UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
The Quarterly Period Ended
or
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ____________ to ____________
Commission
File Number
(Exact name of registrant issuer as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
| Address of principal executive offices, including zip code |
| + |
| Registrant’s phone 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 on each exchange on which registered | ||
| N/A | N/A | N/A |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large Accelerated Filer ☐ | Accelerated Filer ☐ | Smaller
reporting company | |
| Emerging
growth company |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act).
Yes
☐
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
N/A
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
| Class | Outstanding shares as of November 12, 2021 | |
| Common Stock, $0.0001 par value |
TABLE OF CONTENTS
| 2 |
PART I — FINANCIAL INFORMATION
Item 1. Financial statements
SYNERGY EMPIRE LIMITED
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2021 AND MARCH 31, 2021
(Currency expressed in United States Dollars (“US$”), except for number of share)
As of September 30, 2021 | As of March 31, 2021 | |||||||
| (Unaudited) | (Audited) | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Trade receivables, net | ||||||||
| Prepaid expenses and deposits | ||||||||
| Inventories | ||||||||
| TOTAL CURRENT ASSETS | $ | $ | ||||||
| NON-CURRENT ASSETS | ||||||||
| Operating lease right of use asset, net | ||||||||
| Plant and equipment, net | ||||||||
| Intangible asset, net | - | |||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses and other payables | ||||||||
| Operating lease liability | ||||||||
| Bank borrowing | ||||||||
| Amount due to a director | ||||||||
| TOTAL CURRENT LIABILITIES | $ | $ | ||||||
| NON-CURRENT LIABILITIES | ||||||||
| Operating lease liability | ||||||||
| Bank borrowing | ||||||||
| TOTAL LIABILITIES | $ | $ | ||||||
| STOCKHOLDERS’ EQUITY | ||||||||
| Preferred stock – Par value $; Authorized: issued and outstanding | - | - | ||||||
| Common stock – Par value $; Authorized: Issued and outstanding: shares as of September 30, 2021 and March 31, 2021 respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| TOTAL STOCKHOLDERS’ DEFICIT | $ | ( | ) | $ | ( | ) | ||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | $ | ||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
| F-1 |
SYNERGY EMPIRE LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
FOR THE THREE AND SIX MONTHS ENDED SEPTEMBER 30, 2021 AND 2020
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(Unaudited)
| Three months ended September 30, | Six months ended September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| REVENUE | $ | $ | $ | $ | ||||||||||||
| COST AND EXPENSES: | ||||||||||||||||
| Cost of revenue | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| General and administrative expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total operating costs and expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income, Net | ||||||||||||||||
| Loss before income tax | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income tax expense | ||||||||||||||||
| Net Loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Foreign currency translation income/ (loss) | ( | ) | ( | ) | ||||||||||||
| Total comprehensive loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| NET LOSS PER SHARE, BASIC AND DILUTED | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING, BASIC AND DILUTED | ||||||||||||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
| F-2 |
SYNERGY EMPIRE LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE THREE AND SIX MONTHS ENDED SEPTEMBER 30, 2021 AND 2020
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(Unaudited)
| Common Stock | ||||||||||||||||||||||||
| NUMBER OF Shares | Amount | Additional Paid-in Capital | Accumulated DEFICIT | Accumulated comprehensive loss | Total STOCKHOLDERS EQUITY | |||||||||||||||||||
| Balance as of April 1, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||
| Net loss for the period | - | ( | ) | ( | ) | |||||||||||||||||||
| Foreign currency translation | - | |||||||||||||||||||||||
| Balance as of June 30, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||
| Net loss for the period | - | ( | ) | ( | ) | |||||||||||||||||||
| Foreign currency translation gain | - | |||||||||||||||||||||||
| Balance as of September 30, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||
| Common Stock | ||||||||||||||||||||||||
| NUMBER OF Shares | Amount | Additional Paid-in Capital | Accumulated DEFICIT | Accumulated comprehensive loss | Total STOCKHOLDERS EQUITY | |||||||||||||||||||
| Balance as of April 1, 2020 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||
| Net loss for the period | - | ( | ) | ( | ) | |||||||||||||||||||
| Foreign currency translation loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance as of June 30, 2020 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||
| Net loss for the period | - | ( | ) | ( | ) | |||||||||||||||||||
| Foreign currency translation loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance as of September 30, 2020 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||
