties for Maison El Monte was $3,834 and $11,328, respectively.

     

    25

     

     

    Investment in equity purchased from related parties

     

    Name of Investment Company  Nature of Operation  Investment percentage   Relationship  As of
    July 31,
    2025
       As of
    April 30,
    2025
     
                       
    Dai Cheong Trading Co Inc.  Import and wholesales of groceries   10%  John Xu, the Company’s Chief Executive Officer, Chairman and President, controls this entity with 90% ownership through DC Holding CA, Inc., Maison owns the remaining 10%  $162,665   $162,665 
    Total             $162,665   $162,665 

     

    In May 2021, the Company purchased a 10% equity interest in Dai Cheong Trading Company Inc., a grocery trading company, for $162,665 from DC Holding CA, Inc. DC Holding CA, Inc. is owned by John Xu, the Chief Executive Officer, Chairman and President of the Company.

     

    In December 2021, the Company purchased a 10% equity interest in HKGF Market of Alhambra, Inc, the legal entity holding the Alhambra Store (as defined below) for $40,775 from Ms. Grace Xu, a related party as the spouse of Mr. John Xu, the Chief Executive Officer, Chairman and President of the Company. HKGF Market of Alhambra was temporarily shut down at the end of September 2024 as a result of a strategic operating decision by HKGF Market of Alhambra’s management but was later reopened on December 15, 2024. Accordingly, the Company recorded $40,775 investment loss during the year ended April 30, 2025.

     

    Related party balances

     

    Accounts receivable — sales to related parties

     

    Name of Related Party  Nature  Relationship  July 31,
    2025
       April 30,
    2025
     
                   
    HKGF Market of Arcadia, LLC  Supermarket product sales  Maison owns 49% equity interest  $131,967   $62,444 
    HKGF Market of Alhambra, Inc.  Supermarket product sales  Grace Xu, spouse of John Xu, controls this entity with 90% ownership, Maison owns the remaining 10%   -    19,223 
    JC Business Guys, Inc.  Supermarket product sales  Shareholder with 51% equity interest of HKGF Market of Arcadia, LLC   72,810    66,728 
    Grantstone Inc.  Supermarket product sales  John Xu, indirectly owns this entity with 100% ownership   9,570    11,864 
    United Food, LLC  Supermarket product sales  John Xu, ultimately owns 24% of United Food, LLC   303,942    312,647 
    Total        $518,289   $472,907 

     

    26

     

     

    Accounts payable — purchase from related parties

     

    Name of Related Party  Nature  Relationship  July 31,
    2025
       April 30,
    2025
     
                   
    Hong Kong Supermarket of Monterey Park, Ltd.  Due on demand, non-interest bearing  John Xu, controls this entity  $440,166   $440,166 
    HKGF Market of Alhambra, Inc.  Supermarket product sales  Grace Xu, spouse of John Xu, controls this entity with 90% ownership, Maison owns the remaining 10%   34,556    54,251 
    Dai Cheong Trading Co Inc.  Import and wholesales of groceries  John Xu, controls this entity with 100% ownership through DC Holding CA, Inc. prior to the 10% equity interest acquisition by Maison   94,247    41,956 
    Total        $568,969   $536,373 

     

    Other receivables — related parties

     

    Name of Related Party  Nature  Relationship  July 31,
    2025
       April 30,
    2025
     
                   
    Ideal Investment  Due on demand, non-interest bearing  John Xu, has majority ownership of this entity  $3,995   $3,995 
    Ideal City Capital  Due on demand, non-interest bearing  John Xu, has majority ownership of this entity   30,000    30,000 
    HKGF Market of Arcadia, LLC  Due on demand, non-interest bearing  Maison owns 49% equity interest   105,000    95,000 
    Total        $138,995   $33,995 

     

    Other payables — related parties

     

    Name of Related Party  Nature  Relationship  July 31,
    2025
       April 30,
    2025
     
                   
    John Xu  due on demand, non-interest bearing  The Company’s Chief Executive Officer, Chairman and President  $222,049   $222,049 
    Grace Xu  due on demand, non-interest bearing  Spouse of John Xu   40,775    40,775 
    New Victory Foods Inc  due on demand, non-interest bearing  John Xu, owns this entity with 100% ownership   250,000    250,000 
    Total        $512,824   $512,824 

     

    14. 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.

     

    27

     

     

    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*  August 31, 2055 (with extension)
    Maison San Gabriel  November 30, 2030
    Maison El Monte**  July 14, 2028
    Maison Monterey Park  May 1, 2028
    Lee Lee - Peoria store  January 31, 2044 (with extension)
    Lee Lee - Chandler store  February 8, 2049 (with extension)
    Lee Lee - Tucson store  December 31, 2050 (with extension)

     

    * On April 1, 2023, the Company renewed lease of Maison Monrovia for additional five years with new monthly based rent of $40,000 for first year and 3% increase for each of the next four years. On July 6, 2023, the Company and the lessor entered an amendment to lease, pursuant to which the lessor will provide monthly basic rent abatement of $5,000 from August 1, 2023 through March 31, 2024, $2,500 from April 1, 2024 through March 31, 2025, and $1,000 from April 1, 2025 through March 31, 2026. As a result of increased monthly base rent, the Company remeasured the lease and determined the ROU and lease liability of this lease increased by $3.62 million for each.
    ** Lease for Maison El Monte was terminated early on June 7, 2025. For more information, see Note 19.

     

    As of July 31, 2025, the average remaining term of the supermarkets’ store lease was 22.18 years. As of April 30, 2025, the average remaining term of the supermarkets’ store lease was 15.80 years.

     

    In June and November 2022, the Company entered three leases for three copiers with terms of 63 months for each. In January 2024, Maison El Monte entered a lease for copier with terms of 63 months. As of July 31, 2025, the average remaining term of the copier lease was 2.30 years. As of April 30, 2025, the average remaining term of the copier lease is 2.87 years.

     

    The copier lease detail information was listed below:

     

    Store  Lease Term
    Due
    Maison Monrovia  January 1, 2028
    Maison San Gabriel  January 1, 2028
    Maison Monterey Park  August 1, 2027

     

    The Company’s total lease expenses under ASC 842 are $0.93 million and $1.13 million for the three months ended July 31, 2025 and 2024, respectively. The Company’s ROU assets and lease liabilities are recognized using an effective interest rate of range from 4.5% to 7.50%, which was determined using the Company’s incremental borrowing rate.

     

    The Company’s operating ROU assets and lease liabilities were as follows:

     

       July 31,
    2025
       April 30,
    2025
     
             
    Operating ROU:        
    ROU assets – supermarket leases  $35,166,560   $35,669,333 
    ROU assets – copier leases   14,615    24,007 
    Total operating ROU assets  $35,181,175   $35,693,340 

     

    28

     

     

       July 31,
    2025
       April 30,
    2025
     
             
    Operating lease obligations:        
    Current operating lease liabilities  $3,425,836   $3,403,852 
    Non-current operating lease liabilities   34,756,278    35,180,573 
    Total lease liabilities  $38,182,114   $38,584,425 

     

    As of April 30, 2025, Maison El Monte’s operating ROU assets and lease liabilities were $2,365,655 and $2,365,655.

     

    As of July 31, 2025, the five-year maturity of the Company’s operating lease liabilities was as following:

     

    Twelve Months Ended July 31,  Operating
    lease
    liabilities
     
    2026  $3,425,836 
    2027   3,492,291 
    2028   3,378,594 
    2029   2,654,783 
    2030   2,733,763 
    Thereafter   48,725,311 
    Total future undiscounted lease payments   64,410,578 
    Less: interest   (26,228,464)
    Present value of lease liabilities  $38,182,114 

     

    15. Stockholder’s equity

     

    Common stock

     

    Maison was initially authorized to issue 500,000 shares of common stock with a par value of $0.0001 per share. On September 8, 2021, the total number of authorized shares of all classes of stock was increased to 100,000,000 by way of a 200-for-1 stock split, among which, the authorized shares were divided into (i) 95,000,000 shares of common stock, par value of $0.0001 per share (the “common stock”) of which (a) 92,000,000 shares shall be a series designated as Class A common stock (the “Class A common stock”), and (b) 3,000,000 shares shall be a series designated as Class B common stock (the “Class B common stock”), and (ii) 5,000,000 shares of preferred stock, par value $0.0001 per share (the “preferred stock”). For the Class A common stock and Class B common stock, the rights of the holders of Class A common stock and Class B common stock are identical, except with respect to voting and conversion rights. Each share of Class A common stock is entitled to one (1) vote. Each share of Class B common stock is entitled to ten (10) votes and is convertible at any time into one share of Class A common stock. As of July 31, 2025, John Xu, the Company’s Chief Executive Officer, Chairman and President, holds all of our outstanding shares of Class B common stock. All shares and per share amounts used herein and in the accompanying consolidated financial statements have been retroactively adjusted to reflect (i) the increase of share capital as if the change of share numbers became effective as of the beginning of the first period presented for Maison Group and (ii) the reclassification of all outstanding shares of our common stock beneficially owned by Golden Tree USA Inc. into Class B common stock, which are collectively referred to as the “Reclassification.”

