SYNERGY EMPIRE LTD MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND OPERATING RESULTS (Form 10-Q)

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The information contained in this quarterly report on Form 10-Q is intended to update the information contained in our dated Form 10-K. June 29, 2021, for the year ended March 31, 2021 and assumes that readers have access to, and will have read, the “Management’s Review and Analysis of the Financial Condition and Results of Operations” and other information contained in this Form 10-K. The following discussion and analysis should also be read in conjunction with our financial statements and the notes to financial statements included elsewhere in this Form 10-Q.

Certain statements contained in this report constitute forward-looking statements. These forward-looking statements include statements, which involve risks and uncertainties, concerning, among other things, (a) our sales, profitability and cash flow forecasts, (b) our growth strategy, (c) expected trends in our industry, (d) our future financing plans, and (e) our anticipated working capital needs and uses. They are generally identified by the use of the words “may”, “will”, “should”, “anticipate”, “estimate”, “plan”, “potential”, “project”, “continue”, “in progress”. , “expect”, “management believes”, “we believe”, “we intend” or the negative of these words or other variations of 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 report will actually occur. You should not place undue reliance on these forward-looking statements.

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 do not undertake to update any forward-looking statements to reflect events or developments. circumstances subsequent to the date on which the statements are made or reflect the occurrence of unforeseen events.


Overview


We share the same business plan as that of our subsidiaries. We are engaged in the production and sale of food products, especially desserts created and sold by various restaurants in which we operate. Malaysia. We sell our products under our “Sweet Hut” brand. We have two dessert restaurants and a central kitchen.

It should be noted that on June 15, 2021, the government of Malaysia presented a four-phase national recovery plan (hereinafter referred to as the “PNR”) 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 intensive care treatment and vaccination rates, it can be extended or move on to the next phase, if possible.

Phase 1 – Conditions are the same as “full containment” initiated from June 1, 2021. Social gatherings, dining out, interstate travel, and non-essential services are not permitted. All remaining workplaces are required to have their workers work from home. Phase 1 ended on September 10, 2021
for states, the company’s restaurant operates in and on October 1, 2021, the entire nation moves on to phase 2.

Phase 2 – Allows dinner on site, gathering up to 5 people for a fully vaccinated person or 2 people for an unvaccinated person, including mask-less activities. Phase 2 ended on October 1, 2021 for the states in which the company’s restaurant operates.

Phase 3 – Allowing a gathering of up to 8 people for a fully vaccinated individual or 5 people for an unvaccinated individual, all economic sectors will be allowed, except those with high attendance such as conventions and bars. Phase 3 ended on
October 18, 2021 for the states in which the company’s restaurant operates.

Phase 4 – No number restriction on the collection.

The company’s central kitchen and two restaurants were and will continue to operate throughout each phase of the NRP.


Results of Operations


For the past six months September 30, 2021 and 2020, the Company generated sales of $ 27,883 and $ 139,463, respectively, with a decrement of 80.00% YOY. Income distribution as follows:


                                     Three months ended           Six months ended
                                        September 30                September 30
                                     2021          2020          2021          2020

Income on site and to take away $ 1,502 $ 30,316 $ 7,759 $ 88,905
Percentage of total income 8.92% 63.84% 27.83% 63.75%

Delivery Revenue                   $  15,335     $  17,173     $  20,124     $  50,558

Percentage of total income 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 %




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Revenue for the three months ended September 30, 2021 and 2020

Decrease in income from on-site and take-out meals $ 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 about 95%. Decline in income from on-site meals mainly due to the implementation of the PNR, which discourages nearby residents from traveling beyond the restricted area to eat and take out as well.

Decrease in delivery revenues 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 about 11%.

Total turnover increased from $ 47,489 for the three months ended September 30, 2020 To $ 16,837 for the three months ended September 30, 2021 for a decline rate of around 65% which is mainly caused by the decline in restaurant and take-out food receipts.

Turnover for the half-year ended September 30, 2021 and 2020

Dine in and take away drop $ 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%. Decline in income from on-site meals mainly due to the implementation of the PNR, which discourages nearby residents from traveling beyond the restricted area to eat and take out as well.

Delivery revenues decrease by $ 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 turnover 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%. The decrease in income is mainly caused by the decline in restaurant and take-out food receipts.