See accompanying notes to consolidated financial statements
| F-3 |
SYNERGY EMPIRE LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR SIX MONTHS ENDED SEPTMEBER 30, 2021 AND 2020
(Currency expressed in United States Dollars (“US$”), except for number of shares)
For the Six Months Ended, September 30 | ||||||||
| 2021 | 2020 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities | ||||||||
| Depreciation expenses | ||||||||
| Disposal of fixed assets | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| (Increase)/Decrease in inventories | ( | ) | ||||||
| Increase in prepaid expenses | ( | ) | ( | ) | ||||
| Decrease in accounts payable | ( | ) | ( | ) | ||||
| Decrease in accrued liabilities | ( | ) | ( | ) | ||||
| Change in operating lease liability | ( | ) | ( | ) | ||||
| Net cash flows used in operating activities | $ | ( | ) | $ | ( | ) | ||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchase of plant and equipment | ( | ) | ( | ) | ||||
| Application of trademark | ( | ) | ||||||
| Sale proceeds from disposal of plant and equipment | ||||||||
| Net cash flows (used in)/provided by investing activities | $ | ( | ) | $ | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Repayment to from related parties | ( | ) | ||||||
| Advance from directors | ||||||||
| Principal repayments of bank loan | ( | ) | ||||||
| Net cash flows (used in)/provided by financing activities | $ | ( | ) | $ | ||||
| Effect of exchange rate changes in cash and cash equivalents | $ | $ | ||||||
| Net changes in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents, beginning of year | ||||||||
| CASH AND CASH EQUIVALENTS, END OF YEAR | $ | $ | ||||||
| SUPPLEMENTAL CASH FLOWS INFORMATION | ||||||||
| Income taxes paid | $ | $ | ||||||
| Interest paid | $ | $ | ||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
| F-4 |
SYNERGY EMPIRE LIMITED
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2021 AND 2020
(Currency expressed in United States Dollars (“US$”), except for number of shares)
1. ORGANIZATION AND BUSINESS BACKGROUND
Synergy Empire Limited (“the Company”) was incorporated under the laws of the State of Nevada on October 17, 2018. We have historically conducted our business through Lucky Star F&B Sdn. Bhd. and SH Dessert Sdn. Bhd, both are private limited liability company, incorporated in Malaysia.
On
January 16, 2019, the Company acquired
On
December 31, 2018, Synergy Empire Marshall acquired
On
February 21, 2019, Synergy Empire HK acquired
Lucky
Star acquired
On
February 26, 2021, Synergy Empire Marshall acquired
Mr. Leong Will Liam is the common director and major shareholder of the Company, Synergy Empire Marshall, Synergy Empire HK, Lucky Star and SH Dessert.
The Company, through its wholly owned subsidiaries, produce and distribute high quality dessert through Lucky Star and operate two restaurants through SH Dessert. Details of the Company’s subsidiaries:
| No. | Company Name | Domicile and Date of Incorporation | Particulars of Issued Capital | Principal Activities | ||||
| 1 | ||||||||
| 2 | ||||||||
| 3 |
| F-5 |
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
These accompanying financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”).
The accompanying financial statements include the accounts of the Company and its wholly-owned subsidiaries. Intercompany transactions and balances were eliminated in consolidation.
Below is the organization chart of the Group.
Use of Estimates
In preparing these financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheets and revenues and expenses during the years reported. Actual results may differ from these estimates.
Cash and Cash Equivalents
The Company considers short-term, highly liquid investments with an original maturity of 90 days or less to be cash equivalents.
Our
deposit in Malaysia is currently deposit in Public Bank Berhad and Standard Chartered Bank (Malaysia) Berhad, and there is a Perbadanan
Insurans Deposit Malaysia protects our eligible deposits held with bank in Malaysia which is members of the Scheme. The scheme will pay
a compensation up to a limit of Malaysia Ringgit (“MYR”)
Plant and Equipment
Plant and equipment are stated at cost, with depreciation and amortization provided using the straight-line method over the following periods:
| Asset Categories | Depreciation Periods | |
| Renovation | ||
| Office and kitchen equipment | ||
| Motor vehicle |
Intangible Asset
Intangible assets are stated at cost, with amortization provided using the straight-line method over the following periods:
| Asset Categories | Amortization Periods | |
| Trademark |
| F-6 |
Inventories
Inventories consisting of products available for sell, are stated at the lower of cost or market value. Cost of inventory is determined using the first-in, first-out (FIFO) method. Inventory reserve is recorded to write down the cost of inventory to the estimated market value due to slow-moving merchandise and damaged goods, which is dependent upon factors such as historical and forecasted consumer demand, and promotional environment. The Company takes ownership, risks and rewards of the products purchased. Write downs are recorded in cost of revenue in the consolidated statements of operations and comprehensive income (loss).
