MSS Maison Solutions Inc

 

UNITED STATES 
SECURITIES AND EXCHANGE COMMISSION 
Washington, D.C. 20549

 

FORM 8-K/A

 

CURRENT REPORT 
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 

 

Date of Report (Date of earliest event reported): April 4, 2024

 

Maison Solutions Inc.
(Exact name of registrant as specified in its charter)

 

Delaware		001-41720		84-2498787
(State or other jurisdiction of incorporation)		(Commission File Number)		(IRS Employer Identification No.)

 

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

 

Registrant’s telephone number, including area code: (626) 737-5888

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

☐

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

☐

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a -12)

 

☐

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

☐

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e -4(c))

 

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

 

Title of each class		Trading Symbol(s)		Name of each 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 is an emerging growth company as defined in in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b -2 of this chapter).

 

Emerging growth company ☒

 

If an emerging growth company, indicate by checkmark 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. ☐

 

  

 

Explanatory Note

 

 

 

Item 9.01 Financial Statements and Exhibits.

 

(a) Financial statements of business or funds acquired.

 

The historical audited financial statements of Lee Lee and the historical unaudited interim financial statements of Lee Lee required by Item 9.01(a) of Form 8-K are attached as Exhibit 99.1 and Exhibit 99.2 to this Amendment and are incorporated herein by reference.

 

(b) Pro forma financial information.

 

In accordance with Rule 11-02(c)(1) of Regulation S-X, a pro forma balance sheet has not been prepared to give effect to the acquisition of Lee Lee on April 8, 2024 (the “Lee Lee Acquisition”), as it is reflected in the Company’s Audited Consolidated Balance Sheet included in the Company’s Annual Report on Form 10-K for the year ended April 30, 2024, which was filed with the SEC on August 13, 2024 (the “Form 10-K”). Additionally, a pro forma statement of comprehensive income has not been prepared to give effect the Lee Lee Acquisition, as it is reflected in footnote 18 to the Company’s financial statements included in the Company’s Form 10-K for the year ended April 30, 2024.

 

(d) Exhibits.

 

Exhibit No.		Description
99.1		The audited financial statements of Lee Lee for the years ended December 31, 2022 and December 31, 2023.
99.2		The unaudited financial statements of Lee Lee for the three months ended March 31, 2023 and March 31, 2024.
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

 

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 hereunto duly authorized.

 

Date: February 21, 2025	MAISON SOLUTIONS INC.
	By:	/s/ John Xu
		John Xu
		Chief Executive Officer, Chairman and President

 

 

3

 

Exhibit 99.1

 

Report of Independent Registered Public Accounting Firm

 

To the Board of Directors and Shareholders

Maison Solutions Inc. and Lee Lee Oriental Supermart, Inc.,

also known as “Lee Lee International Supermarkets”

a wholly-owned subsidiary of Maison Solutions Inc.

 

Opinion on the Financial Statements

 

We have audited the accompanying balance sheets of Lee Lee Oriental Supermart, Inc. also known as Lee Lee International Supermarkets. (the “Company”) as of December 31, 2023 and 2022, and the related statements of operations, changes in shareholders’ equity, and cash flows for each of the two years in the period ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

 

Basis for Opinion

 

These financial statements are the responsibility of the company’s management. Our responsibility is to express an opinion on the company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

/s/ Kreit & Chiu CPA LLP

 

We have served as the Company’s auditor since 2024.

 

Los Angeles, California

February 21, 2025

 

PCAOB Firm ID: 6651

 

 

LEE LEE ORIENTAL SUPERMART, INC.

BALANCE SHEETS

 

		As of December 31, 2023				As of December 31, 2022
ASSETS
Current Assets
Cash and cash equivalents		$	6,634,667			$	7,070,568
Other receivables			985,582				760,872
Inventories, net			4,370,694				3,712,714
Total Current Assets			11,990,943				11,544,154
Non-current Assets
Security deposits			20,256				20,256
Operating lease right-of-use assets, net			18,395,235				18,807,699
Property and equipment, net			1,596,987				1,248,821
Total Non-current Assets			20,012,478				20,076,776
Total Assets		$	32,003,421			$	31,620,930
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts payable		$	2,225,013			$	2,270,413
Accrued expenses and other payables			1,186,016				1,382,974
Operating lease liabilities - current			1,214,532				1,181,829
Total Current Liabilities			4,625,561				4,835,216
Non-current Liabilities
Security deposit from sub-tenants			6,300				6,300
Operating lease liabilities - non-current			19,240,962				19,471,592
Total Non-current Liabilities			19,247,262				19,477,892
Total Liabilities			23,872,823				24,313,108
Commitment and contingencies
Stockholders’ Equity
Paid in capital			5,393,007				5,393,007
Retained earnings			2,737,591				1,914,815
Total Stockholders’ Equity			8,130,598				7,307,822
Total Liabilities and Stockholders’ Equity		$	32,003,421			$	31,620,930

 

 

LEE LEE ORIENTAL SUPERMART, INC.

STATEMENTS OF OPERATIONS 

 

		Years Ended December 31,
		2023				2022
Revenue		$	75,734,198			$	76,745,068
Cost of Goods Sold			58,557,397				63,962,660
Gross Profit			17,176,801				12,782,408
Operating Expenses
Selling expenses			12,983,828				13,056,300
General and administrative expenses			1,287,939				970,818
Total Operating Expenses			14,271,767				14,027,118
Income (Loss) from Operations			2,905,034				(1,244,710	)
Non-operating Income (Expenses)
Other income, net			25,706				37,896
Interest expense (income), net			73,036				(3,493	)
Total Non-operating Income, net			98,742				34,403
Net Income (Loss)		$	3,003,776			$	(1,210,307	)

 

 

LEE LEE ORIENTAL SUPERMART, INC. 