     

    Warrants

     

    On October 10, 2023, the Company issued the Underwriter non-redeemable warrants (the “Underwriter Warrants”) to purchase an amount equal to five (5%) percent of 2,500,000 shares of Class A Common Stock sold in the Company’s initial public offering (the “IPO”) on October 10, 2023. The Company issued 125,000 Underwriter Warrants, which is exclusive of the over-allotment option, pursuant to the Underwriting Agreement. The Underwriter Warrants became exercisable one hundred eighty (180) days after the commencement of sales of the IPO (April 1, 2024) and remain exercisable until the fifth anniversary of the effective date of the IPO (April 1, 2029). The Company accounted for the Underwriter Warrants issued based on the fair value (“FV”) method under FASB ASC Topic 505, and the FV of the Underwriter Warrants was calculated using the Black-Scholes model under the following assumptions: life of 5 years, volatility of 100%, risk-free interest rate of 4.26% and dividend yield of 0%. The FV of the Underwriter Warrants issued at the grant date was $382,484. The Underwriter Warrants issued in this financing were classified as equity instruments.

     

    29

     

     

    Following is a summary of the activities of warrants for the three months ended July 31, 2025:

     

       Number of
    Warrants
       Exercise
    Price
       Weighted
    Average
    Remaining
    Contractual
    Term in
    Years
     
                 
    Outstanding as of April 30, 2025   125,000   $4.80    3.32 
    Exercisable as of April 30, 2025   
    —
        
    —
        — 
    Granted   
    —
        
    —
        — 
    Exercised   
    —
        
    —
        — 
    Forfeited   
    —
        
    —
        — 
    Expired   
    —
        
    —
        — 
    Outstanding as of July 31, 2025   125,000   $4.80    3.07 
    Exercisable as of July 31, 2025   
    —
        
    —
        — 

     

    16. Income taxes

     

    Maison is a Delaware holding company that is subject to the U.S. income tax of 21%. Maison Monrovia and Maison San Gabriel are pass through entities whose income or losses flow through Maison Solution’s income tax return. Maison El Monte and Maison Monterey Park are Subchapter C corporation (“C-Corp”) incorporated in the state of California, are subject to U.S. income tax of 21% and California state income tax of 8.84%. Lee Lee was a Subchapter S corporation (“S-Corp”) incorporated in the state of Arizona prior to the acquisition by Maison, and was converted into a Limited Liability Company (“LLC”) on June 10, 2024. Both the S-Corp and LLC are pass through entities whose income or losses flow through Maison Solution’s income tax return.

     

    The provision for income taxes provisions consisted of the following components:

     

       Three Months ended
    July 31,
    2025
       Three Months ended
    July 31,
    2024
     
             
    Current:        
    Federal income tax expense  $318,371   $503,111 
    State income tax expense   85,709    143,127 
    Deferred:          
    Federal income tax benefit   (80,694)   (14,561)
    State income tax benefit   (2,843)   (2,897)
    Total  $320,543   $628,780 

     

    30

     

     

    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:

     

       Three Months ended
    July 31,
    2025
       Three Months July
    31 30,
    2024
     
             
    Federal statutory rate expense (benefit)   (107,227)   355,763 
    State statutory rate, net of effect of state income tax deductible to federal income tax   (64,615)   49,705 
    Permanent difference – penalties, interest, and others   14,578    12,892 
    Change in valuation allowance *   477,807    210,420 
    Tax expense per financial statements   320,543    628,780 

     

    * excludes the amount of Maison El Monte due to discontinued operation presentation

      

    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 were comprised of the following:

     

       July 31,
    2025
       April 30,
    2025
     
             
    Deferred tax assets:        
    Bad debt expense  $75,141   $75,141 
    Inventory impairment loss   132,815    78,988 
    Investment loss   532,391    294,983 
    Lease liabilities, net of ROU   825,493    796,543 
    NOL   1,289,678    871,411 
    Valuation allowance   

    (2,750,737

    )   (2,079,374)
    Deferred tax assets, net  $104,781   $37,692 
               
    Deferred tax liability:          
    Trademark acquired at acquisition of Maison Monterey Park and Lee Lee  $1,205,158   $1,221,606 
    Deferred tax liability, net of deferred tax assets  $1,100,377   $1,183,914 

     

    As of July 31, 2025 and April 30, 2025, Maison and Maison El Monte had approximately $4.31 million and $2.05 million, respectively, of U.S. federal NOL carryovers available to offset future taxable income which do not expire but are limited to 80% of income until utilized. As of July 31, 2025 and April 30, 2025, Maison and Maison El Monte had approximately $4.33 million and $3.20 million, respectively, of California state net operating loss which can be carried forward up to 20 years to offset future taxable income. In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets depends upon the Company’s future generation of taxable income during the periods in which temporary differences representing net future deductible amounts become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. After consideration of all the information available, management believes that significant uncertainty exists with respect to future realization of the deferred tax assets and has therefore established a full valuation allowance.

     

    As of July 31, 2025, the Company’s U.S. income tax returns filed for the year ending on December 31, 2021 and thereafter are subject to examination by the relevant taxation authorities.

     

    31

     

     

    17. Other income

     

    For the three months ended July 31, 2025, other income mainly consisted of 1) $0.31 million from change in fair value of derivative liability of a convertible note, 2) $0.34 million consulting income for providing comprehensive consulting services focusing on enhancing operational efficiency, optimizing resource allocation, and supporting overall business growth to other non-related supermarkets, 3) income tax refund of $0.1 million, and 4) $ 51,093 other income. 

     

    18. 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.

     

    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.

     

    On January 4, 2024, the Defendants were named in a class action complaint filed in the United States District Court for the Central District of California alleging violations of Sections 11 and 15 of the Securities Act of 1933, as amended, as well as violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended (Rick Green and Evgenia Nikitina v. Maison Solutions Inc., et. al., Case No. 2:24-cv-00063).   As relief, the plaintiffs are seeking, among other things, compensatory damages. 

     

    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 the cases. 

     

    On April 9, 2024, a shareholder derivative action was brought by Shah Azad derivatively on behalf of the Company against John Xu, Tao Han, Alexandria Lopez, Bin Wang, Mark Willis, and Xiaoxia Zhang, and the Company itself as a nominal defendant. The complaint was filed in the United States District Court for the Central District of California, Case No. 2:24-cv-02897. On April 12, 2024, another derivative complaint was filed by Arnab Baral in the United States District Court Central District of California, Case No. 2:24-cv-03018. The two cases have since been consolidated, with the Azad case taking lead. The lawsuits allege breaches of fiduciary duty, abuse of control, unjust enrichment, gross mismanagement, waste of corporate assets, and contribution under Section 11(f) of the Securities Act and Section 21D of the Exchange Act. The claims arise from the allegations underlying the class action securities lawsuits. On July 19, 2024, the Court ordered the Azad case stayed until a motion to dismiss is heard in the class action securities action. The Company is not able to make a reasonable estimate about the amount of contingent loss of these cases at current stage.

     

    On September 8, 2023, a complaint was filed by former employee against Maison San Gabriel for wrongful termination and labor law violation. Maison San Gabriel filed a general denial in November 2023. Status conference is scheduled for July 1, 2025, and final status conference is scheduled for February 26, 2026. Trial is scheduled for March 9, 2026. In the complaint, the plaintiff’s counsel asked for a range of $300,000 to $3,000,000. On August 4, 2025, both parties reached a confidential settlement agreement and release, the Company agreed to pay $25,000 to plaintiff in exchange for plaintiff’s release of all claims.

     

    32

     

     

    On September 3, 2024, a claim was filed against Maison El Monte alleging violations of the Unruh Civil Rights Act and the California Disabled Persons Act for building not having adequate access for disabilities. The case Management Conference is scheduled for January 30, 2025. On April 8, 2025, both parties reached a confidential settlement agreement and release of claims, and the Company agreed to pay $6,000 to settle the case. 

     

    On October 17, 2024, a complaint was filed against HKGF Alhambra, HKGF Arcadia, Maison El Monte, Maison San Gabriel, Maison Monrovia, Maison Monterey Park and Tion Hin for unpaid invoices of seafood purchase for $115,388.39. The case management conference is scheduled for August 4, 2025. The management is not able to estimate the outcome of the case due to early stage of the case. 