Revenue recognition
Revenue is generated through sale of goods and delivery services. Revenue is recognized when a customer obtains control of promised goods or services and is recognized in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The amount of revenue that is recorded reflects the consideration that the Company expects to receive in exchange for those goods and services. The Company applies the following five-step model in order to determine this amount:
(i) identification of the promised goods and services in the contract;
(ii) determination of whether the promised goods and services are performance obligations, including whether they are distinct in the context of the contract;
(iii) measurement of the transaction price, including the constraint on variable consideration;
(iv) allocation of the transaction price to the performance obligations; and
(v) recognition of revenue when (or as) the Company satisfies each performance obligation.
The Company adopted ASU 2014-09, Revenue from Contracts with Customers (Topic 606). Under Topic 606, the Company records revenue when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable and collectability is probable. The Company records revenue from the sale of product upon shipment or delivery of the products to the customer. The Company doesn’t allow return of the products purchased or refund unless the food delivered is spoilt.
Cost of revenue
Cost of revenue includes the purchase cost of raw material for manufacturing and distribute to customers and packing materials. It includes purchasing and receiving costs, internal transfer costs, other costs of distribution network, opening and closing inventory net off discount received and return outwards in cost of revenue.
Income tax expense
Income taxes are determined in accordance with the provisions of ASC Topic 740, “Income Taxes” (“ASC Topic 740”). Under this method, 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 basis. Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Any 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.
ASC
740 prescribes a comprehensive model for how companies should recognize, measure, present, and disclosed in their financial statements
uncertain tax positions taken or expected to be taken on a tax return. Under ASC 740,
The Company conducts major businesses in Malaysia and is subject to tax in their own jurisdictions. As a result of its business activities, the Company will file separate tax returns that are subject to examination by the foreign tax authorities.
| F-7 |
Foreign currencies translation
Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the statement of operations and comprehensive income (loss).
The functional currency of the Company is the United States Dollars (“US$”) and the accompanying financial statements have been expressed in US$. In addition, the Company’s subsidiary maintains its books and record in the respective local currency, Hong Kong Dollars (“HK$”) and Malaysian Ringgits (“MYR”), which is the respective functional currency as being the primary currency of the economic environment in which the entity operates.
In general, for consolidation purposes, assets and liabilities of its subsidiaries whose functional currency is not US$ are translated into US$, in accordance with ASC Topic 830-30, “Translation of Financial Statement”, using the exchange rate on the balance sheet date. Revenues and expenses are translated at average rates prevailing during the period. The gains and losses resulting from translation of financial statements of foreign subsidiary are recorded as a separate component of accumulated other comprehensive income.
Translation of amounts from the local currency of the Company into US$1 has been made at the following exchange rates for the respective periods:
For the six months ended September 30 | ||||||||
| 2021 | 2020 | |||||||
| Period-end MYR : US$1 exchange rate | ||||||||
| Period-average MYR : US$1 exchange rate | ||||||||
Related parties
Parties, which can be a corporation or individual, are considered to be 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 operating decisions. Companies are also considered to be related if they are subject to common control or common significant influence.
Fair value of financial instruments
The carrying value of the Company’s financial instruments: cash and cash equivalents, trade receivable, deposits and other receivables, amount due to related parties and other payables approximate at their fair values because of the short-term nature of these financial instruments.
The Company also follows the guidance of the ASC Topic 820-10, “Fair Value Measurements and Disclosures” (“ASC 820-10”), with respect to financial assets and liabilities that are measured at fair value. ASC 820-10 establishes a three-tier fair value hierarchy that prioritizes the inputs used in measuring fair value as follows:
Level 1 : Observable inputs such as quoted prices in active markets;
Level 2 : Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
Level 3 : Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
As of September 30, 2021 and 2020, the Company did not have any nonfinancial assets and liabilities that are recognized or disclosed at fair value in the financial statements, at least annually, on a recurring basis, nor did the Company have any assets or liabilities measured at fair value on a non-recurring basis.
The Company calculates net income/(loss) per share in accordance with ASC Topic 260, “Earnings per Share.” Basic income/(loss) per share is computed by dividing the net income/(loss) by the weighted-average number of common shares outstanding during the period. Diluted income per share is computed similar to basic income/(loss) per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common stock equivalents had been issued and if the additional common shares were dilutive.
| F-8 |
Recently Issued Accounting Standards
Recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future financial statements.
3. GOING CONCERN UNCERTAINTIES
The
accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The company having accumulated
deficit of $
For
the six months ended September 30, 2021 and 2020, the Company suffered from a net loss of $
For
the six months ended September 30, 2021 and 2020, the Company recorded operating cash outflows of $
Furthermore,
the Company recorded a negative working capital of $
The Company’s cash position is not significant to support the Company’s daily operations. While the Company believes in the viability of its strategy and in its ability to raise additional funds, there can be no assurances to that effect. The Company’s ability to continue as a going concern is dependent upon its ability to improve profitability and the ability to acquire financial support from its shareholder.