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022

 

		Paid-in Capital				Retained Earnings				Total
Balance at January 1, 2022		$	5,393,007			$	4,835,122			$	10,228,129
Net loss for the year			-				(1,210,307	)			(1,210,307	)
Dividend paid			-				(1,710,000	)			(1,710,000	)
Balance at December 31, 2022			5,393,007				1,914,815				7,307,822
Net income for the year			-				3,003,776				3,003,776
Dividend paid			-				(2,181,000	)			(2,181,000	)
Balance at December 31, 2023		$	5,393,007			$	2,737,591			$	8,130,598

 

  

LEE LEE ORIENTAL SUPERMART, INC.

STATEMENTS OF CASH FLOWS 

 

		Years Ended December 31,
		2023				2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)		$	3,003,776			$	(1,210,307	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation expense			177,059				156,111
Operating lease expense			1,396,370				1,396,364
Inventory impairment loss			7,850				13,760
Changes in operating assets and liabilities:
Accounts receivable			-				2,801
Other receivables and other current assets			(224,714	)			(42,459	)
Inventories			(665,830	)			3,174,793
Accounts payable			(45,397	)			(1,584,165	)
Accrued expenses and other payables			(196,958	)			(1,006,007	)
Operating lease liabilities			(1,181,832	)			(1,181,826	)
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES			2,270,324				(280,935	)
CASH FLOWS FROM INVESTING ACTIVITIES
Payments of equipment			(525,225	)			(83,626	)
NET CASH USED IN INVESTING ACTIVITIES			(525,225	)			(83,626	)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of loan payable			-				(7,223	)
Dividends paid			(2,181,000	)			(1,710,000	)
Repayment to related party			-				(440,919	)
NET CASH USED IN FINANCING ACTIVITIES			(2,181,000	)			(2,158,142	)
NET DECREASE IN CASH			(435,901	)			(2,522,703	)
CASH AT THE BEGINNING OF YEAR			7,070,568				9,593,271
CASH AT THE END OF YEAR		$	6,634,667			$	7,070,568
Supplemental disclosure of cash flow information
Cash paid for interest		$	-			$	4,018
Cash paid for income taxes		$	-			$	-

 

 

LEE LEE ORIENTAL SUPERMART INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2023 AND 2022

 

1. Organization

 

Lee Lee Oriental Supermart Inc. (“Lee Lee” or the “Company”) was founded on January 4, 1999 in the State of Arizona. The Company operates three supermarkets located in the city of Chandler, Peoria and Tucson. The Company offers a wide variety of ethnic foods and merchandise sourced from over 30 countries and regions to U.S. consumers.

 

2. Summary of significant accounting policies

 

Basis of presentation

 

The accompanying 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”).

 

Use of estimates

 

The preparation of 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 financial statements and the reported amounts of revenues and expenses during the periods presented. Significant accounting estimates are used for, but not limited to, commitments and contingencies, inventory reserve, allowance for other receivables and impairment of long-lived assets. Given the global economic climate and additional or unforeseen effects from the COVID-19 pandemic, these estimates have become more challenging, and actual results could differ materially from these estimates.

 

Cash and cash equivalents

 

Cash and equivalents include cash on hand, demand deposits and short-term cash investments that are highly liquid in nature and have original maturities when purchased of three months or less. The Company’s cash is maintained at financial institutions in the United States of America. Deposits in these financial institutions may, from time to time, exceed the Federal Deposit Insurance Corporation (“FDIC”)’s federally insured limits. The standard insurance amount is $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 December 31, 2023 and 2022, cash balances held in the banks, exceeding the standard insurance amount, are $5,095,656 and $5,578,506, 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.

 

Credit losses

 

On January 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 adoption of the credit loss accounting standard has no material impact on the Company’s financial statements as of January 1, 2023.

 

The Company’s other receivables 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 in the 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.

 

Inventories, net

 

Inventories consisting of products available for sale, are primarily accounted for using the first-in, first-out method, and are valued at the lower of cost and net realizable value. This valuation requires the Company to make judgments, based on currently available information, about the likely method of disposition, such as through sales to individual customers, returns to product vendors, or liquidations, and expected recoverable values of each disposition category. The Company records inventory shrinkage based on the historical data and management’s estimates and provides a reserve for inventory shrinkage for the years ended December 31, 2023 and 2022. The Company provided a reserve for inventory shrinkage of $7,850 and $13,760 for the years ended December 31, 2023 and 2022, respectively. 

 

Other receivables

 

Other receivables primarily include merchant card receivables from processed credit and debit card transactions that are awaiting settlement by the payment processor or acquiring bank. These receivables arise from sales made via card payments, with the funds typically being deposited into the merchant’s bank account within a few days. Management regularly reviews the aging of receivables and changes in payment trends and records allowances when management believes collection of amounts due are at risk. Accounts considered uncollectable are written off against allowances after exhaustive efforts at collection are made. As of December 31, 2023 and 2022, the Company did not have any bad debt allowance for other receivables.

 

Property and equipment

 

Property and equipment are stated at cost less accumulated depreciation. Depreciation expense is computed using the straight-line method over the estimated useful lives of the individual assets.

 

The following table includes the estimated useful lives of certain of our asset classes:

 

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

 

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 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, equipment and 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 years ended December 31, 2023 and 2022.

 

Security deposits

 

Security deposits primarily include deposits made to the Company’s landlord for its supermarkets and office facilities. These deposits are refundable upon expiration of the lease.

 

Leases

 

On January 1, 2020, the Company adopted Accounting Standards Update (“ASU”) 2016-02, Lease (FASB ASC Topic 842). The adoption of Topic 842 resulted in the presentation of operating lease right-of-use (“ROU”) assets and operating lease liabilities on the balance sheet.