     

    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 $220,000, 40% of which was payable within three (3) days of effectiveness, 40% of which is due within three (3) days of the completion and delivery of initialization services (including initializing of a feasibility plan, store digitalization, delivery of online retailing and e-commerce business and operational solutions for the Stores) as outlined in the Collaboration Agreement, and the remaining 20% is payable within three (3) days of the completion and delivery of the implementation services (including product and merchandise supply chain configuration, staff training for operation and management of the digital solutions, installation and configuration of hardware, customization of software, concept design and implementation), as outlined in the Collaboration Agreement. The Collaboration Agreement also included certain additional storage and implementation fees to be determined by the parties and royalty fees, following the commercial launch of the platform developed by JD US, of 1.2% of gross merchandise value based on information generated by the platform. For each additional store requiring Consultancy and Initialization service, an additional $50,000 will be charged for preparing the feasibility plan for such additional store. The Collaboration Agreement has an initial term of 10 years and customary termination and indemnification provisions. Simultaneously with the effectiveness of the Collaboration Agreement, JD US and Maison entered into an Intellectual Property License Agreement (the “IP Agreement”) outlining certain trademarks, logos and designs, and other intellectual property rights used in connection with the retail supermarket operations outlined in the Collaboration Agreement, which includes an initial term of 10 years and customary termination provisions. There are no additional licensing fees or costs associated with the IP Agreement. As of the date of this report, there is no new progress on the collaboration agreement with JD US. 

     

    19. Closure of Maison El Monte store

     

    As part of the Company’s ongoing commitment to improve its profitability and support sustainable growth, the Company closed Maison El Monte store. On June 7, 2025, Maison EL Monte, Inc. entered into a lease termination agreement with Jendo Ermi, LP (“Lessor”). Pursuant to the agreement, the lessee Maison El Monte agreed to pay the lessor a total sum of One Hundred Thousand Dollars ($100,000) as consideration for the lessor’s agreement to terminate the lease and release the lessee from all obligations and liabilities under the lease, including, but not limited to, any outstanding rent.

     

    The following table summarizes the carrying value of the assets and liabilities of discontinued operations Maison El Monte at June 7, 2025.

     

    Inventory  $43,066 
    Other current assets   15,797 
    Operating lease right-of-use assets, net   2,365,655 
    Fixed assets, net   387,876 
    Security deposits   114,350 
          
    Total assets  $2,912,394 
          
    Accrued liability and other payables  $57,359 
    Lease liabilities   2,365,655 
          
    Total liabilities  $2,423,014 

     

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    The following tables shows the results of operations relating to discontinued operations Maison El Monte for the three months ended July 31, 2025 and 2024, respectively.

     

       Three Months ended July 31 
       2025   2024 
    Revenue  $753,579   $1,471,289 
    Cost of goods sold   767,419    1,343,298 
               
    Gross profit   (13,840)   127,991 
               
    Operating expenses          
    Selling expenses   255,457    430,089 
    General and administrative expenses   69,404    133,426 
               
    Total operating expenses   324,861    563,515 
               
    Loss from operations   (338,701)   (435,524)
               
    Other expense, net (including $489,380 loss from disposal of assets due to store closure)   (486,798)   (4,533)
               
    Loss before income taxes   (825,499)   (440,057)
               
    Income tax expenses   
    -
        7,448 
               
    Net loss  $(825,499)  $(447,505)

     

    20. 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 following events need to be disclosed.

     

    On September 8, 2025, Lee Lee entered into a business loan agreement with Royal Business Bank for a principal amount of $5,250,000, with an annual interest rate of 7.5%. The Note bears interest at a rate of 7.5% per year and requires monthly payments of principal and interest in the amount of $91,039.77, with a final ballon payment in the amount of $1,139,916.57 due at maturity on September 5, 2030. The Note is secured by a substantially all assets of Lee Lee under the terms of a Commercial Security Agreement (the “Security Agreement”) and is personally guaranteed by our CEO, John Xu, and his spouse, Grace Xu. In addition, Mr. Xu has pledged certain real property as collateral security for his guaranty of the loan. Lee Lee used $4,913,579 from the proceeds of this loan to repay in full the remaining outstanding balance (including both principal and interest) of Lee Lee note (Note 10).

     

    On September 5, 2025, Maison entered into an agency agreement with Kweichow Moutai Co., Ltd., effective through December 31, 2025. Under the terms of this agreement, Maison is granted full authority over all aspects of the export operations for Kweichow Moutai liquor and Moutai-flavored liqueur products. This includes responsibilities such as warehousing, transportation, handling, and other logistical matters, as well as brand building, market development, and cost control in international markets. In accordance with the agreement, Maison is required to transfer RMB 300,000 to the supplier’s designated deposit account within 10 business days of the agreement’s execution.

     

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    Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

     

    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     

    This management’s discussion and analysis of financial condition and results of operations contains forward-looking statements that involve risks and uncertainties. See “Cautionary Note Regarding Forward-Looking Statements” for a discussion of the uncertainties, risks and assumptions associated with those statements. You should read the following discussion in conjunction with our consolidated financial statements and related notes which are included elsewhere in this Quarterly Report on Form 10-Q. Our actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including, but not limited to, those described under “Risk Factors,” and included in other portions of this Quarterly Report on Form 10-Q.

     

    Cautionary Note Regarding Forward-Looking Statements

     

    This Quarterly Report on Form 10-Q includes forward-looking statements. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties, and assumptions about us that may cause our actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other Securities and Exchange Commission (“SEC”) filings. References to “we,” “us,” “our,” “Maison” or the “Company” are to Maison Solutions Inc., except where the context requires otherwise.

     

    Overview

     

    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.

     

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    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 percentage equity interest in HKGF Arcadia to 49% and increase JC Business Guy’s percentage equity interest to 51%. As a result of the amendment, we made an additional investment of $62,000. During the three months ended July 31, 2025, the Company recorded $848,493 impairment charges for its investments in HKGF Market of Arcadia due to the Company’s plan of closing the supermarket business in this location.

     

    On November 3, 2023, we incorporated a wholly-owned subsidiary, AZLL LLC (“AZLL”), in Arizona. On April 8, 2024, AZLL closed an acquisition transaction and purchased 100% of the equity interests in Lee Lee Oriental Supermart, Inc. (“Lee Lee”) for an aggregate purchase price of approximately $22.2 million, consisting of: (i) $7.0 million in cash paid immediately at the closing of the transaction, and (ii) a senior secured promissory note (the “Secured Note”) with an original principal amount of approximately $15.2 million pursuant to a senior secured note agreement dated April 8, 2024 and amended on October 21, 2024 (as amended, the “Senior Secured Note Agreement”). Lee Lee is a three-store supermarket chain operating in Arizona under the name Lee Lee International Supermarkets and specializing in ethnic groceries.

     

    As part of the Company’s ongoing commitment to improve its profitability and support sustainable growth, the Company closed Maison El Monte store. On June 7, 2025, Maison EL Monte, Inc. entered into a lease termination agreement with Jendo Ermi, LP (“Lessor”). Pursuant to the agreement, the lessee Maison El Monte agreed to pay the lessor a total sum of One Hundred Thousand Dollars ($100,000) as consideration for the lessor’s agreement to terminate the lease and release the lessee from all obligations and liabilities under the lease, including, but not limited to, any outstanding rent.

     

    Collaboration with JD.com

     

    On April 19, 2021, JD E-commerce America Limited (“JD US”), the U.S. subsidiary of JD.com, and Maison 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 agreement included a consultancy and initialization fee of $220,000, 40% of which was payable within three (3) days of effectiveness and which has been paid, 40% of which is due within three (3) days of the completion and delivery of initialization services as outlined in the Collaboration Agreement, and the remaining 20% is payable within three (3) days of the completion and delivery of the implementation services, as outlined in the Collaboration Agreement. The Collaboration Agreement also included certain additional storage and implementation fees to be determined by the parties and royalty fees, following the commercial launch of the platform developed by JD.com, of 1.2% of gross merchandise value based on information generated by the platform. For each additional store requiring consultancy and initialization service, an additional $50,000 will be charged for preparing the feasibility plan for such additional store. The Collaboration Agreement has an initial term of 10 years and customary termination and indemnification provisions. Simultaneously with the effectiveness of the Collaboration Agreement, JD US and Maison entered into an Intellectual Property License Agreement (the “IP Agreement”) outlining certain trademarks, logos and designs and other intellectual property rights used in connection with the retail supermarket operations outlined in the Collaboration Agreement, which includes an initial term of 10 years and customary termination provisions.

     

    Key Factors that Affect Operating Results

     

    Inflation

     

    The inflation rate for the United States was 2.7% for the three months ended July 31, 2025, 2.9% for the three months ended July 31, 2024 according to Bureau of Labor Statistics. Inflation increased our purchase costs, occupancy costs, and payroll costs. 

     

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    Operating Cost Increase After Initial Public Offering

     

    We historically have operated our business as a private company. We completed our initial public offering on October 10, 2023. As a public company, we are subject to increased operating costs related to our listing on Nasdaq, including increased costs related to our compliance with Securities Act and Exchange Act periodic reporting, annual audit expenses, legal service expenses, and related consulting service expenses. 

     

    Competition

     

    Food retail is a competitive industry. Our competition varies and includes 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. Our principal competitors include 99 Ranch Market and H-Mart for conventional supermarkets and Weee! for online groceries. Each of these stores competes with us based on product selection, product quality, customer service, price, store format, location, or a combination of these factors. In addition, some competitors are aggressively expanding their number of stores or their product offerings. Some of these competitors may have been in business longer, may have more experience operating multiple store locations, or may have greater financial or marketing resources than us.