These and other factors raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that financial statements are issued. These financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result in the Company not being able to continue as a going concern.
4. PREPAID EXPENSES AND DEPOSITS
As of September 30, 2021 (Unaudited) | As of March 31, 2021 (Audited) | |||||||
| Rental deposits | $ | $ | ||||||
| Other deposits | - | |||||||
| Prepaid expenses | ||||||||
| Other receivables | ||||||||
| Total | $ | $ | ||||||
The rental deposits represent the deposit of the tenancy agreements.
Other deposits consist of deposit of copy machine, coffee machine and security deposits.
Prepaid expenses represent the deposit payments of public utilities, such as electricity, telephone, and water supplies.
Other receivables represent payment made on behalf of customers such as lorry rental and outstanding payment due from delivery platform.
5. INVENTORIES
As of September 30, 2021 (Unaudited) | As of March 31, 2021 (Audited) | |||||||
| Raw material, at cost | $ | $ | ||||||
| F-9 |
6. PLANT AND EQUIPMENT
As of (Unaudited) | As of March 31, 2021 (Audited) | |||||||
| Renovation | $ | $ | ||||||
| Office equipment | ||||||||
| Kitchen equipment | ||||||||
| Motor vehicle | ||||||||
| Total plant and equipment | $ | $ | ||||||
| Less: Accumulated depreciation | ( | ) | ( | ) | ||||
| Total plant and equipment | $ | $ | ||||||
For
the six months ended September 30, 2021, the Company has invested $
For
the six months ended September 30, 2020, the Company had invested $
Depreciation
expenses for six months ended September 30, 2021 and 2020 amounted to $
7. INTANGIBLE ASSET
As
of (Unaudited) | As of March 31, 2021 (Audited) | |||||||
| Trademark | $ | $ | ||||||
| Less: Accumulated depreciation | ( | ) | - | |||||
| Total plant and equipment | $ | $ | ||||||
On
May 11, 2021, the Company was granted approval by Intellectual Property Corporation of Malaysia for trademark application with
Amortization
expenses for the six months ended September 30, 2021 amounted to $
8. ACCRUED EXPENSES AND OTHER PAYABLES
As of September 30, 2021 (Unaudited) | As of March 31, 2021 (Audited) | |||||||
| Accrued expenses | $ | $ | ||||||
| Other payables | ||||||||
| Total | $ | $ | ||||||
Accrued expenses consist of accrued salary, rental, utilities bills, other expenses and professional fee.
Other payable consist of outstanding marketing expenses and sales and service tax payable.
| F-10 |
9. AMOUNT DUE TO A DIRECTOR
As
of March 31, 2021, the Company has an outstanding loan payable to Mr. Leong Will Liam amounted $
No transaction for the six months ended September 30, 2021, other than currency exchange fluctuation on balance outstanding.
As
of September 30, 2021, the Company has an outstanding loan payable to Mr. Leong Will Liam amounted $
Both aforementioned loans are unsecured, non-interest bearing and payable on demand.
| Amount due to director, Mr. Leong Will Liam thru Synergy Empire HK | ||||
| Balance as of March 31, 2021 | ||||
| Balance as of September 30, 2021 |
| Amount due to director, Mr. Leong Will Liam directly | ||||
| Balance as of March 31, 2021 | ||||
| Foreign currency translation | ||||
| Balance as of September 30, 2021 |
10. BANK BORROWING
On
January 25, 2017, Lucky Star F&B Sdn. Bhd., a wholly owned subsidiary of the Company has acquired a business loan from Standard Chartered
Saadiq Berhad, a bank incorporated in Malaysia, amounted to MYR
The outstanding balance of business loan as of September 30 and March 31, 2021 can be summarized as follow:
As of September 30, 2021 (Unaudited) | As of March 31, 2021 (Audited) | |||||||
| Bank borrowing (Current portion) | $ | $ | ||||||
| Bank borrowing (Non-current portion) | ||||||||
| Total | $ | $ | ||||||
For
the six months ended September 30, 2021, the Company repaid $
On April 1, 2020, Standard Chartered Saadiq Berhad announced to provide loan deferment to borrower for a period 6 months in supporting of Malaysia National Bank to ease financial pressure as a result of movement control order promulgated by Malaysia Government to contain the outbreak of COVID-19.