 

The Company determines if an arrangement contains a lease at the inception of a contract under ASC Topic 842. At the commencement of each lease, management determines its classification as an operating or finance lease. For leases that qualify as operating leases, ROU assets and liabilities are recognized at the commencement date based on the present value of any remaining lease payments over the lease term. For this purpose, the Company considers only payments that are fixed and determinable at the time of commencement. As most of its leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The ROU assets include adjustments for accrued lease payments. The ROU asset also includes any lease payments made prior to commencement and is recorded net of any lease incentives received. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that it will exercise such options.

 

A short-term lease is defined as a lease that, at the commencement date, has a lease term of 12 months or less and does not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise. When determining whether a lease qualifies as a short-term lease, the Company evaluates the lease term and the purchase option. Hence, the Company does not recognize any operating lease ROU assets and operating lease liabilities for short-term leases.

 

The Company evaluates the carrying value of ROU assets if there are indicators of impairment and review the recoverability of the related asset group. If the carrying value of the asset group is determined to not be recoverable and is in excess of the estimated fair value, the Company will record an impairment loss in other expenses in the 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 rent and common area maintenance fee.

 

Fair value measurements

 

The Company records its financial assets and liabilities in accordance with the framework for measuring fair value in accordance with U.S GAAP. This framework establishes a fair value hierarchy that prioritizes the inputs used to measure fair value:

 

Level 1:

Quoted prices for identical instruments in active markets.

 

Level 2:

Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.

 

Level 3:

Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

 

 

Fair value measurements of nonfinancial assets and non-financial liabilities are primarily used in the impairment analysis of intangible assets and long-lived assets.

 

Financial instruments included in current assets and current liabilities are reported in the 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.

 

Revenue recognition

 

In accordance with ASC 606, “Revenue from Contracts with Customers,” revenue is recognized when a customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration that the Company expects to be entitled to receive in exchange for these goods or services. The Company recognizes revenues following the five-step model prescribed under ASU No. 2014-09: (i) identifies contract(s) with a customer; (ii) identifies the performance obligations in the contract; (iii) determines the transaction price; (iv) allocates the transaction price to the performance obligations in the contract; and (v) recognizes revenues when (or as) it satisfies the performance obligation.

 

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 tax and returns and allowances.

 

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, lottery, Chinese herbal supplements and non-food.

 

		Years ended December 31,
		2023				2022
Perishables		$	36,258,533			$	36,798,793
Non-perishables			39,475,665				39,946,275
Total revenues		$	75,734,198			$	76,745,068

 

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.

 

Selling expenses

 

Selling expenses mainly consist of advertising costs, promotion expenses and payroll and related expenses for personnel engaged in selling and marketing activities. Advertising expenses, which consist primarily of online and offline advertisements, are expensed when the services are performed. The Company’s advertising expenses were $33,773 and $39,630 for the years ended December 31, 2023 and 2022, respectively.

 

General and administration expenses

 

General and administration expenses mainly consist of payroll and related costs for employees involved in general corporate functions, professional fees and other general corporate expenses, as well as expenses associated with the use by these functions of facilities and equipment, such as rental and depreciation expenses.

 

 

Concentrations of risks

 

(a)     Major customers

 

For each of the years ended December 31, 2023 and 2022, the Company did not have any customers that accounted for more than 10% of 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 years ended December 31, 2023 and 2022.

 

Year Ended December 31, 2023						Year Ended December 31, 2022
Supplier		Percentage of Total Purchases				Supplier		Percentage of Total Purchases
A			14	%		A			14	%
B			13	%		B			14	%

 

Income taxes

 

Lee Lee files its income tax return under Subchapter S of the Internal Revenue Code (“IRS”) as a S-corporation, and elected to be taxed as a pass-through entity, for which the income, losses, deductions, and credits flow through to the shareholders of the company for federal income tax and Arizona state income tax purposes. On April 8, 2024, Lee Lee submitted an application to the IRS for revoking its S-corporation election pursuant to Section 1362(a) of the Internal Revenue Code and to be taxed as a regular corporation (or C-corporation). The first taxable year for which the revocation is intended to be effective is the corporation taxable year beginning April 8, 2024. On June 10, 2024, Lee Lee filed a Statement of Conversion with the Arizona State to converting the entity type from Corporation to Limited Liability Company and changed its name to Lee Lee Oriental Supermart, LLC.

 

Related Parties and Transactions

 

The Company identifies related parties, and accounts for, discloses related party transactions in accordance with ASC 850, “Related Party Disclosures” and other relevant ASC standards.

 

Parties, which can be a corporation or individual, are related if the Company has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operational decisions. Companies are also considered to be related if they are subject to common control or common significant influence. Transactions between related parties commonly occurring in the normal course of business are related party transactions. Transactions between related parties are also considered to be related party transactions even though they may not be given accounting recognition. While ASC does not provide accounting or measurement guidance for such transactions, it nonetheless requires their disclosure.

 

Segment Information

 

The Company’s chief operating decision-maker has been identified as the chief executive officer, who reviews financial information presented on a basis, accompanied by disaggregated information about revenues by different product types for purposes of allocating resources and evaluating financial performance. The Company and its subsidiaries offer grocery products, general merchandise, Chinese herbal supplements and other items and services in its stores. The Company’s supermarket stores are geographically based, have similar economic characteristics and similar expected long-term financial performance. The Company’s operating segments, and reporting units are its three 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 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.

 

 

Commitments and Contingencies

 

Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company’s management and legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought. If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, the estimated liability would be accrued in the Company’s financial statements.

 

If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed. As of December 31, 2023 and 2022, the Company has no such contingencies.

 

Recently Issued Accounting Pronouncements

 

In November 2023, the FASB issued ASU 2023-07, the amendments in the ASU are intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss. In addition, the amendments enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit or loss, provide new segment disclosure requirements for entities with a single reportable segment, and contain other disclosure requirements. The purpose of the amendments is to enable “investors to better understand an entity’s overall performance” and assess “potential future cash flows.” The amendments in ASU 2023-07 are effective for all public entities for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company’s management does not believe the adoption of ASU 2023-09 will have a material impact on its financial statements and disclosures.