     

    As competition in certain areas intensifies or competitors open stores within proximity to our stores, our results of operations may be negatively impacted through a loss of sales, decrease in market share, reduction in margin from competitive price changes, or greater operating costs. In addition, other established food retailers could enter our markets, increasing competition for market share.

     

    Payroll

     

    As of July 31, 2025, we had approximately 333 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 $16.00 per hour in 2024 and increased to $16. 50 per hour starting from January 1, 2025; in Arizona, the minimum wage was $14.35 per hour in 2024, and increased to $14.70 per hour starting from January 1, 2025. Our payroll and payroll tax expenses were $3.83 million and $3.44 million for the three months ended July 31, 2025 and 2024, respectively. 

     

    Vendor and Supply Management

     

    Maison believes that a centralized and efficient vendor and supply management system is the key to profitability. Maison has major vendors, including Lawrence Wholesale, Gulf Cost Sea Trade Corp, BRC International Inc, and XHJC Holding Inc. For the three months ended July 31, 2025, these four suppliers accounted for 11%, 6%, 4% and 3% of the Company’s total purchases, respectively. For the three months ended July 31, 2024, three suppliers accounted for 11%, 11% and 9% 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.

     

    Store Maintenance and Renovation

     

    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, 2025 and 2024. We spent $0.24 million for the three months ended July 31, 2025 for repairs and maintenance and supermarket renovation, a decrease of $0.06 million compared to $0.29 for the three months ended July 31, 2024. 

     

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    Liquidity

     

    As reflected in the accompanying unaudited consolidated financial statements, for the three months ended July 31, 2025, the Company had a net loss of $784,798 from continuing operation. The Company had an accumulated deficit of $3.19 million and negative working capital of $9.78 million as of July 31, 2025.

     

    The Company plans to increase its revenue by strengthening its sales force, providing attractive sales incentive programs, recruiting experienced industry-related managerial personnel, increasing marketing and promotion activities, seeking suppliers with competitive price and good quality products, opening or acquiring additional specialty supermarkets in the locations that have less-competition. If deemed necessary, management could also seek to raise additional funds by way of admitting strategic investors, or private or public offerings, or by seeking to obtain loans from banks or others, to support the Company’s daily operation. While management of the Company believes in the viability of its strategy to generate sufficient revenues and its ability to raise additional funds on reasonable terms and conditions, there can be no assurances to that effect.

     

    The Company believes that its cash on hand and operating cash flows will be sufficient to fund its operations over at least the next 12 months from the date of issuance of these financial statements. However, the Company may need additional cash resources in the future if the Company experiences changed business conditions or other developments and may also need additional cash resources in the future if the Company wishes to pursue opportunities for investment, acquisition, strategic cooperation or other similar actions. If it is determined that the cash requirements exceed the Company’s amounts of cash on hand, the Company may seek to issue debt or equity securities or obtain a credit facility. 

     

    Critical Accounting Policy

     

    Related Parties

     

    The Company identifies related parties, and 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.

     

    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 receivables 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.

     

    Inventories

     

    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, 2025 and 2024. The Company provided a reserve for inventory shrinkage of $215,594 and $204,604 for the three months ended July 31, 2025 and 2024, respectively.

     

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    Revenue Recognition

     

    The Company adopted ASC Topic 606, Revenue from Contracts with Customers (“ASC Topic 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 Topic 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 $675,428 and $701,929 as of July 31, 2025 and April 30, 2025, respectively.

     

    Leases 

     

    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.

     

    ROU assets also include any lease payments made prior to commencement and are 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.

     

    39

     

     

    Recently Issued Accounting Pronouncements

     

    Please refer to Note 2 — “Summary of significant accounting policies” for details.

     

    How to Assess Our Performance

     

    In assessing performance, management considers a variety of performance and financial measures, including principal growth in net revenue, gross profit and selling, and general and administrative expenses. The key measures that we use to evaluate the performance of our business are set forth below.

     

    Net Revenue

     

    Our net revenues comprise gross revenues net of returns and discounts. We do not record sales taxes as a component of retail revenues as it is considered a pass-through conduit for collecting and remitting sales taxes.

     

    Gross Profit

     

    We calculate gross profit as net revenues less cost of revenues and occupancy costs. Gross margin represents gross profit as a percentage of net revenues. Occupancy costs include store rental costs. The components of our cost of revenues and occupancy costs may not be identical to those of our competitors. As a result, our gross profit and gross margin may not be comparable to similar data made available by our competitors.

     

    Cost of revenue includes the purchase price of consumer products, inbound and outbound shipping costs, including costs related to our sorting and delivery center, and where we are the transportation service provider. Shipping costs to receive products from our suppliers are included in our inventory and recognized in cost of revenues upon sale of products to our customers.

     

    Selling, General and Administrative Expenses

     

    Selling, general, and administrative expenses primarily consist of retail operational expenses, administrative salaries and benefits costs, marketing costs, advertising costs, and corporate overhead.

     

    Selling expenses mainly consist of advertising costs, promotion expenses, and payroll and related expenses for personnel engaged in selling and marketing activities.

     

    General and administrative expenses primarily consist of costs for corporate functions, including payroll and related expenses; facilities and equipment expenses, such as depreciation and amortization expense and rent; and professional fees and litigation costs. 

     

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

     

       Three Months Ended July 31, 
       2025   2024   Change   Percentage
    Change increase (decrease)
     
    Net revenues  $27,165,134   $28,178,091   $(1,012,957)   (3.6)%
    Cost of revenues   20,606,000    20,040,443    565,557    2.8%
    Gross profit   6,559,134    8,137,648    (1,578,514)   (19.4)%
    Operating expenses                    
    Selling expenses   4,767,089    4,469,804    297,285    6.7%
    General and administrative expenses   1,607,830    1,597,445    10,385    0.7%
    Total operating expenses   6,374,919    6,067,249    307,670    5.1%
    Income from operations   184,215    2,070,399    (1,886,184)   (91.1)%
    Other income (expenses), net   (42,415)   (197,232)   (154,817)   (78.5)%
    Interest expense, net   (652,409)   (179,056)   473,353    264.4%
    Income (loss) before income taxes   (510,609)   1,694,111    (2,204,720)   (130.1)%
    Income tax provisions   320,543    628,780    (308,237)   (49.0)%
    Net income (loss) from continuing operation   (831,152)   1,065,331    (1,896,483)   (178.0)%
    Net loss from discontinued operation   (825,499)   (447,505)   (377,994)   84.5%
    Net income (loss) before noncontrolling interests   (1,656,651)   617,826    (2,274,477)   (368.1)%
    Net loss attributable to noncontrolling interests from continuing operation   (46,354)   (45,805)   549    1.2%
    Net loss attributable to noncontrolling interests from discontinued operation   (68,764)   (37,277)   31,487    84.5%
    Net loss attributable to noncontrolling interests   (115,118)   (83,082)   32,036    38.6%
    Net income (loss) attribute to the Company from continuing operation   (784,798)   1,111,136    (1,895,934)   (170.6)%
    Net loss attribute to the Company from discontinued operation   (756,735)   (410,228)   346,507    84.5%
    Net income (loss) attributable to Maison Solutions Inc.  $(1,541,533)  $700,908   $(2,242,441)   (319.9)%

     

    Revenues

     

       Three Months Ended July 31, 
       2025   2024   Change   Percentage
    Change
     
    Perishables  $14,148,985   $14,441,407   $(292,422)   (2.0)%
    Non-perishables   13,016,149    13,736,684    (720,535)   (5.2)%
    Net revenue  $27,165,134   $28,178,091   $(1,012,957)   (3.6)%

     

    Our net revenues were approximately $27.2 million for the three months ended July 31, 2025, a decrease of approximately $1.0 million or 3.6%, from approximately $28.2 million for the three months ended July 31, 2024. The decrease in net revenues was driven by decreased sales of Maison Monterey Park by $0.8 million, decreased sales of Maison San Gabriel by $0.3 million, decreased sales of Maison Monrovia by $0.2 million, which was partly offset by increased sales of Lee Lee stores by $0.3 million, as compared to the three months ended July 31, 2024. Our California-based supermarkets contributed $8.7 million in revenue during the three months ended July 31, 2025, a decrease of approximately $1.3 million, as compared to the three months ended July 31, 2024. The $1.3 million decrease was mainly due to high competition from nearby Asian supermarkets as there are too many supermarkets including Asia supermarkets in the surrounding area of our stores. For the three months ended July 31, 2025 and 2024, revenue for Maison El Monte were $753,579 and $1,471,289, respectively. We closed our Maison El Monte store on June 7, 2025 due to its continuous loss as well as our ongoing commitment to improve its profitability and support sustainable growth,

     

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    Cost of Revenues

     

       Three Months Ended July 31, 
       2025   2024   Change   Percentage
    Change
     
    Total cost of revenues  $20,606,000   $20,040,443   $565,557    2.8%

     

    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 $0.6 million, from $20.0 million for the three months ended July 31, 2024, to approximately $20.6 million for the three months ended July 31, 2025. The increase in cost of revenues was mainly from Lee Lee stores by $1.7 million, which was partly offset by decreased cost of revenues from our four California-based supermarkets by $1.1 million. For the three months ended July 31, 2025 and 2024, Cost of revenue for Maison El Monte were $767,419 and $1,343,298.