Pursuant
to the announcement, no instalment is required, and no penalty will be imposed during the 6 months period however additional non-compounding
interest will continue to accrue. As such, the Company has incurred additional interest of $
For
the six months ended September 30, 2020, the Company repaid $
| F-11 |
Maturities of the loan for each of the five years and thereafter are as follows:
| Year ending March 31 | ||||
| 2022 | $ | |||
| 2023 | $ | |||
| 2024 | $ | |||
| Total | $ | |||
11. LEASE - RIGHT-OF-USE ASSET AND LEASE LIABILITIES
| Right-Of-Use Assets | ||||
| Balance as of March 31, 2021 | ||||
| Amortization for the six months ended September 30, 2021 | ( | ) | ||
| Adjustment for discount rate | ||||
| Foreign exchange translation | ( | ) | ||
| Balance as of September 30, 2021 |
For
the six months ended September 30, 2021 and 2020, the amortization of the operating lease right of use asset amounted $
| Lease Liability | ||||
| Balance as of March 31, 2021 | ||||
| Imputed interest | ||||
| Gross repayment | ( | ) | ||
| Foreign exchange translation | ||||
| Balance as of September 30, 2021 | ||||
| Lease liability current portion | ||||
| Lease liability non-current portion | $ |
Maturities of operating lease obligation as follow:
| Year ending | ||||
| March 31, 2022 | ||||
| March 31, 2023 | ||||
| March 31, 2024 | ||||
| March 31, 2025 | ||||
| March 31, 2026 | ||||
| Total | $ |
Other information:
For the six months ended September 30 | ||||||||
| 2021 | 2020 | |||||||
| Cash paid for amounts included in the measurement of lease liabilities: | - | |||||||
| Operating cash flow to operating lease | $ | $ | ||||||
| Right-of-use assets obtained in exchange for operating lease liabilities | ||||||||
| Remaining lease term for operating lease (years) | ||||||||
| Weighted average discount rate for operating lease | % | % | ||||||
| F-12 |
12. CONCENTRATION OF RISK
| (a) | Major Customers |
For the three and six months ended September 30, 2021 and 2020, there was no customer who accounted for 10% or more of the Company’s revenues nor with significant outstanding receivables.
| (b) | Major Suppliers |
For the three and six months ended September 30, 2021 and 2020, there was no supplier who accounted for 10% or more of the Company’s purchases nor with significant outstanding payables.
13. INCOME TAXES
The income / (loss) before income taxes of the Company for the six months ended September 30, 2021 and 2020 were comprised of the following:
For the six months ended September 30 | ||||||||
| 2021 | 2020 | |||||||
| Tax jurisdictions from: | ||||||||
| – Local | $ | ( | ) | $ | ( | ) | ||
| – Foreign, representing: | ||||||||
| Marshall Islands (non-taxable jurisdiction) | ||||||||
| Hong Kong | ( | ) | ||||||
| Malaysia | ( | ) | ( | ) | ||||
| Loss before income taxes | $ | ( | ) | $ | ( | ) | ||
| F-13 |
Provision for income taxes consisted of the following:
As of September 30, 2021 | As of March 31, 2021 | |||||||
| Current: | ||||||||
| – Local | $ | $ | ||||||
| – Foreign: | ||||||||
| Marshall Islands (non-taxable jurisdiction) | ||||||||
| Hong Kong | ||||||||
| Malaysia | ||||||||
| Deferred: | ||||||||
| – Local | ||||||||
| – Foreign | ||||||||
| $ | $ |
The effective tax rate in the periods presented is the result of the mix of income earned in various tax jurisdictions that apply a broad range of income tax rates. During the periods presented, the Company has a number of subsidiaries that operates in different countries and is subject to tax in the jurisdictions in which its subsidiaries operate, as follows:
United States of America
Malaysia
For
the six months ended September 30, 2021, Lucky Star F&B Sdn. Bhd. and SH Desserts Sdn. Bhd. incurred a loss of $
As
of September 30, 2021, the operations in Malaysia generated $
| F-14 |
The following table sets forth the significant components of the aggregate deferred tax assets of the Company as of September 30, 2021 and March 31, 2021:
| As of | As of | |||||||
| September 30, 2020 | March 31, 2020 | |||||||
| Deferred tax assets: | ||||||||
| Net operating loss carryforwards | $ | $ | ||||||
| – United States of America | ||||||||
| – Marshall Islands | ||||||||
| – Malaysia | ||||||||
| Less: valuation allowance | ( | ) | ( | ) | ||||
| Deferred tax assets | $ | $ | ||||||
Management
believes that it is more likely than not that the deferred tax assets will not be fully realizable in the future. Accordingly, the Company
provided for a full valuation allowance against its deferred tax assets of $
14. STOCKHOLDERS’ EQUITY
On
October 17, 2018, the founder of the Company, Mr. Leong Will Liam purchased shares of restricted common stock of the Company
at $ per share for the Company’s initial working capital. Each share was with a par value of $
On
January 21, 2019, CBA Capital Holdings Sdn. Bhd. waived an interest-free loan of $
On
December 30, 2020, the Company resolved to close the offering from the registration statement on Form S-1/A, dated February 25, 2020,
that had been declared effective by the Securities and Exchange Commission on March 10, 2020. The Offering resulting in shares
of common stock being sold at $ per share for a total of $
15. FOREIGN CURRENCY EXCHANGE RATE
The Company cannot guarantee that the current exchange rate will remain stable, therefore there is a possibility that the Company could post the same amount of income for two comparable periods and because of the fluctuating exchange rate post higher or lower income depending on exchange rate converted into US$ at the end of the financial year. The exchange rate could fluctuate depending on changes in political and economic environments without notice.