 

No other new accounting pronouncements issued or effective had, or are expected to have, a material impact on the Company’s financial statements.

 

3. Inventories, net

 

A summary of inventories, net, at December 31, 2023 and 2022 was as follows:

 

		December 31, 2023				December 31, 2022
Perishables		$	716,296			$	747,864
Non-perishables			3,799,212				3,101,813
Reserve for inventory shrinkage			(144,814	)			(136,963	)
Inventories, net		$	4,370,694			$	3,712,714

 

Movements of reserve for inventory shrinkage were as follows:

 

		Year Ended December 31, 2023				Year Ended December 31, 2022
Beginning balance		$	136,963			$	123,203
Provision for inventory shrinkage reserve			7,851				13,760
Ending Balance		$	144,814			$	136,963

 

 

4. Other receivables

 

Other receivables and other current assets consisted of the following at December 31, 2023 and 2022:

 

		December 31, 2023				December 31, 2022
Credit card receivable for sales through credit card		$	979,312			$	760,872
Other			6,270				-
Total  other receivables and other current assets		$	985,582			$	760,872

 

5. Property and equipment, net

 

Property and equipment consisted of the following at December 31, 2023 and 2022:

 

		December 31, 2023				December 31, 2022
Furniture & Fixtures		$	176,170			$	176,170
Equipment			3,411,138				2,944,250
Leasehold Improvement			1,433,209				1,433,209
Automobile			678,276				680,098
Total property and equipment			5,698,793				5,233,727
Accumulated depreciation			(4,101,806	)			(3,984,906	)
Property and equipment, net		$	1,596,987			$	1,248,821

 

Depreciation expenses included for the years ended December 31, 2023 and 2022 were $177,059 and $156,111, respectively.

 

6. Accrued expenses and other payables

 

Accrued expenses and other payables consisted of the following at December 31, 2023 and 2022:

 

		December 31, 2023				December 31, 2022
Credit card payable		$	197,196			$	177,571
Other payables			269,094				597,741
Utilities payable			64,209				23,363
Payroll payable			547,406				479,071
Sales tax payable			108,111				105,228
Total accrued expenses and other payables		$	1,186,016			$	1,382,974

 

 

7. Leases

 

The Company accounted for leases in accordance with ASU No. 2016-02, Leases (Topic 842), for all periods presented. The Company leases certain supermarkets and office facilities from third parties. Some of the Company’s leases include one or more options to renew, which are typically at the Company’s sole discretion. The Company evaluates the renewal options, and, when it is reasonably certain of exercise, it will include the renewal period in its lease term. New lease modifications result in re-measurement of the right of use (“ROU”) assets and lease liabilities. Operating ROU assets and lease liabilities are recognized at the lease commencement date, based on the present value of lease payments over the lease term. Since the implicit rate for the Company’s leases is not readily determinable, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The incremental borrowing rate is the rate of interest that the Company would have to pay to borrow, on a collateralized basis, an amount equal to the lease payments, in a similar economic environment and over a similar term.

 

The Company’s leases consist of store rent. The store lease detail information is listed below:

 

Store		Lease Term Due
Chandler		February 8, 2049
Tucson		December 31, 2050
Peoria		January 31, 2044 (with option to extension)

 

As of December 31, 2023, the average remaining term of the supermarkets’ store lease is 18.36 years.

 

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

 

		December 31, 2023				December 31, 2022
Operating ROU:
ROU assets - supermarket leases, net		$	18,395,235			$	18,807,699
Total operating ROU assets		$	18,395,235			$	18,807,699

 

		December 31, 2023				December 31, 2022
Operating lease obligations:
Current operating lease liabilities		$	1,214,532			$	1,181,829
Non-current operating lease liabilities			19,240,962				19,471,592
Total lease liabilities		$	20,455,494			$	20,653,421

 

As of December 31, 2023, the five-year maturity of the Company’s operating lease liabilities is as follow:

 

Years Ending December 31,		Operating lease liabilities
2024		$	1,214,532
2025			1,261,323
2026			1,292,068
2027			1,292,068
2028			1,292,068
Thereafter			29,357,426
Total lease payments			35,709,485
Less: interest			(15,253,991	)
Present value of lease liabilities		$	20,455,494

 

 

8. Acquisition of Lee Lee by Maison Solutions Inc.

 

On April 4, 2024, AZLL, LLC (“AZLL” or the “Purchaser”) an Arizona limited liability company and a wholly-owned subsidiary of Maison Solutions Inc (“Maison”), entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”) with Meng Truong (“Meng Truong”) and Paulina Truong (“Paulina Truong” and, together with Meng Truong, the “Sellers”), pursuant to which AZLL purchased 100% of the outstanding equity interests in Lee Lee from the Sellers. The transaction was closed on April 8, 2024.

 

Pursuant to the Purchase Agreement, Purchaser agreed to pay to the Sellers an aggregate purchase price of approximately $22.2 million, subject to certain adjustments as set forth in the Purchase Agreement, consisting of: (i) $7.0 million in cash paid immediately at the closing of the Transaction, and (ii) a senior secured note agreement with an original principal amount of approximately $15.2 million, subject to certain adjustments. In addition, the Purchase Agreement contained customary representations and warranties, and indemnification, non-competition, non-solicitation and confidentiality provisions.

 

The following condensed unaudited pro forma consolidated results of operations for Lee Lee for the years ended December 31, 2023 and 2022 present the results of operations of Lee Lee and Maison as if the acquisitions occurred on January 1, 2023 and 2022, respectively. 

 

The pro forma results are not necessarily indicative of the actual results that would have occurred had the acquisitions been completed as of the beginning of the periods presented, nor are they necessarily indicative of future consolidated results. 