     

    Gross Profit and Gross Margin

     

       Three Months Ended July 31, 
       2025   2024   Change   Percentage
    Change
     
    Gross Profit  $6,559,134   $8,137,648   $1,578,514    19.4%
    Gross Margin   24.2%   28.9%   -    4.7%

     

    Gross profit was approximately $6.6 million and $8.1 million for the three months ended July 31, 2025 and 2024, respectively. Gross margin was 24.2% and 28.9% for the three months ended July 31, 2025 and 2024, respectively. Our supermarkets’ sales profit margins decreased by 4.7% for the three months ended July 31, 2025 compared to the three months ended July 31, 2024. The decrease in our gross profit was mainly due to the increase cost of goods sold due to inflation. For the three months ended July 31, 2025 and 2024, gross profit (loss) for Maison El Monte were $(13,840) and $127,991, respectively. We sold products in Maison El Monte store at a big discount due to the closure of the store.

      

    Total Operating Expenses

     

       Three Months Ended July 31, 
       2025   2024   Change   Percentage
    Change
     
    Selling Expenses  $4,767,089   $4,469,804   $297,285    6.7%
    General and Administrative Expenses   1,607,830    1,597,445    10,385    0.7%
    Total Operating Expenses  $6,374,919   $6,067,249   $307,670    5.1%
    Percentage of revenue   23.5%   21.5%        1.9%

     

    Total operating expenses were approximately $6.4 million for the three months ended July 31, 2025, an increase of approximately $0.3 million, compared to approximately $6.1 million for the three months ended July 31, 2024. Total operating expenses as a percentage of revenues were 23.5% and 21.5% for the three months ended July 31, 2025 and 2024, respectively. The increase in operating expenses was primarily attributable to the increase in selling expenses, which included the increase in payroll expense and merchant service charges , but was partly offset by decreased utilities expense. Payroll expense increased by $0.4 million in the three months ended July 31, 2025, as compared to the three months ended July 31, 2024 due to the increase of hourly rate. Merchant service charges increased by $53,723 in the three months ended July 31, 2025, as compared to the three months ended July 31, 2024 due to increased customers who use credit card. Utility expenses decreased by $0.1 million in the three months ended July 31, 2025, as compared to the three months ended July 31, 2024.

     

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    The increase in general and administrative expenses during the three months ended July 31, 2025 was primarily due to increased office expenses by $0.2 million, increased supplies by $38,460, increased meal and entertainment expense by $12,500, increased officer’s payroll expense by $10,370, increased pest control expense by $14,130 and increased other G&A expense by 5,500, which was partly offset by decreased professional fees by $0.2 million and decreased other expenses by $70,000.

     

    For the three months ended July 31, 2025 and 2024, total operating expenses for Maison El Monte were $324,861 and $563,515, respectively.

     

    Other Expenses, Net

     

    Other expense were $42,415 for the three months ended July 31, 2025 compared to other expense of $197,232 for the three months ended July 31, 2024. For the three months ended July 31, 2025, other expense mainly consisted of $848,493 investment loss from HKGF Arcadia, which was partly offset by 1) change in fair value of derivative liability of $309,904, 2) consulting income of $335,000 for providing other non-related supermarkets the comprehensive consulting services aiming at enhancing operational efficiency, optimizing resource allocation, and supporting overall business growth, 3) income tax refund of $0.1 million, and 4) $61,174 other income.

     

    For the three months ended July 31, 2024, other expenses mainly consisted of investment loss from equity method investment of $206,803, which was partly offset by other income of $9,571.

     

    For the three months ended July 31, 2025 and 2024, other expenses for Maison El Monte were $482,143 and $202, respectively. For the three months ended July 31, 2025, other expenses mainly consisted of loss on disposal of store assets of $489,380, which is partly offset by other income by $7,237.

     

    Interest Expense

     

    Interest expense was $652,409 for the three months ended July 31, 2025, an increase of $473,353 from $179,056 for the three months ended July 31, 2024. For the three months ended July 31, 2025, the interest expense was for the SBA loans, convertible note and note payable arising from the acquisition of Lee Lee. 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, 2025 and 2024, interest expense for Maison El Monte were $4,655 and $4,331.

     

    Income Taxes Provisions

     

    Income tax expense was $320,543 for the three months ended July 31, 2025, a decrease of $308,237 from income taxes expense of $628,780 for the three months ended July 31, 2024. The decrease in income tax expense was mainly due to the net loss from Maison parent company, decreased taxable income for Maison Monterey Park supermarket, and increased taxable loss for our other two California-based supermarkets.

     

    Net Loss from Discontinued Operation

     

    We generated net loss from discontinued operation Maison El Monte of $ 756,735 and $ 410,228 for the three months ended July 31, 2025 and 2024, respectively.  

     

    Net Income (Loss) from Continuing Operation

     

    Net loss attributable to the Company from continuing operation was $784,798 for the three months ended July 31, 2025, an increase of net loss of $1,895,934, or 170.6%, from a net income of $1,111,136 attributable to the Company for the three months ended July 31, 2024. This was mainly attributable to the reasons discussed above, which included a decrease in gross profit by $1,578,514 and increased operating expenses by $307,670.

     

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    Liquidity and Capital Resources

     

    Cash Flows for the three Months Ended July 31, 2025 Compared to the three Months Ended July 31, 2024

     

    As of July 31, 2025, we had cash and cash equivalents of approximately $1,070,802. We had net loss from continuing operation attributable to us of $784,798 for the three months ended July 31, 2025, and had a working capital deficit of approximately $9.78 million as of July 31, 2025. As of July 31, 2025, the Company had outstanding loan facilities of approximately $2.60 million SBA loans, $4.88 million secured senior note payable due to the acquisition of Lee Lee but which was repaid in full on September 8, 2025, and $3.00 million convertible note payable.

     

    In assessing its liquidity, management monitors and analyzes the Company’s cash on-hand, its ability to generate sufficient revenue sources in the future, and its operating and capital expenditure commitments. We have funded our working capital, operations and other capital requirements in the past primarily by equity contributions from shareholders, cash flow from operations, government grants, and bank loans. Cash is required to pay purchase costs for inventory, rental expenses, salaries, income taxes, other operating expenses and to repay debts. Our ability to repay our current expenses and obligations will depend on the future realization of our current assets. Management has considered the historical experience, the economy, trends in the retail grocery industry, the expected collectability of our accounts receivable and the realization of the inventories as of July 31, 2025 and April 30, 2025. Our ability to continue to fund these items may be affected by general economic, competitive, and other factors, many of which are outside of our control.

     

    On October 4, 2023, we entered into an Underwriting Agreement with Joseph Stone Capital, LLC in connection with the Company’s initial public offering (the “IPO”) of 2,500,000 shares of Class A common stock, par value $0.0001, at a price of $4.00 per share, less underwriting discounts and commissions. The IPO closed on October 10, 2023, and the Company received net proceeds of approximately $8.72 million, after deducting underwriting discounts and commissions and estimated IPO offering expenses payable by the Company.

     

    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.

     

    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.

     

    All of our business expansion endeavors involve risks and will require significant management, human resources, and capital expenditures. There is no assurance that the investment to be made by us as contemplated under our future expansion plans will be successful and generate the expected return. If we are not able to manage our growth or execute our strategies effectively, or at all, our business, results of operations, and prospects may be materially and adversely affected.

     

    The following table summarizes our cash flow data for the three months ended July 31, 2025 and 2024.

     

       Three Months Ended
    July 31,
     
       2025   2024 
    Net cash provided by operating activities  $1,086,701   $3,585,390 
    Net cash used in investing activities   (1,000)   (102,631)
    Net cash used in financing activities   (790,259)   (2,894,964)
    Net change in cash  $295,442   $587,795 

     

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    Operating Activities 

     

    Net cash provided by operating activities was approximately $1.1 million for the three months ended July 31, 2025, which mainly comprised of net loss of $1,656,651, add-back of non-cash adjustments to net loss including depreciation and amortization expense of $220,759, inventory impairment of $215,594, amortization of OID and debt issuance cost of $434,472, investment loss from 49% equity investee HKGF Arcadia store of $848,493, and $489,380 loss from disposal of assets due to Maison El Monte store closure. In addition, for the three months ended July 31, 2025, we had cash inflow from (i) decreased outstanding accounts receivables of $315,825, (ii) increased outstanding accounts payable of $526,792 (including accounts payable from related parties of $32,596), (iii) increased outstanding income tax payable of $404,080, (iv) increased operating lease liabilities of $109,854, and (v) increased accrued expenses and other payables of $294,899.