16. SUBSEQUENT EVENTS
In accordance with ASC Topic 855, “Subsequent Events”, which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued, the Company has evaluated all events or transactions that occurred after September 30, 2021 up through the date the Company presented these unaudited financial statements.
| F-15 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The information contained in this quarter report on Form 10-Q is intended to update the information contained in our Form 10-K dated June 29, 2021, for the year ended March 31, 2021 and presumes that readers have access to, and will have read, the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other information contained in such Form 10-K. The following discussion and analysis also should be read together with our financial statements and the notes to the financial statements included elsewhere in this Form 10-Q.
Certain statements in this Report constitute forward-looking statements. These forward-looking statements include statements, which involve risks and uncertainties, regarding, among other things, (a) our projected sales, profitability, and cash flows, (b) our growth strategy, (c) anticipated trends in our industry, (d) our future financing plans, and (e) our anticipated needs for, and use of, working capital. They are generally identifiable by use of the words “may,” “will,” “should,” “anticipate,” “estimate,” “plan,” “potential,” “project,” “continuing,” “ongoing,” “expects,” “management believes,” “we believe,” “we intend,” or the negative of these words or other variations on these words or comparable terminology. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this filing will in fact occur. You should not place undue reliance on these forward-looking statements.
The forward-looking statements speak only as of the date on which they are made, and, except to the extent required by federal securities laws, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date on which the statements are made or to reflect the occurrence of unanticipated events.
Overview
We share the same business plan as that of our subsidiaries. We are engaged in the production and sale of food products, specifically dessert created and sold through various restaurants that we operate in Malaysia. We sell our goods under our brand name “Sweet Hut.” We have two dessert restaurant and one central kitchen.
It is worth highlighting that, on 15 June 2021, Malaysia Government introduced a four-phase National Recovery Plan (herein and after referred the “NRP”) to help the country emerge from the COVID-19 pandemic and its economic fallout. As each phase is based on the number of new cases, people requiring ICU treatment, and vaccination rates, it can be extended, or moved on to the next phase, whenever possible.
Phase 1 - Conditions are the same as “total lockdown” launched from 1 June 2021. No social gatherings, dine-in eating at restaurants, interstate travel and non-essential services are permitted. Any remaining workplaces are required to have their workers work from their homes. Phase 1 ended on September 10, 2021 for states the Company restaurant operates in and on October 1, 2021, entire nation move to phase 2.
Phase 2 – Allows Dine-in, gathering up to 5 people for fully vaccinated individual or 2 people for non-vaccinated individual including off-mask activities. Phase 2 ended on October 1, 2021 for states the Company restaurant operates in.
Phase 3 – Allow gathering up to 8 people for fully vaccinated individual or 5 people for non-vaccinated individual, all economic sectors will be allowed, excluding those with large crowds such as conventions and bars. Phase 3 ended on October 18, 2021 for states the Company restaurant operates in.
Phase 4 – No headcount restriction on gathering.
The Company’s central kitchen and two restaurants were and will continue to operate throughout each phases of NRP.