 

		For the years ended December 31,
		2023				2022
		(Unaudited)				(Unaudited)
Revenue		$	131,035,053			$	128,870,089
Operating costs and expenses			128,396,657				130,190,638
Income (loss) from operations			2,638,396				(1,320,549	)
Other income			1,435,980				1,571,303
Income tax expense			(189,151	)			(189,773	)
Net income		$	3,885,225			$	60,981

 

9. Subsequent Event

 

The Company follows the guidance in FASB ASC 855-10 for the disclosure of subsequent events. The Company evaluated subsequent events through the date the financial statements were issued and determined the Company has no major subsequent event that need to be disclosed except the acquisition of Lee Lee by Maison disclosed in Note 8.

 

 

14

Exhibit 99.2

 

LEE LEE ORIENTAL SUPERMART, INC.

BALANCE SHEETS

 

		As of March 31, 2024 (Unaudited)				As of December 31, 2023
ASSETS
Current Assets
Cash and cash equivalents		$	6,655,012			$	6,634,667
Other receivables			910,268				985,582
Inventories, net			3,799,150				4,370,694
Total Current Assets			11,364,430				11,990,943
Non-current Assets
Security deposits			-				20,256
Operating lease right-of-use assets, net			18,290,677				18,395,235
Property and equipment, net			1,574,819				1,596,987
Total Non-current Assets			19,865,496				20,012,478
Total Assets		$	31,229,926			$	32,003,421
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts payable		$	1,969,413			$	2,225,013
Accrued expenses and other payables			1,154,759				1,186,016
Operating lease liabilities - current			1,231,935				1,214,532
Total Current Liabilities			4,356,107				4,625,561
Non-current Liabilities
Security deposit from sub-tenants			6,300				6,300
Operating lease liabilities - non-current			19,170,165				19,240,962
Total Non-current Liabilities			19,176,465				19,247,262
Total Liabilities			23,532,572				23,872,823
Commitment and contingencies
Stockholders’ Equity
Paid in capital			5,393,007				5,393,007
Retained earnings			2,304,347				2,737,591
Total Stockholders’ Equity			7,697,354				8,130,598
Total Liabilities and Stockholders’ Equity		$	31,229,926			$	32,003,421

 

 

LEE LEE ORIENTAL SUPERMART, INC.

STATEMENTS OF OPERATIONS

 

		Three Months Ended March 31,
		2024				2023
		(Unaudited)
Revenue		$	19,879,460			$	19,602,702
Cost of Goods Sold			15,583,873				15,985,894
Gross Profit			4,295,587				3,616,808
Operating Expenses
Selling expenses			3,817,327				3,855,001
General and administrative expenses			222,366				233,273
Total Operating Expenses			4,039,693				4,088,274
Income (Loss) from Operations			255,894				(471,466	)
Non-operating Income (Expenses)
Other income, net			13,627				783
Interest expense (income), net			48,235				(697	)
Total Non-operating Income, net			61,862				86
Net Income (Loss)		$	317,756			$	(471,380	)

 

 

LEE LEE ORIENTAL SUPERMART, INC.

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023 (UNAUDITED)

 

		Paid-in Capital				Retained Earnings				Total
Balance at January 1, 2024		$	5,393,007			$	2,737,591			$	8,130,598
Net income for the period			-				317,756				317,756
Dividend paid			-				(751,000	)			(751,000	)
Balance at March 31,2024		$	5,393,007			$	2,304,347			$	7,697,354

 

		Paid-in Capital				Retained Earnings				Total
Balance at January 1, 2023		$	5,393,007			$	1,914,815			$	7,307,822
Net loss for the period			-				(471,380	)			(471,380	)
Dividend paid			-				(736,000	)			(736,000	)
Balance at March 31, 2023		$	5,393,007			$	707,435			$	6,100,442

 

 

LEE LEE ORIENTAL SUPERMART, INC.

STATEMENTS OF CASH FLOWS

 

		Three Months Ended March 31,
		2024				2023
		(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)		$	317,756			$	(471,380	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation expense			49,260				39,665
Operating lease expense			349,092				349,092
Inventory impairment loss			62,564				1,963
Changes in operating assets and liabilities:
Other receivables			75,314				454,534
Inventories			508,981				646,341
Security deposits			20,256				-
Accounts payable			(255,600	)			(351,195	)
Accrued expenses and other payables			(31,258	)			75,042
Operating lease liabilities			(297,928	)			(295,457	)
NET CASH PROVIDED BY OPERATING ACTIVITIES			798,437				448,605
CASH FLOWS FROM INVESTING ACTIVITIES
Payments of equipment			(27,092	)			(112,676	)
NET CASH USED IN INVESTING ACTIVITIES			(27,092	)			(112,676	)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid			(751,000	)			(736,000	)
NET CASH USED IN FINANCING ACTIVITIES			(751,000	)			(736,000	)
NET INCREASE (DECREASE) IN CASH			20,345				(400,071	)
CASH AT THE BEGINNING OF PERIOD			6,634,667				7,070,568
CASH AT THE END OF PERIOD		$	6,655,012			$	6,670,497
Supplemental disclosure of cash flow information
Cash paid for interest		$	-			$	773
Cash paid for income taxes		$	-			$	-

 

 

LEE LEE ORIENTAL SUPERMART INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2024 (UNAUDITED) AND DECEMBER 31, 2023

 

1. Organization

 

Lee Lee Oriental Supermart Inc. (“Lee Lee” or the “Company”) was founded on January 4, 1999 in the State of Arizona. The Company operates three supermarkets located in the city of Chandler, Peoria and Tucson. The Company offers a wide variety of ethnic foods and merchandise sourced from over 30 countries and regions to U.S. consumers.