     

    However, our net cash provided by operating activities for the three months ended July 31, 2025 was impacted by deducting non-cash adjustments from net loss including change in fair value of derivative liability of $309,904 and change in deferred taxes by $83,537. In addition, for the three months ended July 31, 2025, we had cash outflow from i) increased accounts receivable from related parties of $45,382, ii) increased purchase of inventories of $394,209, iii) increased cash outflow on prepayment of $216,362, iv) increase cash outflow on other receivables and other current assets of $39,701, v) increased payment of other long-term payables of $1,200, and iii) increased payment for contract liabilities of $26,501.

     

    Net cash provided by operating activities was approximately $3.6 million for the three months ended July 31, 2024, which mainly comprised of net income of $617,826, add-back of non-cash adjustments to net income including depreciation and amortization expense of $266,895, inventory impairment of $204,604, and investment loss from 49% equity investee HKGF Arcadia store of $166,028 and investment loss from 10% cost investee HKGF Alhambra store of $40,775. In addition, for the three months ended July 31, 2024, we had cash inflow from (i) decrease to other receivables and other current assets of $752,663, (ii) increased outstanding accounts payable of $2,091,840, (iii) increased outstanding of income tax payable of $713,504, (iv) increased operating lease liabilities of $134,896, and (iv) increase of other long-term payables of $15,432.

     

    However, our net cash provided by operating activities for the three months ended July 31, 2024 was mainly offset by an increase of prepayments of $105,091, an increase of inventories of $753,104, an increase of accounts receivable from related parties of $217,153, an increase of payment of accrued expenses and other payables of $246,651, and an increase of payment for contract liabilities of $67,886. 

     

    Investing Activities 

     

    Net cash used in investing activities was $1,000 for the three months ended July 31, 2025, which mainly consisted of purchase of equipment of $1,000.

     

    Net cash used in investing activities was $102,631 for the three months ended July 31, 2024, which mainly consisted of store renovation and purchase of equipment of $102,631. 

     

    Financing Activities

     

    Net cash used in financing activities was approximately $790,259 for the three months ended July 31, 2025, which mainly consisted of repayment for a note payable arising from the acquisition of Lee Lee of $760,000, loan to related party of $10,000, bank overdraft of $6,447, and repayment of loan payable of $13,812.

     

    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.

     

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    Debt

     

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

     

    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 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.

     

    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. On January 6, 2022, 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.

     

    As of July 31, 2025 and April 30, 2025, the Company’s aggregate balance on the three SBA loans was $2,602,237 and $2,616,050, respectively.

     

    Senior Secured Note Payable

     

    On April 8, 2024, AZLL closed an acquisition transaction and purchased 100% of the equity interests in Lee Lee for an aggregate purchase price of approximately $22.2 million, consisting of: (i) $7.0 million in cash paid immediately at the closing of the transaction, and (ii) the Secured Note with an original principal amount of approximately $15.2 million pursuant to the Senior Secured Note Agreement.

     

    Under the Senior Secured Note Agreement, the Secured Note will accrue interest on the outstanding principal amount at an annual interest rate of five percent (5%). The payment schedule of the principal amount of the Secured Note is as follows: (i) $2.5 million due and immediately payable on each of May 8, 2024 and June 8, 2024; (ii) $1.5 million due and immediately payable on each of September 8, 2024, October 8, 2024 and November 8, 2024; (iii) $1.0 million due and immediately payable on December 8, 2024; and (iv) approximately $4.7 million due and immediately payable on February 8, 2025. Additionally, pursuant to the terms and conditions of the Senior Secured Note Agreement, the principal amount may be adjusted to include certain Premium Guarantees (as defined in the Senior Secured Note Agreement) if certain conditions, as set forth in the Senior Secured Note Agreement and the Stock Purchase Agreement, are not met.

     

    Upon an “Event of Default” under the Senior Secured Note Agreement, the holders of the Secured Note will have certain rights, including the right to (i) declare all of the Obligations, as defined in the Senior Secured Note Agreement to be immediately due and payable, and (ii) resume daily operational control of Lee Lee’s operations until such time as the Obligations, as defined in the Senior Secured Note Agreement, have been satisfied. Additionally, if an “Event of Default” occurs, the outstanding principal amount will bear interest at the simple interest rate of 10 percent (10%) per annum, from the date of such Event of Default until all such sum are fully paid.

     

    On June 10, 2024, Lee Lee filed a Statement of Conversion with the Arizona Corporation Commission (the “ACC”) converting Lee Lee Oriental Supermart, Inc. into Lee Lee Oriental Supermart, LLC, an Arizona limited liability company (the “Conversion”). Following the Conversion, AZLL filed a Statement of Merger with the ACC, pursuant to which Lee Lee merged into AZLL, effective August 28, 2024 (the “Merger”). On September 9, 2024, AZLL filed a Statement of Division with the ACC resulting in the restoration of both Lee Lee and AZLL as separate legal entities (the “Division”). The Conversion, the Merger and the Division are herein referred to collectively as the “Lee Lee Reorganization.”

     

    On October 21, 2024, Lee Lee, AZLL, the Company and the Holders entered into the First Amendment to Senior Secured Note Agreement (the “First Amendment”), which amends that certain Senior Secured Note Agreement, dated as of April 8, 2024.Among other things, the First Amendment amends the Secured Note to (i) reflect the Lee Lee Reorganization, (ii) modify certain cure periods pursuant to an “Event of Default” under the Secured Note, and (iii) include certain covenants and representations with respect to the Lee Lee Reorganization. Additionally, pursuant to the First Amendment, Lee Lee, AZLL and the Company irrevocably waive and forfeit any and all defenses, causes or remedies which may have arisen or may arise as a result of the Lee Lee Reorganization in relation to any action or enforcement of any rights, remedies or provisions of the Secured Note, the Security Agreement and/or otherwise at law taken by the Holders.

     

    46

     

     

    On October 21, 2024, following the execution of the First Amendment, Lee Lee, AZLL and the Holders entered into the Second Amendment to the Senior Secured Note Agreement (the “Second Amendment”). Among other things, the Second Amendment: (i) increases the annual interest rate on the outstanding Principal Amount, effective as of October 8, 2024, to ten percent (10%); (ii) amends the payment schedule of the principal and interest amounts to be due every Monday of each week starting on October 14, 2024, as set forth in Exhibit A of the Second Amendment; (iii) amends the definition of “Events of Default”; and (iv) increases the Default Rate to fourteen percent (14%) per annum. Additionally, pursuant to the Second Amendment, upon execution of the Second Amendment, the Company paid a restructuring fee of $40,000 to the Holders.

     

    On March 12, 2025, we entered into a note modification agreement dated March 12, 2025 (the “Modification Agreement”) with AZLL, Lee Lee, Holders of the Secured Note, John Xu and Grace Xu (together with the Company, the “Parties”) to modify certain terms of the Note, Security Agreement and Guarantees. Pursuant to the Modification Agreement, the Parties agreed to revise the payment schedule of the Note and extend the maturity date of the Note to May 11, 2026 (the “Extended Maturity Date”). The Modification Agreement also provides for an additional extension fee interest to accrue on the outstanding principal balance of the Note as of January 15, 2025 at an annual rate of eight percent (8%), which shall become payable and immediately due on the earliest of (i) the Extended Maturity Date or (ii) immediately upon the occurrence of any “Event of Default” under any of the Loan Documents or the Modification Agreement, as such term is defined under the applicable Loan Document. Furthermore, the Modification Agreement includes additional “Events of Default” and remedies under the Loan Documents, and additional covenants of the Company, among other things. The Modification Agreement increases the annual interest rate on the outstanding Principal Amount, effective as of February 24, 2024, to twelve percent (12%). Additionally, the amount of each Guaranty Premium shall be added to the outstanding Principal Amount of the Note as of the date Issuer’s liability for payment of the Guaranty Premium becomes fixed and shall accrue interest at the rate set forth in the Note until paid in full. The Modification stated that no new debt or encumbrances without holders’ approval. Absent Holders’ prior, express written authorization, Issuer shall not: (i) pay or incur any indebtedness outside the ordinary course of business; or (b) grant, permit or suffer the attachment of any liens or security interests in or to any Collateral; or (c) enter into any single or series of contracts, agreements or commitments requiring cumulative payments in excess of $10,000.00. Moreover, pursuant to the Modification Agreement, issuer shall not make any distributions to Parent, Grantor, Guarantors or any other related party, company or entity related to the Parent, Grantor or Guarantors through any direct or indirect ownership or control or any other financial arrangement (together, the “Related Parties”). Upon execution of the Modification Agreement, the Company paid the Holders a $35,000 documentation fee pursuant to the terms of the Modification Agreement.

     

    As of July 31, 2025 and April 30, 2025, the Company had an outstanding note payable of $4,882,060 and $5,642,060 to the sellers of Lee Lee. The Company repaid this note in full on September 8, 2025.