The Company expects, thanks to the relaxation of catering and gathering restrictions, a slow but gradual recovery in consumer confidence in consumption in the public space, and therefore in the Company’s revenues.


Gross Profit


The Company’s gross profit margin slightly decreased by 63.17% for the three months ended September 30, 2020 at 60.02% for the three months ended
September 30, 2021, while the gross profit margin slightly decreased by 69.90% for the six months ended September 30, 2020 at 61.55% for the six months ended
September 30, 2021.

As a result, the gross margin for the three months ended September 30, 2020
decreased by $ 30,004 To $ 10,105 for the three months ended September 30, 2021
for a declination rate of 66%, while the gross margin for the half-year ended
September 30, 2020 decreased by $ 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 past six months September 30, 2021 and 2020, the Company incurred general and administrative expenses of $ 259,265 and $ 192,529 respectively. Of which mainly made up of salaries, rental costs, utilities, depreciation, professional fees, repair and maintenance, as well as advertising and promotions.


                                                            Six months ended
                                                              September 30
Primary expenses                                           2021          2020
Salary and salary related expenses                       $ 122,374     $ 114,218

Percentage of general and administrative costs 47.20% 56.35%

Lease expenses                                           $  40,879     $  41,152

Percentage of general and administrative costs 15.77% 20.31%

Utility expenses                                         $  12,693     $  17,758

Percentage of general and administrative expenses 4.90% 8.76%

Depreciation expenses                                    $  39,057     $  13,876

Percentage of general and administrative costs 15.06% 6.85%

Professional expenses                                    $  16,068     $   5,000

Percentage of general and administrative expenses 6.20% 2.47%

Repair and maintenance expenses                          $   6,093     $   3,469

Percentage of general and administrative expenses 2.35% 1.71%

Compliance expenses                                      $   3,059     $   1,415

Percentage of general and administrative expenses 1.18% 0.70%

Advertisement and promotion expenses                     $       -     $     941

Percentage of general and administrative costs 0.00% 0.46%

Total primary expenses                                   $ 240,223     $ 197,829

Percentage of general and administrative expenses 92.66% 97.62%

Miscellaneous expenses                                   $  19,042     $   4,821

Percentage of general and administrative costs 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 past six months September 30, 2021 and 2020, the Company 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 it is possible that the Company may record the same amount of income for two comparable periods and due to the fluctuation of the exchange rate after higher or lower income depending on the exchange rate converted to US $ at year end. The exchange rate may fluctuate depending on the changing political and economic environment without notice.


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Liquidity and capital resources

Cash used in operating activities

For the past six months September 30, 2021, the Company used $ 286,703 in operating activities caused by net operating loss, increase in inventories, prepayments, decrease in accounts payable, accrued liabilities and rental charges against depreciation.

For the past six months September 30, 2020, the Company used $ 86,600 in operating activities mainly caused by the net operating loss, the increase in prepayments and the decrease in trade payables, other payables, lease obligations and the reclassification of the gain on disposal of fixed assets as cash flow investment against depreciation and depletion of stocks.

Cash used in investing activities

The Company has invested $ 33,238 in investment activity for the acquisition of new kitchen equipment, office equipment, renovation and trademark registration for the half-year ended September 30, 2021.

The Company has invested $ 1,699 in investment activity for the acquisition of new kitchen equipment and receipt $ 10,121 the sale of a fully depreciated motor vehicle, compensation for a $ 8,422 net income from the investment cash flow for the six months ended September 30, 2020.

Cash provided by fundraising activities

For the past six months September 30, 2021, the Company received $ 5,984 advances from the director and reimbursed $ 7,590 bank loan.

For the past six months September 30, 2020, the Company received $ 80,954 The cash flow from the financing consists mainly of advances from the director and an increase in the bank loan due to the compound interest charged during the counterpart of the MCO by the reimbursement to the director.

Off-balance sheet provisions

We have no material off-balance sheet arrangement that has or is reasonably likely to have a current or future effect on our financial condition, changes in our financial condition, income or expenses, results of operations, liquidity, our capital expenditures or our capital resources which are material to our shareholders as of September 30, 2021.


Contractual Obligations


From September 30, 2021, the Company has no contractual obligation involved.



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