NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED JUNE 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 100% of the equity interests of Synergy Empire Holding Limited, a company incorporated in Republic
of the Marshall Islands (“Synergy Empire Marshall”).
On
December 31, 2018, Synergy Empire Marshall acquired 100% of Synergy Empire Limited, a limited liability company incorporated in Hong
Kong (“Synergy Empire HK”).
On
February 21, 2019, Synergy Empire HK acquired 100% of the equity interests of Lucky Star F&B Sdn. Bhd., a limited liability company
incorporated in Malaysia (“Lucky Star”).
Lucky
Star acquired 100% of the equity interests of SH Dessert Sdn. Bhd., a limited liability company incorporated in Malaysia (“SH Dessert”)
by Lucky Star on February 19, 2016.
On
February 26, 2021, Synergy Empire Marshall acquired 100% of Lucky Star F&B Sdn. Bhd from Synergy Empire HK. Subsequently on March
31, 2021, Mr. Leong Will Liam acquired 100% of Synergy Empire HK, as such Synergy Empire HK is no longer a subsidiary of the Company.
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:
SCHEDULE OF COMPANY'S SUBSIDIARIES
No.
|
|
|
Company
Name
|
|
Domicile
and Date of Incorporation
|
|
Particulars
of Issued
Capital
|
|
Principal
Activities
|
|
1
|
|
|
Synergy Empire Holding Limited
|
|
Marshall Islands, October 22,
2018
|
|
1 Share of Ordinary Share, US$1
each
|
|
Investment Holding
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
Lucky Star F&B Sdn. Bhd.
|
|
Malaysia, February 9, 2010
|
|
100,000 Share of Ordinary Share, MYR1 each
|
|
Dessert Producer and Distributor
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
SH Dessert Sdn. Bhd.
|
|
Malaysia, February 19, 2016
|
|
100 Share of Ordinary Share, MYR1 each
|
|
Restaurant Operator
|
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”) 250,000 per deposit per member bank, which is equivalent to $60,218,
if the aforementioned banks fails.
Plant
and Equipment
Plant
and equipment are stated at cost, with depreciation provided using the straight-line method over the following periods:
SCHEDULE OF DEPRECIATION AND AMORTIZATION PERIODS OF PLANT AND EQUIPMENT
Asset
Categories
|
|
Depreciation
Periods
|
Renovation
|
|
over
the remaining lease period
|
Office
and kitchen equipment
|
|
10
years
|
Motor
vehicle
|
|
5
years
|
Intangible Asset
Intangible assets are stated at cost, with amortization
provided using the straight-line method over the following periods:
SCHEDULE OF AMORTIZATION PERIOD OF INTANGIBLE ASSET
Asset Categories
|
|
Amortization Periods
|
Trademark
|
|
10 years
|
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, tax positions must initially be recognized in the
financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax
positions must initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50% likelihood of
being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts.
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.
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$. In addition, the Company’s subsidiary maintains its books and record in Malaysian Ringgits (“MYR”)
and United States Dollars (“US$”), 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:
SCHEDULE OF EXCHANGE RATE TRANSLATION OF AMOUNTS FROM LOCAL CURRENCY
|
|
For
the three months ended
June
30
|
|
|
|
2021
|
|
|
2020
|
|
Period-end MYR : US$1 exchange
rate
|
|
|
4.15
|
|
|
|
4.28
|
|
Period-average MYR : US$1 exchange rate
|
|
|
4.12
|
|
|
|
4.31
|
|
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 June 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.
Net
Income/(Loss) per Share
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.
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 $1,262,694 and $1,156,263 as of June 30, 2021 and March 31, 2021 respectively.
For
the three months ended June 30, 2021 and 2020, the Company suffered from a net loss of $ 106,431 and $24,755 respectively.
Furthermore,
the Company recorded a negative working capital of $891,977 and $769,069 as of as of June 30, 2021 and March 31, 2021 respectively.
The
Company’s cash position is not sufficient 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
SCHEDULE OF PREPAID EXPENSES AND DEPOSITS
|
|
As
of
June
30, 2021
|
|
|
As
of
March
31, 2021
|
|
Rental deposits
|
|
$
|
22,329
|
|
|
$
|
23,951
|
|
Other deposits
|
|
|
1,618
|
|
|
|
-
|
|
Prepaid expenses
|
|
|
870
|
|
|
|
1,017
|
|
Other receivables
|
|
|
1,633
|
|
|
|
1,419
|
|
Total
|
|
$
|
26,450
|
|
|
$
|
26,387
|
|
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, water supplies.
Other
receivables represent payment made on behalf of customers such as lorry rental and outstanding payment due from delivery platform.
5.