Results of Operations
For the six months ended September 30, 2021 and 2020, the Company has generated a revenue of $27,883 and $139,463, respectively, with a decrement of 80.00% Y-O-Y. Breakdown of revenue as following:
Three months ended September 30 | Six months ended September 30 | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Dine-In and Take Away Revenue | $ | 1,502 | $ | 30,316 | $ | 7,759 | $ | 88,905 | ||||||||
| Percentage towards Total Revenue | 8.92 | % | 63.84 | % | 27.83 | % | 63.75 | % | ||||||||
| Delivery Revenue | $ | 15,335 | $ | 17,173 | $ | 20,124 | $ | 50,558 | ||||||||
| Percentage towards Total Revenue | 91.08 | % | 36.16 | % | 72.17 | % | 36.25 | % | ||||||||
| Total Revenue | $ | 16,837 | $ | 47,489 | $ | 27,883 | $ | 139,463 | ||||||||
| Total Cost of Sales | $ | (6,732 | ) | $ | (17,485 | ) | $ | (10,721 | ) | $ | (41,984 | ) | ||||
| Total Gross Profit | $ | 10,105 | $ | 30,004 | $ | 17,162 | $ | 97,479 | ||||||||
| Gross Profit Margin | 60.02 | % | 63.17 | % | 61.55 | % | 69.90 | % | ||||||||
| 3 |
Revenue for the Three Months ended September 30, 2021 and 2020
Dine-in and take away revenue decline from $30,316 for the three months ended September 30, 2020 to $1,502 for the three months ended September 30, 2021 for a declination rate of approximately 95%. Declination in dine-in revenue primarily due to the implementation NRP, which discourage nearby residents to travel beyond restricted area for dining and take away thusly.
Delivery revenue decline from $17,173 for the three months ended September 30, 2020 to $15,335 for the three months ended September 30, 2020 for a declination rate of approximately 11%.
Total revenue declined from $47,489 for the three months ended September 30, 2020 to $16,837 for the three months ended September 30, 2021 for a declination rate of approximately 65% which primarily caused by declined in dine-in and take away revenue.
Revenue for the Six Months ended September 30, 2021 and 2020
Dine-in and take away decrease from $88,905 for the six months ended September 30, 2020 to $7,759 for the six months ended September 30, 2020, for a declination rate of 91%. Declination in dine-in revenue primarily due to the implementation NRP, which discourage nearby residents to travel beyond restricted area for dining and take away thusly.
Delivery revenue decrease from $50,558 for the six months ended September 30, 2020 to $30,434 for the six months ended September 30, 2021 for a declination rate of 60%.
Total revenue increased from $139,463 for the six months ended September 30, 2020 to $27,883 for the six months ended September 30, 2021 for a declination rate of 80%. Declination in revenue is primarily caused by declination in dine-in and take away revenue.
The Company expect, through relaxation of dine-in and gathering restriction, should expect a slow but gradual recovery in consumer confidence in consumption in public space, and revenue of the Company thusly.
Gross Profit
The Company gross profit margin has decreased marginally from 63.17% for the three months ended September 30, 2020 to 60.02% for the three months ended September 30, 2021, while, gross profit margin decreased marginally from 69.90% for the six months ended September 30, 2020 to 61.55% for the six months ended September 30, 2021.
As a result, gross profit for the three months ended September 30, 2020 decreased from $30,004 to $10,105 for the three months ended September 30, 2021 for a declination rate of 66%, while gross profit for the six months ended September 30, 2020 decreased from $97,479 to $17,162 for the six months ended September 30, 2021 for a declination rate of 82%.
General and Administrative Expenses
For the six months ended September 30, 2021 and 2020, the Company has incurred a general and administrative expenses of $259,265 and $192,529 respectively. Of which primarily consist of salary, lease expenses, utilities, depreciation, professional fees and repair and maintenance and advertisement and promotions.
Six months ended September 30 | ||||||||
| Primary expenses | 2021 | 2020 | ||||||
| Salary and salary related expenses | $ | 122,374 | $ | 114,218 | ||||
| Percentage towards General and Administrative Expenses | 47.20 | % | 56.35 | % | ||||
| Lease expenses | $ | 40,879 | $ | 41,152 | ||||
| Percentage towards General and Administrative Expenses | 15.77 | % | 20.31 | % | ||||
| Utility expenses | $ | 12,693 | $ | 17,758 | ||||
| Percentage towards General and Administrative Expenses | 4.90 | % | 8.76 | % | ||||
| Depreciation expenses | $ | 39,057 | $ | 13,876 | ||||
| Percentage towards General and Administrative Expenses | 15.06 | % | 6.85 | % | ||||
| Professional expenses | $ | 16,068 | $ | 5,000 | ||||
| Percentage towards General and Administrative Expenses | 6.20 | % | 2.47 | % | ||||
| Repair and maintenance expenses | $ | 6,093 | $ | 3,469 | ||||
| Percentage towards General and Administrative Expenses | 2.35 | % | 1.71 | % | ||||
| Compliance expenses | $ | 3,059 | $ | 1,415 | ||||
| Percentage towards general and administrative expenses | 1.18 | % | 0.70 | % | ||||
| Advertisement and promotion expenses | $ | - | $ | 941 | ||||
| Percentage towards General and Administrative Expenses | 0.00 | % | 0.46 | % | ||||
| Total primary expenses | $ | 240,223 | $ | 197,829 | ||||
| Percentage towards General and Administrative Expenses | 92.66 | % | 97.62 | % | ||||
| Miscellaneous expenses | $ | 19,042 | $ | 4,821 | ||||
| Percentage towards General and Administrative Expenses | 7.34 | % | 2.38 | % | ||||
| Gain on disposal of motor vehicle | $ | - | $ | (10,121 | ) | |||
| Total General and Administrative Expenses | $ | 259,265 | $ | 192,529 | ||||
Net Loss
For the six months ended September 30, 2021 and 2020, the Company has incurred a net loss of $220,587 and $81,721 respectively.