 

2. Summary of significant accounting policies

 

Basis of presentation

 

The accompanying 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”).

 

Use of estimates

 

The preparation of 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 financial statements and the reported amounts of revenues and expenses during the periods presented. Significant accounting estimates are used for, but not limited to, commitments and contingencies, inventory reserve, allowance for other receivables, and impairment of long-lived assets. Given the global economic climate and additional or unforeseen effects from the COVID-19 pandemic, these estimates have become more challenging, and actual results could differ materially from these estimates.

 

Cash and cash equivalents

 

Cash and equivalents include cash on hand, demand deposits and short-term cash investments that are highly liquid in nature and have original maturities when purchased of three months or less. The Company’s cash is maintained at financial institutions in the United States of America. Deposits in these financial institutions may, from time to time, exceed the Federal Deposit Insurance Corporation (“FDIC”)’s federally insured limits. The standard insurance amount is $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 March 31, 2024 and December 31, 2023, cash balances held in the banks, exceeding the standard insurance amount, are $5,456,260 and $5,095,656, 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.

 

Credit losses

 

On January 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 adoption of the credit loss accounting standard has no material impact on the Company’s financial statements as of January 1, 2023.

 

The Company’s other receivables 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 in the 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.

 

Inventories, net

 

Inventories consisting of products available for sale, are primarily accounted for using the first-in, first-out method, and are valued at the lower of cost and net realizable value. This valuation requires the Company to make judgments, based on currently available information, about the likely method of disposition, such as through sales to individual customers, returns to product vendors, or liquidations, and expected recoverable values of each disposition category. The Company records inventory shrinkage based on the historical data and management’s estimates and provides a reserve for inventory shrinkage for the three months ended March 31, 2024 and 2023. The Company provided a reserve for inventory shrinkage of $62,564 and $1,963 for the three months ended March 31, 2024 and 2023, respectively. 

 

Other receivables

 

Other receivables primarily include merchant card receivables from processed credit and debit card transactions that are awaiting settlement by the payment processor or acquiring bank. These receivables arise from sales made via card payments, with the funds typically being deposited into the merchant’s bank account within a few days. Management regularly reviews the aging of receivables and changes in payment trends and records allowances when management believes collection of amounts due are at risk. Accounts considered uncollectable are written off against allowances after exhaustive efforts at collection are made. As of March 31, 2024 and December 31, 2023, the Company did not have any bad debt allowance for other receivables.

 

Property and equipment

 

Property and equipment are stated at cost less accumulated depreciation. Depreciation expense is computed using the straight-line method over the estimated useful lives of the individual assets.

 

The following table includes the estimated useful lives of certain of our asset classes:

 

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

 

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 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, equipment and 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 March 31, 2024 and 2023.

 

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.

 

Leases

 

On January 1, 2020, the Company adopted Accounting Standards Update (“ASU”) 2016-02, Lease (FASB ASC Topic 842). The adoption of Topic 842 resulted in the presentation of operating lease right-of-use (“ROU”) assets and operating lease liabilities on the balance sheet.

 

The Company determines if an arrangement contains a lease at the inception of a contract under ASC Topic 842. At the commencement of each lease, management determines its classification as an operating or finance lease. For leases that qualify as operating leases, ROU assets and liabilities are recognized at the commencement date based on the present value of any remaining lease payments over the lease term. For this purpose, the Company considers only payments that are fixed and determinable at the time of commencement. As most of its leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The ROU assets include adjustments for accrued lease payments. The ROU asset also includes any lease payments made prior to commencement and is recorded net of any lease incentives received. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that it will exercise such options.

 

A short-term lease is defined as a lease that, at the commencement date, has a lease term of 12 months or less and does not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise. When determining whether a lease qualifies as a short-term lease, the Company evaluates the lease term and the purchase option. Hence, the Company does not recognize any operating lease ROU assets and operating lease liabilities for short-term leases.

 

The Company evaluates the carrying value of ROU assets if there are indicators of impairment and review the recoverability of the related asset group. If the carrying value of the asset group is determined to not be recoverable and is in excess of the estimated fair value, the Company will record an impairment loss in other expenses in the 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 rent and common area maintenance fee.

 

 

Fair value measurements

 

The Company records its financial assets and liabilities in accordance with the framework for measuring fair value in accordance with U.S GAAP. This framework establishes a fair value hierarchy that prioritizes the inputs used to measure fair value:

 

Level 1:

Quoted prices for identical instruments in active markets.

 

Level 2:

Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.

 

Level 3:

Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

 

Fair value measurements of nonfinancial assets and non-financial liabilities are primarily used in the impairment analysis of intangible assets and long-lived assets.

 

Financial instruments included in current assets and current liabilities are reported in the 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.

 

Revenue recognition

 

In accordance with ASC 606, “Revenue from Contracts with Customers,” revenue is recognized when a customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration that the Company expects to be entitled to receive in exchange for these goods or services. The Company recognizes revenues following the five-step model prescribed under ASU No. 2014-09: (i) identifies contract(s) with a customer; (ii) identifies the performance obligations in the contract; (iii) determines the transaction price; (iv) allocates the transaction price to the performance obligations in the contract; and (v) recognizes revenues when (or as) it satisfies the performance obligation.

 

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 tax and returns and allowances.

 

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, lottery, and Chinese herbal supplements etc.

 

		Three months ended March 31,
		2024				2023
Perishables		$	9,141,747			$	8,988,764
Non-perishables			10,737,713				10,613,938
Total revenues		$	19,879,460			$	19,602,702

 

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.

 

 

Selling expenses

 

Selling expenses mainly consist of advertising costs, promotion expenses and payroll and related expenses for personnel engaged in selling and marketing activities. Advertising expenses, which consist primarily of online and offline advertisements, are expensed when the services are performed. The Company’s advertising expenses were $5,266 and $1,432 for the three months ended March 31, 2024 and 2023, respectively.