INVENTORIES
SCHEDULE OF INVENTORIES
|
|
As
of
June
30, 2021
|
|
|
As
of
March
31, 2021
|
|
Raw
material, at cost
|
|
$
|
12,810
|
|
|
$
|
11,482
|
|
|
|
|
|
|
|
|
|
|
6.
PLANT AND EQUIPMENT
SCHEDULE OF PLANT AND EQUIPMENT
|
|
As
of June 30, 2021
|
|
|
As
of March 31, 2021
|
|
Renovation
|
|
$
|
362,637
|
|
|
$
|
354,963
|
|
Office equipment
|
|
|
37,239
|
|
|
|
21,741
|
|
Kitchen equipment
|
|
|
21,419
|
|
|
|
15,457
|
|
Motor vehicle
|
|
|
11,803
|
|
|
|
11,828
|
|
Total plant and equipment
|
|
$
|
433,098
|
|
|
$
|
403,989
|
|
Less: Accumulated depreciation
|
|
|
(94,898
|
)
|
|
|
(75,744
|
)
|
Total plant and equipment
|
|
$
|
338,200
|
|
|
$
|
328,245
|
|
For
the three months ended June 30, 2021, the Company has invested $6,036
in kitchen equipment, $8,499
in renovations and $15,649
in office equipment respectively.
For
the three months ended June 30, 2020, the Company had invested $700 into kitchen equipment.
Depreciation
expenses for three months ended June 30, 2021 and 2020 amounted to $19,446 and $6,831 respectively.
7.
ACCRUED EXPENSES AND OTHER PAYABLES
SCHEDULE OF ACCRUED EXPENSES AND OTHER PAYABLES
|
|
As
of June 30, 2021
|
|
|
As
of March 31, 2021
|
|
Accrued expenses
|
|
$
|
43,500
|
|
|
$
|
35,066
|
|
Other payables
|
|
|
37,816
|
|
|
|
135,383
|
|
Total
|
|
$
|
81,316
|
|
|
$
|
170,449
|
|
Accrued
expenses consist of accrued salary, rental, utilities bills and professional fee.
Other
payable consist of outstanding marketing expenses, renovation payment and sales and service tax payable.
8.
AMOUNT DUE TO A DIRECTOR
As
of March 31, 2021, the Company has an outstanding loan payable to Mr. Leong Will Liam amounted $894,480. Of which including an amount
due to Synergy Empire HK, amounted $24,822. No transaction for the three months ended June 30, 2021.
Both
aforementioned loans are unsecured, non-interest bearing and payable on demand.
SCHEDULE OF AMOUNT DUE TO DIRECTORS
Amount due to director, Mr. Leong Will Liam
|
|
|
|
Balance as of March 31, 2021
|
|
|
869,658
|
|
Foreign currency translation
|
|
|
1,739
|
|
Balance as of June 30, 2021
|
|
|
867,919
|
|
Balance as of June 30,
2021 - Amount due to Synergy Empire HK
|
|
|
24,822
|
|
Balance as of June 30,
2021 - Total amount due to director
|
|
|
892,741
|
|
9.
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 MYR342,834 (approximately $83,972) at annual interest of 6.00% accrue in
arrear, for a repayment period of 72 months with interest bearing monthly installment of MYR6,473 (approximately $1,585) which is the
sole bank borrowing by the Company.
The
outstanding balance of business loan as of June 30 and March 31, 2021 can be summarized as follow:
SUMMARY OF OUTSTANDING BALANCE OF BUSINESS LOANS
|
|
As of June 30,
2021
|
|
|
As of March 31,
2021
|
|
Bank borrowing (Current portion)
|
|
$
|
15,931
|
|
|
$
|
15,559
|
|
Bank borrowing (Non-current
portion)
|
|
|
21,625
|
|
|
|
25,836
|
|
Total
|
|
$
|
37,556
|
|
|
$
|
41,395
|
|
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
$2,141 interest expenses. The last repayment is expected on August 2023.
For
the three months ended June 30, 2021, the Company repaid $3,773 in bank borrowings.
For
the three months ended June 30, 2020, the Company repaid $1,116 while incurring additional $1,194 interest in loan deferment.
Maturities
of the loan for each of the three years and thereafter are as follows:
SCHEDULE OF MATURITIES OF LOAN
Year ending March 31
|
|
|
|
|
|
|
|
2022
|
|
$
|
11,796
|
|
2023
|
|
$
|
17,151
|
|
2024
|
|
$
|
8,609
|
|
Total
|
|
$
|
37,556
|
|
10.
LEASE RIGHT-OF-USE ASSET AND LEASE LIABILITIES
SCHEDULE OF OPERATING LEASE RIGHT-OF-USE AND LEASE LIABILITIES
Right-Of-Use Assets
|
|
|
|
|
Balance as of March 31, 2021
|
|
|
308,919
|
|
Amortization for the three months ended June 30, 2021
|
|
|
(16,222
|
)
|
Adjustment for discount rate
|
|
|
5,121
|
|
Foreign exchange
translation
|
|
|
(563
|
)
|
Balance as of June
30, 2021
|
|
|
297,255
|
|
For
the three months ended June 30, 2021 and 2020, the amortization of the operating lease right of use asset amounted $16,222 and $18,167,
respectively.
