SYNERGY EMPIRE: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATIONS (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 requirements and use of such funds. 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 reports are made or to 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 restaurant chains 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. This phase, based on the critical state of health services, could last until the end of July.

Phase 2 – If more people are vaccinated, the use of intensive care beds is reduced to a moderate level; and as new cases fall below 4,000, the country will move on to the next phase which will allow more economic sectors to resume their activities.

Phase 3 – Once the daily cases were reduced to 2,000, the health system returned to a manageable level; Intensive care cases have been reduced to a sufficient number; and 40% of people have been vaccinated. All economic sectors will be allowed to operate and, above all, eating in restaurants and cafes will be allowed. This phase should start at the end of August.

Phase 4 – Once the number of daily cases drops to 500, the health system becomes safe as the intensive care cases become low enough; and 60% of people have been vaccinated. This phase should start at the end of October.

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 three months ended June 30, 2021 and 2020, the Company generated sales of $ 11,047 and $ 91,974. Income distribution as follows:


                                     Three months ended
                                           June 30
                                      2021          2020

Income on site and to take away $ 6,257 $ 59,066
Percentage of total turnover 56.64% 64.22%

Delivery Revenue                   $    4,790     $ 32,908

Percentage of total revenue 43.36% 35.78%

Total Revenue                      $   11,047     $ 91,974

Total Cost of Sales                $    3,989     $ 24,499

Total Gross Profit                 $    7,058     $ 67,475
Gross Profit Margin                     63.89 %      73.36 %




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The Company experienced a significant deterioration in the food delivery and in-place and take-out segment for several reasons. One being the closure of the four previous restaurants since September 2020 and the launch of two new restaurants at C180 and Sri Petaling which will start their activities in February and
June 2021, respectively for commercial rebranding and another being negatively affected by the Malaysian government-imposed COVID-19 movement control order.

General and administrative expenses

For the three months ended June 30, 2021 and 2020, the Company incurred general and administrative expenses of $ 121,868 and $ 101,202 respectively. Of which mainly made up of salaries, rental costs, utilities, depreciation, professional fees, repair and maintenance, as well as advertising and promotions.


                                                           Three months ended
                                                                 June 30
Primary expenses                                            2021          2020
Salary and salary related expenses                       $   53,472     $ 56,735

Percentage of general and administrative expenses 43.88% 56.06%

Lease expenses                                           $   20,597     $ 20,282

Percentage of general and administrative expenses 16.90% 20.04%

Utility expenses                                         $    6,236     $  9,916

Percentage of general and administrative expenses 5.12% 9.80%

Depreciation and amortization expenses                   $   19,473     $  6,832

Percentage of general and administrative costs 15.98% 6.75%

Professional expenses                                    $    6,647     $  2,606

Percentage of general and administrative costs 5.45% 2.58%

Repair and maintenance expenses                          $    2,988     $  1,627

Percentage of general and administrative expenses 2.45% 1.61%

Compliance expenses                                      $      736     $    200

Percentage of general and administrative expenses 0.60% 0.20%

Advertisement and promotion expenses                     $        -     $    928
Percentage towards General and Administrative Expenses            - %       0.92 %

Total primary expenses                                   $  110,149     $ 99,126

Percentage of general and administrative expenses 90.38% 97.95%

Miscellaneous expenses                                   $   11,719        2,076

Percentage of general and administrative expenses 9.62% 2.05%



Net Loss


For the three months ended June 30, 2021 and 2020, the Company incurred a net loss of $ 106,431 and $ 24,755 respectively.


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Liquidity and capital resources

Cash used in operating activities

For the three months ended June 30, 2021, the Company used $ 178,488 in operating activities mainly caused by net operating loss, the decrease in accrued liabilities and rental obligations against depreciation charges are added.

For the three months ended June 30, 2020, the Company used $ 33,978 in operating activities mainly caused by the net operating loss, the increase in prepayments and the decrease in trade payables, other debts and rental obligations against depreciation.

Cash used in investing activities

The Company has invested $ 31,775 in investment activity for the acquisition of new kitchen equipment, office equipment, renovation and trademark registration for the closed quarter June 30, 2021.

The Company has invested $ 701 in investment activity for the acquisition of new kitchen equipment for the closed quarter June 30, 2020.

Cash provided by fundraising activities

For the three months ended June 30, 2021, the Company reimbursed $ 3,773 bank loan.

For the three months ended June 30, 2020, the Company received $ 8,304 The cash flow from financing consists mainly of advances from directors and reimbursements to officers.

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 June 30, 2021.


Contractual Obligations


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



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