Foreign Currency Exposure
The Company cannot guarantee that the current exchange rate will remain stable, therefore there is a possibility that the Company could post the same amount of income for two comparable periods and because of the fluctuating exchange rate post higher or lower income depending on exchange rate converted into US$ at the end of the financial year. The exchange rate could fluctuate depending on changes in political and economic environments without notice.
| 4 |
Liquidity and Capital Resources
Cash Used In Operating Activities
For the six months ended September 30, 2021, the Company has used $286,703 in operating activities caused by net loss from operating, increase in inventories, prepayment, decrease in account payable, accrued liabilities and lease liability contra by depreciation.
For the six months ended September 30, 2020, the Company has used $86,600 in operating activities primarily caused by net loss from operating, increase in prepayment and decrease in trade payable, other payable, lease liability and reclassification of gain from disposal of fixed assets to investing cashflow contra by depreciation and decrease in inventories.
Cash Used in Investing Activities
The Company has invested $33,238 in investing activity for the acquisition of new kitchen equipment, office equipment, renovation and application of trademark for the six months ended September 30, 2021.
The Company has invested $1,699 in investing activity for the acquisition of new kitchen equipment and received $10,121 from disposing fully depreciated motor vehicle, netting a $8,422 net proceed from investing cash flow for the six months ended September 30, 2020.
Cash Provided by Financing Activities
For the six months ended September 30, 2021, the Company received $5,984 of advances from director and repaid $7,590 to bank loan.
For the six months ended September 30, 2020, the Company received $80,954 from financing cash flow primarily consist of advances from director and increase in bank loan due compounding interest charged during MCO contra by repayment to officer.
Off-balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our stockholders as of September 30, 2021.
Contractual Obligations
As of September 30, 2021, the Company has no contractual obligations involved.
| 5 |
ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.
ITEM 4 CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures:
We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of September 30, 2021. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2021, our disclosure controls and procedures were not effective due to the presence of 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 the company’s annual or interim financial statements will not be prevented or detected on a timely basis. Management has identified the following material weaknesses which have caused management to conclude that, as of September 30, 2021, our disclosure controls and procedures were not effective: (1) lack of a functioning audit committee due to a lack of a majority of independent members and a lack of a majority of outside directors on our board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; (2) inadequate segregation of duties and effective risk assessment; (3) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines; and (4) lack of internal audit function due to the fact that the Company lacks qualified resources to perform the internal audit functions properly and that the scope and effectiveness of the internal audit function are yet to be developed.
Changes in Internal Control Over Financial Reporting:
There were no changes in our internal control over financial reporting during the quarter ending September 30, 2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
| 6 |
PART II — OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we may become party to litigation or other legal proceedings that we consider to be a part of the ordinary course of our business. We are not currently involved in legal proceedings that could reasonably be expected to have a material adverse effect on our business, prospects, financial condition or results of operations. We may become involved in material legal proceedings in the future.
Item 1A. Risk Factors
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
(a) None.
(b) None.
(c) None.
Item 3. Defaults Upon Senior Securities
(a) None.
(b) None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information.
None.
Item 6. Exhibits
| 31.1 | Rule 13(a)-14(a) / 15(d)-14(a) Certification of principal executive officer and principal financial officer | |
| 32.1 | Section 1350 Certification of principal executive officer and principal financial officer | |
| 101.INS | Inline XBRL Instance Document | |
| 101.SCH | 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 (embedded within the Inline XBRL document) |
| 7 |
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.
| SYNERGY EMPIRE LIMITED | ||
| (Name of Registrant) | ||
| Date: November 12, 2021 | ||
| By: | /s/ Law Jia Ming | |
| Name: | Law Jia Ming | |
| Title: | Chief Executive Officer, Chief Financial Officer | |
| 8 |