Lease Liability
|
|
|
|
|
Balance as of March 31, 2021
|
|
|
312,635
|
|
Imputed interest
|
|
|
4,375
|
|
Gross repayment
|
|
|
(20,295
|
)
|
Foreign exchange
translation
|
|
|
(36,042
|
)
|
Balance as of June 30, 2021
|
|
|
301,263
|
|
Lease
liability current portion
|
|
|
66,843
|
|
Lease liability non-current
portion
|
|
$
|
234,420
|
|
Maturities
of operating lease obligation as follow:
SCHEDULE OF MATURITIES OF OPERATING LEASE OBLIGATION
Year
ending
|
|
|
2021
|
|
March
31, 2022
|
|
|
49,327
|
|
March
31, 2023
|
|
|
71,596
|
|
March
31, 2024
|
|
|
72,546
|
|
March
31, 2025
|
|
|
72,383
|
|
March
31, 2026
|
|
|
35,411
|
|
Total
|
|
$
|
301,263
|
|
Other
information:
SCHEDULE OF LEASE OTHER INFORMATION
|
|
For the three months ended
June 30
|
|
|
|
2021
|
|
|
2020
|
|
Cash paid for amounts included in the measurement of lease liabilities:
|
|
|
|
|
|
|
-
|
|
Operating cash flow to operating lease
|
|
$
|
20,597
|
|
|
$
|
17,684
|
|
Right-of-use assets obtained in exchange for operating lease liabilities
|
|
|
-
|
|
|
|
-
|
|
Remaining lease term for operating lease (years)
|
|
|
4.14
|
|
|
|
4.55
|
|
Weighted average discount rate for operating lease
|
|
|
5.70
|
%
|
|
|
6.65
|
%
|
11.
CONCENTRATION OF RISK
For
the three months ended June 30, 2021 and 2020, there was no customer who accounted for 10% or more of the Company’s revenues nor
with significant outstanding receivables.
For
the three months ended June 30, 2021 and 2020, there was no supplier who accounted for 10% or more of the Company’s purchases nor
with significant outstanding payables.
12.
INCOME TAXES
The
loss before income taxes of the Company for the three months ended June 30, 2021 and 2020 were comprised of the following:
SCHEDULE OF INCOME LOSS BEFORE INCOME TAXES
|
|
For
the three months ended
June
30
|
|
|
|
2021
|
|
|
2020
|
|
Tax jurisdictions from:
|
|
|
|
|
|
|
|
|
– Local
|
|
$
|
(10,583
|
)
|
|
$
|
(2,376
|
)
|
|
|
|
|
|
|
|
|
|
– Foreign, representing:
|
|
|
|
|
|
|
|
|
Marshall Islands (non-taxable
jurisdiction)
|
|
|
-
|
|
|
|
-
|
|
Hong Kong
|
|
|
-
|
|
|
|
(129
|
)
|
Malaysia
|
|
|
(95,848
|
)
|
|
|
(22,250
|
)
|
Loss before income taxes
|
|
$
|
)
|
|
$
|
)
|
Provision
for income taxes consisted of the following:
SUMMARY OF PROVISION FOR INCOME TAX
|
|
For
the three months ended
June
30
|
|
|
|
2021
|
|
|
2020
|
|
Current:
|
|
|
|
|
|
|
|
|
– Local
|
|
$
|
-
|
|
|
$
|
-
|
|
– Foreign:
|
|
|
|
|
|
|
|
|
Marshall Islands (non-taxable
jurisdiction)
|
|
|
-
|
|
|
|
-
|
|
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
The
Tax Act reduces the U.S. statutory corporate tax rate from 35% to 21% for our tax years beginning in 2018. The Company is registered
in the State of Nevada and is subject to United States of America tax law. As of June 30, 2021, the operations in the United States of
America incurred $147,015 of cumulative net operating losses (NOL’s) which can be carried forward to offset future taxable income.
The NOL carry forwards begin to expire in 2041, if unutilized. The Company has provided for a full valuation allowance of approximately
$30,873 against the deferred tax assets on the expected future tax benefits from the net operating loss carry forwards as the management
believes it is more likely than not that these assets will not be realized in the future.
Malaysia
Lucky
Star F&B Sdn. Bhd. and SH Desserts Sdn. Bhd. are subject to the Malaysia Corporate Tax Laws at a two tier corporate income tax rate
based on amount of paid up capital. The 2021 tax rate for company with paid-up capital of MYR 2,500,000
(approximately
$603,486)
or less and that are not part of a group containing a company exceeding this capitalization threshold is 17% on the first MYR 600,000
(approximately $120,060) taxable profit with the remaining balance being taxed at 24%.