 

General and administration expenses

 

General and administration expenses mainly consist of payroll and related costs for employees involved in general corporate functions, professional fees and other general corporate expenses, as well as expenses associated with the use by these functions of facilities and equipment, such as rental and depreciation expenses.

 

Concentrations of risks

 

(a)

Major customers

 

For each of the three months ended March 31, 2024 and 2023, the Company did not have any customers that accounted for more than 10% of 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 March 31, 2024 and 2023.

 

Three Months Ended March 31, 2024						Three Months Ended March 31, 2023
Supplier		Percentage of Total Purchases				Supplier		Percentage of Total Purchases
A			15	%		A			15	%
B			14	%		B			13	%

 

Income taxes

 

Lee Lee files its income tax return under Subchapter S of the Internal Revenue Code (“IRS”) as a S-corporation, and elected to be taxed as a pass-through entity, for which the income, losses, deductions, and credits flow through to the shareholders of the company for federal income tax and Arizona state income tax purposes. On April 8, 2024, Lee Lee submitted an application to the IRS for revoking its S-corporation election pursuant to Section 1362(a) of the Internal Revenue Code and to be taxed as a regular corporation (or C-corporation). The first taxable year for which the revocation is intended to be effective is the corporation taxable year beginning April 8, 2024. On June 10, 2024, Lee Lee filed a Statement of Conversion with the Arizona State to converting the entity type from Corporation to Limited Liability Company and changed its name to Lee Lee Oriental Supermart, LLC.

 

Related Parties and Transactions

 

The Company identifies related parties, and accounts for, discloses related party transactions in accordance with ASC 850, “Related Party Disclosures” and other relevant ASC standards.

 

Parties, which can be a corporation or individual, are related if the Company has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operational decisions. Companies are also considered to be related if they are subject to common control or common significant influence. Transactions between related parties commonly occurring in the normal course of business are related party transactions. Transactions between related parties are also considered to be related party transactions even though they may not be given accounting recognition. While ASC does not provide accounting or measurement guidance for such transactions, it nonetheless requires their disclosure.

 

 

Segment Information

 

The Company’s chief operating decision-maker has been identified as the chief executive officer, who reviews financial information presented on a basis, accompanied by disaggregated information about revenues by different product types for purposes of allocating resources and evaluating financial performance. The Company and its subsidiaries offer grocery products, general merchandise, Chinese herbal supplements and other items and services in its stores. The Company’s supermarket stores are geographically based, have similar economic characteristics and similar expected long-term financial performance. The Company’s operating segments, and reporting units are its three 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 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.

 

Commitments and Contingencies

 

Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company’s management and legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought. If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, the estimated liability would be accrued in the Company’s financial statements.

 

If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed. As of March 31, 2024 and December 31, 2023, the Company has no such contingencies.

 

Recently Issued Accounting Pronouncements

 

In November 2023, the FASB issued ASU 2023-07, the amendments in the ASU are intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss. In addition, the amendments enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit or loss, provide new segment disclosure requirements for entities with a single reportable segment, and contain other disclosure requirements. The purpose of the amendments is to enable “investors to better understand an entity’s overall performance” and assess “potential future cash flows.” The amendments in ASU 2023-07 are effective for all public entities for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company’s management does not believe the adoption of ASU 2023-09 will have a material impact on its financial statements and disclosures.

 

No other new accounting pronouncements issued or effective had, or are expected to have, a material impact on the Company’s financial statements.

 

3. Inventories, net

 

A summary of inventories, net, at March 31, 2024 and December 31, 2023 was as follows:

 

		March 31, 2024				December 31, 2023
Perishables		$	1,138,564			$	716,296
Non-perishables			2,867,964				3,799,212
Reserve for inventory shrinkage			(207,378	)			(144,814	)
Inventories, net		$	3,799,150			$	4,370,694

 

 

Movements of reserve for inventory shrinkage for the three months ended March 31, 2024 and 2023 were as follows:

 

		Three Months Ended March 31, 2024				Three Months Ended March 31, 2023
Beginning balance		$	144,814			$	136,963
Provision for inventory shrinkage reserve			62,564				1,963
Ending Balance		$	207,378			$	138,926

 

4. Other receivables

 

Other receivables consisted of the following at March 31, 2024 and December 31, 2023:

 

		March 31, 2024				December 31, 2023
Credit card receivable for sales through credit card		$	909,998			$	979,312
Other			6,270				6,270
Total  other receivables and other current assets		$	916,268			$	985,582

 

5. Property and equipment, net

 

Property and equipment consisted of the following at March 31, 2024 and December 31, 2023:

 

		March 31, 2024				December 31, 2023
Furniture & Fixtures		$	176,170			$	176,170
Equipment			3,438,230				3,411,138
Leasehold Improvement			1,433,209				1,433,209
Automobile			678,276				678,276
Total property and equipment			5,725,885				5,698,793
Accumulated depreciation			(4,151,066	)			(4,101,806	)
Property and equipment, net		$	1,574,819			$	1,596,987

 

Depreciation expenses for the three months ended March 31, 2024 and 2023 were $49,260 and $39,665, respectively.

 

 

6. Accrued expenses and other payables

 

Accrued expenses and other payables consisted of the following at March 31, 2024 and December 31, 2023:

 

		March 31, 2024				December 31, 2023
Credit card payable		$	169,064			$	197,196
Other payables			187,618				269,094
Utilities payable			17,483				64,209
Payroll payable			690,301				547,406
Sales tax payable			90,293				108,111
Total accrued expenses and other payables		$	1,154,759			$	1,186,016

 

7. Leases

 

The Company accounted for leases in accordance with ASU No. 2016-02, Leases (Topic 842), for all periods presented. The Company leases certain supermarkets and office facilities from third parties. Some of the Company’s leases include one or more options to renew, which are typically at the Company’s sole discretion. The Company evaluates the renewal options, and, when it is reasonably certain of exercise, it will include the renewal period in its lease term. New lease modifications result in re-measurement of the right of use (“ROU”) assets and lease liabilities. Operating ROU assets and lease liabilities are recognized at the lease commencement date, based on the present value of lease payments over the lease term. Since the implicit rate for the Company’s leases is not readily determinable, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The incremental borrowing rate is the rate of interest that the Company would have to pay to borrow, on a collateralized basis, an amount equal to the lease payments, in a similar economic environment and over a similar term.