     

    On April 8, 2024, in connection with the execution of the Senior Secured Note Agreement, and pursuant to the Stock Purchase Agreement, AZLL entered into a guarantee (the “AZLL Guarantee”) to and for the benefit of the Sellers, pursuant to which AZLL unconditionally guarantees the payment by Lee Lee of the principal amount of the Secured Note, as adjusted pursuant to the Secured Note and the faithful and prompt performance by Lee Lee of the conditions and covenants of the Secured Note. 

     

    Also on April 8, 2024, in connection with the execution of the Senior Secured Note Agreement, and pursuant to the Stock Purchase Agreement, John Jun Xu, Chairman, Chief Executive Officer and controlling stockholder of the Company, and Grace Xu, spouse of John Jun Xu (together with John Jun Xu, the “Xu Guarantors”), entered into a guarantee (the “Xu Guarantee” and, together with the AZLL Guarantee, the “Guarantees”) to and for the benefit of the Sellers, pursuant to which the Xu Guarantors unconditionally guarantee the payment by Lee Lee of the principal amount of the Secured Note, as adjusted pursuant to the Secured Note and the faithful and prompt performance by Lee Lee of the conditions and covenants of the Secured Note.

     

    On October 21, 2024, AZLL entered into a First Amendment to Guarantee of Note (the “AZLL Guarantee Amendment”), which amends the AZLL Guarantee to reflect the Lee Lee Reorganization. Additionally, pursuant to the AZLL Guarantee Amendment, AZLL irrevocably waives any and all defenses, causes or remedies which may have arisen or may arise as a result of the Lee Lee Reorganization in relation to any action or enforcement of any rights, remedies or provisions of the AZLL Guarantee, the Secured Note, the Security Agreement and/or otherwise at law taken by the Holders.

     

    47

     

     

    On October 21, 2024, the Xu Guarantors entered into a First Amendment to Guarantee of Note (the “Xu Guarantee Amendment” and, together with the AZLL Guarantee Amendment, the “Guarantee Amendments”), which amends the Xu Guarantee to reflect the Lee Lee Reorganization. Additionally, pursuant to the Xu Guarantee Amendment, the Xu Guarantors irrevocably waive any and all defenses, causes or remedies which may have arisen or may arise as a result of the Lee Lee Reorganization in relation to any action or enforcement of any rights, remedies or provisions of the Xu Guarantee, the Secured Note, the Security Agreement and/or otherwise at law taken by the Holders.

     

    Convertible Note Payable

     

    On March 12, 2025, we entered into a securities purchase agreement (the “Purchase Agreement”) with an institutional investor (the “Investor” or “Holder”), pursuant to which we agreed to issue and sell (i) a senior unsecured convertible promissory note in the aggregate original principal amount of $3,000,000 with an original issue discount of eight and a half percent (8.5%) (the “Initial Note”), convertible into shares (the “Conversion Shares”) of Class A common stock, $0.0001 par value per share of the Company (the “Common Stock”), and (ii) a note purchase warrant (the “Incremental Warrant”), exercisable for one or more senior unsecured convertible promissory notes in the aggregate original principal amount of up to $6,500,000 with an original issue discount of eight and a half percent (8.5%) and substantially in the form of the Initial Note (each an “Additional Note” and collectively, the “Additional Notes” and together with the Initial Note, the “Notes”). On March 12, 2025 (the “Closing Date”), we issued and sold to the Investor the Initial Note for a purchase price of $2,745,000, representing an original issue discount of eight and a half percent (8.5%), which matures on March 12, 2027, and the Incremental Warrant, which expires on March 12, 2028. The Initial Note bears interest at a rate to 5.25% per annum and may increase to a rate of 18.00% per annum upon the occurrence of an Event of Default (as defined in the Initial Note), for so long as such event remains uncured. Accrued interest will be paid on a monthly basis and, at the Company’s option, will either be paid in cash or paid-in-kind in shares of Common Stock, subject to certain terms and conditions as set forth in the Initial Note.

     

    The Note Holder may exercise the Incremental Warrant, in whole or in part, in increments of up to $1,500,000, but subject to a minimum increment of $250,000, at any time prior to March 12, 2028. The Incremental Warrant also provides that the Company may request that the Holder exercise the Incremental Warrant if certain terms and conditions are satisfied as set forth in the Incremental Warrant. The aggregate exercise price to purchase the maximum aggregate principal amount of Additional Notes issuable under the Incremental Warrant is $5,947,500, which gives effect to an original issue discount of eight and a half percent (8.5%) for each such Additional Note issued upon the exercise of the Incremental Warrant. The Note Holder is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the ninetieth (90) Trading Day following the effective date of the initial Registration Statement (the “Initial Exercise Date”) and on or prior to 5:00 p.m. (New York City time) on March 12, 2028 (the “Termination Date”) but not thereafter, to subscribe for and purchase from Maison. The incremental warrant is contingent for exercise upon effectiveness of the initial registration statement, as of July 31, 2025, the initial registration statement was not effective yet and is under SEC review,  however, the Company expects it will meet the registration effectiveness deadline described below.

     

    On March 12, 2025, the Company also entered into a registration rights agreement (the “Registration Rights Agreement”) with the Investor pursuant to which the Company agreed to register the resale of the Conversion Shares issued or issuable upon conversion of the Initial Note and any Additional Notes. The Registration Rights Agreement requires, among other things, the Company to file an initial resale registration statement covering the Conversion Shares with the SEC within 30 calendar days after the Closing Date. The Company is obligated to use its best efforts to have the registration statement declared effective by the SEC as soon as practicable, but in no event later than the 60th calendar day following the Closing Date (the “Effectiveness Deadline”). However, in the event the Company is notified by SEC that the registration statement will not be reviewed or is no longer subject to further review and comments, the Effectiveness Deadline will be accelerated to the fifth business day following the date on which the Company is so notified if such date precedes the initial Effectiveness Deadline. In the event the registration statement is subject to a full SEC review, or the Company is required to update the financial statements therein, which causes the registration statement not to be declared effective by the Effectiveness Deadline, the Effectiveness Deadline will automatically be deemed to be extended for so long as necessary, provided that the Company is using its best efforts to promptly respond to and satisfy the requests of the SEC. During any such period, the Company will not be in default of satisfying the Effectiveness Deadline.

     

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    Commitments and Contractual Obligations

     

    The following table presents the Company’s material contractual obligations as of July 31, 2025:

     

    Contractual Obligations  Total   Less than
    1 year
       1–3 years   3–5 years   Thereafter 
    Senior secured note payable  $4,882,060*  $4,882,060   $—   $—   $— 
    SBA loans   2,602,237    65,247    130,495    130,495    2,276,000 
    Convertible note payable   3,000,000    —    3,000,000    —    — 
    Operating lease obligations and others   38,182,114    3,425,836    6,870,885    5,388,546    22,496,847 
       $45,666,411   $8,373,143   $7,001,380   $5,519,041   $24,772,847 

     

    *The Company repaid this note in full on September 8, 2025.

     

    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. Additional information regarding our legal proceedings can be found in Note 18 — “Commitments and Contingencies” to the consolidated financial Statements included in this Annual Report on Form 10-K and is incorporated herein by reference.

     

    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. 

     

    On January 4, 2024, the Defendants were named in a class action complaint filed in the United States District Court for the Central District of California alleging violations of Sections 11 and 15 of the Securities Act of 1933, as amended, as well as violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended (Rick Green and Evgenia Nikitina v. Maison Solutions Inc., et. al., Case No. 2:24-cv-00063).  As relief, the plaintiffs are seeking, among other things, compensatory damages. 

     

    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 the cases. 

     

    On April 9, 2024, a shareholder derivative action was brought by Shah Azad derivatively on behalf of the Company against John Xu, Tao Han, Alexandria Lopez, Bin Wang, Mark Willis, and Xiaoxia Zhang, and the Company itself as a nominal defendant. The complaint was filed in the United States District Court for the Central District of California, Case No. 2:24-cv-02897. On April 12, 2024, another derivative complaint was filed by Arnab Baral in the United States District Court Central District of California, Case No. 2:24-cv-03018. The two cases have since been consolidated, with the Azad case taking the lead. The lawsuits allege breaches of fiduciary duty, abuse of control, unjust enrichment, gross mismanagement, waste of corporate assets, and contribution under Section 11(f) of the Securities Act and Section 21D of the Exchange Act. The claims arise from the allegations underlying the class action securities lawsuits. On July 19, 2024, the Court ordered the Azad case stayed until a motion to dismiss is heard in the class action securities action. The Company is not able to make a reasonable estimate about the amount of contingent loss of these cases at current stage.

     

    49

     

     

    On September 8, 2023, a complaint was filed by former employee against Maison San Gabriel for wrongful termination and labor law violation. Maison San Gabriel filed a general denial in November 2023. Status conference is scheduled for July 1, 2025, and final status conference is scheduled for February 26, 2026. Trial is scheduled for March 9, 2026. In the complaint, the plaintiff’s counsel asked for a range of $300,000 to $3,000,000. On August 4, 2025, both parties reached a confidential settlement agreement and release, the Company agreed to pay $25,000 to plaintiff in exchange for plaintiff’s release of all claims.