For
the three months ended June 30, 2021, Lucky Star F&B Sdn. Bhd. and SH Desserts Sdn. Bhd incurred a loss of $56,591
and $39,257,
respectively, which can be carried
forward for seven years to offset its taxable
income.
As
of June 30, 2021, the operations in Malaysia generated $1,112,435 of cumulative net operating losses which can be carried forward to
offset future taxable income. The net operating loss can be carried forward for seven years. The Company has provided for a full valuation
allowance against the deferred tax assets of $189,080 on the expected future tax benefits from the net operating loss carry forwards
as the management believes it is more likely than not that these assets will not be realized in the future.
The
following table sets forth the significant components of the aggregate deferred tax assets of the Company as of June 30 and March 31,
2021:
SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES
|
|
As of June 30,
2021
|
|
|
As of March 31,
2021
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating loss carryforwards
|
|
|
$
|
|
|
|
$
|
|
– United States of America
|
|
|
30,873
|
|
|
|
28,691
|
|
– Marshall Islands
|
|
|
-
|
|
|
|
-
|
|
– Malaysia
|
|
|
189,080
|
|
|
|
172,801
|
|
|
|
|
219,953
|
|
|
|
201,452
|
|
Less: valuation allowance
|
|
|
(219,953
|
)
|
|
|
(201,452
|
)
|
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 $219,953 as of June 30, 2021. For three months ended June
30, 2021, the valuation allowance increased by $18,501, primarily relating to the loss incurred by the Company, Lucky Star F&B Sdn.
Bhd and SH Desserts Shd. Bhd.
13.
STOCKHOLDERS’ EQUITY
On
October 17, 2018, the founder of the Company, Mr. Leong Will Liam purchased 900,000 shares of restricted common stock of the Company
at $0.03 per share for the Company’s initial working capital. Each share was with a par value of $0.0001. All proceeds received
are used for the Company’s working capital.
On
January 21, 2019, CBA Capital Holdings Sdn. Bhd. waived an interest-free loan of $257,183 in Lucky Star F&B Sdn. Bhd., our wholly
own subsidiary, as contribution and recorded in additional paid in capital. CBA Capital Holdings Sdn. Bhd. is wholly owned by our Director,
Mr. Leong Will Liam.
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 100,000 shares
of common stock being sold at $5.00 per share for a total of $500,000. The proceed of $500,000 will become the capital for our expansion,
pursuant to the use of proceed stated in the aforementioned Form S-1/A.
14.
FOREIGN CURRENCY EXCHANGE RATE
The
Company cannot guarantee that the current exchange rate will remain stable, therefore there is a possibility that the Company could post
the same amount of income for two comparable periods and because of the fluctuating exchange rate post higher or lower income depending
on exchange rate converted into US$ at the end of the financial year. The exchange rate could fluctuate depending on changes in political
and economic environments without notice.
15.
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 June 30, 2021 up through the date the Company presented these audited financial statements.
On
May 28, 2021, Malaysia Prime Minister announced that a nationwide “total lockdown” will be imposed on all social and economic
sectors in Malaysia from June 1 to June 14, 2021. Under this lockdown, only essential economic and social services listed by the National
Security Council will be allowed to operation. Restaurants operation will be limited to delivery and take away while dine in is strictly
prohibited.
On
June 12, 2021, the Malaysian Government extended the country’s total lockdown by another two weeks until 28 June. The Company believes,
with dine in restriction, having direct adverse impact on Company financial performance until such restriction removed.
On
15 June 2021, the Malaysia Government introduced a four-phase National Recovery Plan to help the country emerge from the COVID-19 pandemic
and its economic fallout. As each phase is based on the amount 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. This phase, based on the critical condition of the healthcare services, may last until end of July.
Phase
2 - If more people are vaccinated, ICU bed usage reduced to a moderate level; and new cases fall below 4,000, the country will move on
to the next phase which allows more economic sectors to resume operation.
Phase
3 - Once daily cases are reduced to 2,000, the healthcare system has returned to a manageable level; ICU cases have been reduced to an
adequate amount; and 40% of the people have been vaccinated. All economic sectors will be allowed to operate and most importantly dining
in restaurants and cafes will be allowed. This phase will be expected to start on late August.
Phase
4 - Once daily cases have dropped to 500, the healthcare system becomes safe as ICU cases become low enough; and 60% of the people have
been vaccinated. This phase will be expected to start on late October.
The Company’s central kitchen and two
restaurants were and will continue to operate throughout each phases of NRP, however improvement on financial performance will not be
expected until late August which is the beginning of Phase 3 where dining in restaurants and cafes will be allowed.