 

The Company’s leases consist of store rent. The store lease detail information is listed below:

 

Store		Lease Term Due
Chandler		February 8, 2049
Tucson		December 31, 2050
Peoria		January 31, 2044 (with option to extension)

 

As of March 31, 2024, the average remaining term of the supermarkets’ store lease is 18.11 years.

 

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

 

		March 31, 2024				December 31, 2023
Operating ROU:
ROU assets - supermarket leases, net		$	18,290,677			$	18,395,235
Total operating ROU assets		$	18,290,677			$	18,395,235

 

		March 31, 2024				December 31, 2023
Operating lease obligations:
Current operating lease liabilities		$	1,231,935			$	1,214,532
Non-current operating lease liabilities			19,170,165				19,240,962
Total lease liabilities		$	20,402,100			$	20,455,494

 

 

As of March 31, 2024, the five-year maturity of the Company’s operating lease liabilities is as follow:

 

Years Ending March 31,		Operating lease liabilities
2025		$	1,231,935
2026			1,269,010
2027			1,292,068
2028			1,292,068
2029			1,294,687
Thereafter			29,031,789
Total lease payments			35,411,557
Less: interest			(15,009,457	)
Present value of lease liabilities		$	20,402,100

 

8. Acquisition of Lee Lee by Maison Solutions Inc

 

On April 4, 2024, AZLL, LLC (“AZLL” or the “Purchaser”) an Arizona limited liability company and a wholly-owned subsidiary of Maison Solutions Inc (“Maison”), entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”) with Meng Truong (“Meng Truong”) and Paulina Truong (“Paulina Truong” and, together with Meng Truong, the “Sellers”), pursuant to which AZLL purchased 100% of the outstanding equity interests in Lee Lee from the Sellers. The transaction was closed on April 8, 2024.

 

Pursuant to the Purchase Agreement, Purchaser agreed to pay to the Sellers an aggregate purchase price of approximately $22.2 million, subject to certain adjustments as set forth in the Purchase Agreement, consisting of: (i) $7.0 million in cash paid immediately at the closing of the Transaction, and (ii) a senior secured note agreement with an original principal amount of approximately $15.2 million, subject to certain adjustments. In addition, the Purchase Agreement contained customary representations and warranties, and indemnification, non-competition, non-solicitation and confidentiality provisions.

 

The following condensed unaudited pro forma consolidated results of operations for Lee Lee for the three months ended March 31, 2024 and 2023 present the results of operations of Lee Lee and Maison as if the acquisitions occurred on January 1, 2024 and 2023, respectively. 

 

The pro forma results are not necessarily indicative of the actual results that would have occurred had the acquisitions been completed as of the beginning of the periods presented, nor are they necessarily indicative of future consolidated results. 

 

		For the three months ended March 31,
		2024				2023
		(Unaudited)				(Unaudited)
Revenue		$	32,196,491			$	33,786,559
Operating costs and expenses			33,779,844				34,254,572
Loss from operations			(1,583,353	)			(468,013	)
Other income			285,873				554,988
Income tax expense			(424,722				(147,335	)
Net loss		$	(1,722,202	)		$	(60,360	)

 

9. Subsequent Event

 

The Company follows the guidance in FASB ASC 855-10 for the disclosure of subsequent events. The Company evaluated subsequent events through the date the financial statements were issued and determined the Company has no major subsequent event that need to be disclosed except the acquisition of Lee Lee by Maison disclosed in Note 8.

 

 

v3.25.0.1

Cover	Apr. 04, 2024
Cover [Abstract]
Document Type	8-K/A
Amendment Flag	true
Amendment Description	On April 10, 2024, Maison Solutions Inc. (the “Company”) filed a Current Report on Form 8-K (the “Original Form 8-K”) with the Securities and Exchange Commission (the “SEC”) to report the consummation of AZLL, LLC’s, an Arizona limited liability company and a wholly-owned subsidiary of the Company, acquisition of 100% of the outstanding equity interests in Lee Lee Oriental Supermart, Inc. d/b/a Lee Lee Oriental Supermarket, Lee Lee International Supermarkets or Lee Lee (“Lee Lee”). This Current Report on Form 8-K/A (this “Amendment”) amends and supplements Item 9.01 of the Original Form 8-K for the historical audited financial statements of Lee Lee, the historical unaudited interim financial statements of Lee Lee and the unaudited pro forma condensed combined financial information of the Company pursuant to Items 9.01(a) and 9.01(b) of Form 8-K that were excluded from the Original Form 8-K in reliance on the instructions to such items. Except as noted in this paragraph, no other information contained in the Original Form 8-K is amended or supplemented.
Document Period End Date	Apr. 04, 2024
Entity File Number	001-41720
Entity Registrant Name	Maison Solutions Inc.
Entity Central Index Key	0001892292
Entity Tax Identification Number	84-2498787
Entity Incorporation, State or Country Code	DE
Entity Address, Address Line One	127 N Garfield Ave
Entity Address, City or Town	Monterey Park
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	91754
City Area Code	626
Local Phone Number	737-5888
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Class A common stock, $0.0001 par value per share
Trading Symbol	MSS
Security Exchange Name	NASDAQ
Entity Emerging Growth Company	true
Elected Not To Use the Extended Transition Period	false

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