     

    On September 3, 2024, a claim was filed against Maison El Monte alleging violations of the Unruh Civil Rights Act and the California Disabled Persons Act for building not having adequate access for disabilities. The case Management Conference is scheduled for January 30, 2025. On April 8, 2025, both parties reached a confidential settlement agreement and release of claims, and the Company agreed to pay $6,000 to settle the case.

     

    On October 17, 2024, a complaint was filed against HKGF Alhambra, HKGF Arcadia, Maison El Monte, Maison San Gabriel, Maison Monrovia, Maison Monterey Park and Tion Hin for unpaid invoices of seafood purchase for $115,388.39. The case management conference is scheduled for August 4, 2025. The management is not able to estimate the outcome of the case due to early stage of the case.

     

    Off-Balance Sheet Arrangements

     

    The Company has guaranteed all of the loans described above, and Mr. John Xu, the Company’s CEO, Chairman and President, has personally guaranteed the loans with the SBA. The Company does not have any other off-balance sheet arrangements that either have, or are reasonably likely to have, a current or future material effect on its financial condition.

     

    Item 3. Quantitative And Qualitative Disclosures About Market Risk.

     

    We are a smaller reporting company, as defined by Rule 12b-2 of the Exchange Act, and are not required to provide the information required by this Item.

     

    Item 4. Controls and Procedures.

     

    Evaluation of Disclosure Controls and Procedures 

     

    Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered in this Quarterly Report on Form 10-Q. Based on this evaluation and the material weaknesses described below, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of July 31, 2025 due to the previously identified material weaknesses described below.

     

    As described in our Annual Report on Form 10-K for the year ended April 30, 2025, under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, our management conducted an evaluation of the effectiveness of our internal control over financial reporting as of April 30, 2025 based on the framework in “Internal Control — Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the control deficiencies identified during this evaluation and set forth below, our management concluded that we did not maintain effective internal control over financial reporting as of April 30, 2025 due to the existence of previously identified material weaknesses in internal control over financial reporting as described below.

     

    50

     

     

    As set forth below, management will continue to take steps to remediate the control deficiencies identified below. Notwithstanding the control deficiencies described below, we have performed additional analyses and other procedures to enable management to conclude that our consolidated financial statements included in this Form 10-Q fairly present, in all material respects, our financial condition and results of operations as of and for the quarter ended July 31, 2025. 

     

    Material Weaknesses in Internal Control over Financial Reporting

     

    A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

     

    As previously reported, management has determined that the Company had the following material weaknesses in its internal control over financial reporting, which continue to exist as of April 30, 2025, as related to: (i) insufficient full-time employees with the necessary levels of accounting expertise and knowledge to compile and analyze consolidated financial statements and related disclosures in accordance with U.S. GAAP and address complex accounting issues under U.S. GAAP; (ii) the lack of timely related party transaction monitoring and the failure to keep a related party list and keep records of related party transactions on a regular basis; (iii) the failure to keep an up-to-date perpetual inventory control system or timely perform company-wide inventory count at or near its fiscal year-end date. Specifically, maintaining records for inbound warehouse purchases or have specialized personnel to scan goods into the warehouse on a timely basis; (iv) the lack of adequate policies and procedures in control environment and control activities to ensure that the Company’s policies and procedures have been carried out as planned; (v) information technology general control in the areas of: (1) Risk and Vulnerability Assessment; (2) Selection and Management/Monitoring of Critical Vendors; (3) System Development and Change Management; (4) Backup Management; (5) System Security & Access: Deficiency in the Area of Audit Trail Record Control, Password Management, Vulnerability Scanning or Penetration Testing; (6) Segregation of Duties, Privileged Access, and Monitoring Controls; and (7) System Monitoring and Incident Management; and (vi) accounting personnel have the ability in the accounting system to prepare, review, and post the same accounting journal entry.

     

    Plan of Remediation of Material Weakness in Internal Control Over Financial Reporting

     

    As previously reported in our Annual Report on Form 10-K for the fiscal year ended April 30, 2025, following the identification and communication of the material weaknesses, management commenced remediation actions relating to the material weaknesses beginning in the first quarter of fiscal year 2025.

     

    We have taken, and are taking, certain actions to remediate the material weakness related to our lack of U.S. GAAP experience. We plan to hire additional credentialed professional staff and consulting professionals with greater knowledge and experience of U.S. GAAP and related regulatory requirements to oversee our financial reporting process in order to ensure our compliance with U.S. GAAP and other relevant securities laws. In addition, we plan to provide additional training to our accounting personnel on U.S. GAAP, and other regulatory requirements regarding the preparation of financial statements. Until such time as we hire qualified accounting personnel with the requisite U.S. GAAP knowledge and experience and train our current accounting personnel, we have engaged an outside CPA with U.S. GAAP knowledge and experience to supplement our current internal accounting personnel and assist us in the preparation of our financial statements to ensure that our financial statements are prepared in accordance with U.S. GAAP.

     

    Changes in Internal Control over Financial Reporting

     

    During the period covered by this Quarterly Report, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

     

    Limitations on Effectiveness of Controls and Procedures

     

    In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

     

    51

     

     

    PART II - OTHER INFORMATION

     

    Item 1. Legal Proceedings

     

    Information regarding our legal proceedings can be found in Note 18 — “Commitments and Contingencies” to the consolidated financial Statements included in this Quarterly Report on Form 10-Q and is incorporated herein by reference.

     

    Item 1A. Risk Factors.

     

    We are a smaller reporting company, as defined by Rule 12b-2 of the Exchange Act, and are not required to provide the information under this item.

     

    Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

     

    There were no sales of equity securities during the period covered by this Quarterly Report that were not registered under the Securities Act or were not previously reported in a Current Report on Form 8-K filed by the Company.

     

    Item 3. Defaults Upon Senior Securities

     

    None.

     

    Item 4. Mine Safety Disclosure

     

    Not applicable.

     

    Item 5. Other Information

     

    None.

     

    Item 6. Exhibits.

     

    Exhibit No.  
    Description
    31.1*   Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act
    31.2*   Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act
    32.1**   Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
    32.2**   Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
    101.INS*   Inline XBRL Instance Document
    101.INS*   Inline XBRL Taxonomy Extension Schema Document
    101.CAL*   Inline XBRL Taxonomy Extension Calculation Linkbase Document
    101.DEF*   Inline XBRL Taxonomy Extension Definition Linkbase Document
    101.LAB*   Inline XBRL Taxonomy Extension Label Linkbase Document
    101.PRE*   Inline XBRL Taxonomy Extension Presentation Linkbase Document
    104*   Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)

     

    *Filed herewith
    **Furnished herewith

     

    52

     

     

    SIGNATURES

     

    Pursuant to the requirements 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: September 22, 2025 MAISON SOLUTIONS INC.
         
      By: /s/ John Xu
      Name:  John Xu
      Title: Chief Executive Officer, Chairman, and President
        (Principal Executive Officer)
         
    Dated: September 22, 2025 By: /s/ Alexandria M. Lopez
      Name: Alexandria M. Lopez
      Title: Chief Financial Officer
        (Principal Financial and Accounting Officer)

     

     

    53

     

     

    http://fasb.org/us-gaap/2025#UsefulLifeShorterOfTermOfLeaseOrAssetUtilityMember http://fasb.org/srt/2025#ChiefExecutiveOfficerMember http://fasb.org/srt/2025#ChiefFinancialOfficerMember Software systems On October 30, 2023, the Company entered a System Purchase and Implementation Consulting Agreement with Drem Consulting Pte. Ltd. for purchasing a merchandise display planning and management system for $1.5 million. The system uses advanced technology such as artificial intelligence, IoT (Internet of Things), client computing, etc. to optimize shelf display and planning, inventory control and customer services. The system is amortized over 10 years. On November 22, 2023, the Company entered a Supply Chain Management System Purchase Agreement with WSYQR Limited to purchase a supply chain management system for $1.45 million. The system has the necessary software and hardware that was specifically designed for supermarkets application for the key units of 1) data synchronization across the entire supply chain, 2) centralized order processing and fulfillment, 3) refund and return processing, 4) customer complaints handling, and 5) distribution and delivery management and optimization. The system is amortized over 10 years. On March 30, 2025, the Company sold software license of above two software to four licensees for a total of $2.6 million. Trademark Trademark mainly consisted of 1) a trademark acquired through the acquisition of Maison Monterey Park on June 30, 2022. The fair value of the trademark from the acquisition of Maison Monterey Park at acquisition date was $194,000, to be amortized over 15 years; 2)) a trademark acquired through the acquisition of Lee Lee on April 7, 2024. The fair value of the trademark from the acquisition of Lee Lee at acquisition date was $5,000,000, to be amortized over 20 years. The amortization expense for the three months ended July 31, 2025 and 2024 was $139,775 and $139,775, respectively. The amortization expense for Maison El Monte for the three months ended July 31, 2025 and 2024 was $291 and 291, respectively. 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