NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED DECEMBER 31, 2022 AND 2021
(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 $56,787
if the aforementioned banks fail.
Plant
and Equipment
Plant
and equipment are stated at cost, with depreciation and amortization 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$. In addition, the Company’s subsidiary maintains its books and record in Malaysia Ringgits (“MYR”)
and United States Dollars (“US$”), 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 nine months ended December 31 | |
| |
2022 | | |
2021 | |
Period-end MYR : US$1 exchange rate | |
| 4.40 | | |
| 4.17 | |
Period-average MYR : US$1 exchange rate | |
| 4.48 | | |
| 4.16 | |
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 December 31, 2022 and 2021, 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.
Lease
The
Company adopted the ASU No. 2016-02, on April 1, 2019 (date of inception). The Company leases central kitchen and restaurants for fixed
periods pre-emptive extension options. The Company recognizes lease payments for its short-term lease on a straight-line basis over the
lease term.
The right-of-use asset is initially measured at cost, which comprises
the initial amount of the lease liability adjusted for lease payments made at or before the lease commencement date, plus any initial
direct costs incurred less any lease incentives received. Costs associated with operating lease assets are recognized on a straight-line
basis within operating expenses over the term of the lease.
In
determining the present value of the unpaid lease payments, ASC 842 requires a lessee to discount its unpaid lease payments using the
interest rate implicit in the lease or, if that rate cannot be readily determined, its incremental borrowing rate. As most of the Company
leases do not provide an implicit rate, the Company uses its incremental borrowing rate as the discount rate for the lease. The Company
incremental borrowing rate is estimated to approximate the interest rate on a collateralized basis with similar terms and payments. As
of December 31, 2022, the Company have no operating lease.
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 $2,119,697 and $1,599,531 as of December 31, 2022 and March 31, 2022, respectively.
For
the nine months ended December 31, 2022 and 2021, the Company suffered from a net loss of $520,166 and $305,478 respectively.
For
the nine months ended December 31, 2022 and 2021, the Company recorded operating cash outflows of $295,748 and $344,975 in operating
activities respectively.
Furthermore,
the Company recorded a negative working capital of $1,381,920 and $1,188,819 as of December 31, 2022 and March 31, 2022 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 December 31, 2022 | | |
As of March 31, 2022 | |
Rental deposits | |
$ | - | | |
$ | 22,048 | |
Prepaid expenses | |
| 1,183 | | |
| 12,050 | |
Other receivables | |
| - | | |
| 1,675 | |
Total | |
$ | 1,183 | | |
$ | 35,773 | |
The
rental deposits represent the deposit of the tenancy agreements. As of December 31, 2022, the rental deposits have been forfeited as the Company has terminated all the tenancy
agreements before the agreements due.
Prepaid expenses represent the payments of subscription
fees.
5.
INVENTORIES
SCHEDULE
OF INVENTORIES
| |
As of December 31, 2022 | | |
As of March 31, 2022 | |
Raw material, at cost | |
$ | - | | |
$ | 11,198 | |
On October 31, 2022, the Company has terminated
all the tenancy agreements. As of December 31, 2022, the Company has no inventory because all the inventories become obsolete to be used
in the business operation.
6.
PLANT AND EQUIPMENT
SCHEDULE
OF PLANT AND EQUIPMENT
| |
As of December 31, 2022 | | |
As of March 31, 2022 | |
Renovation | |
$ | - | | |
$ | 360,458 | |
Office equipment | |
| 39,468 | | |
| 41,187 | |
Kitchen equipment | |
| 43,423 | | |
| 33,427 | |
Motor vehicle | |
| 11,130 | | |
| 11,654 | |
Total plant and equipment | |
$ | 94,021 | | |
$ | 446,726 | |
Less: Accumulated depreciation | |
| (25,457 | ) | |
| (151,703 | ) |
Total plant and equipment | |
$ | 68,564 | | |
$ | 295,023 | |
For
the nine months ended December 31, 2022, the Company has invested $11,303 in kitchen equipment and $131 in office equipment respectively.
The Company has written off $182,716 in renovation due to discontinuation of all tenancy agreements.
For
the nine months ended December 31, 2021, the Company has invested $14,720 in kitchen equipment, $13,588 in renovations and $17,072 in
office equipment respectively.
Depreciation
expenses for three and nine months ended December 31, 2022 amounted to $6,445 and $38,291 respectively.
Depreciation
expenses for three and nine months ended December 31, 2021 amounted to $19,861 and $58,852 respectively.
7.
ACCRUED EXPENSES AND OTHER PAYABLES
SCHEDULE
OF ACCRUED EXPENSES AND OTHER PAYABLES
| |
As of December 31, 2022 | | |
As of March 31, 2022 | |
Accrued expenses | |
$ | 16,310 | | |
$ | 50,388 | |
Other payables | |
| 38,893 | | |
| 43,513 | |
Deposit received | |
| 454 | | |
| - | |
Total | |
$ | 55,657 | | |
$ | 93,901 | |
Accrued
expenses consist of taxation fee and professional fee.
Other payables consist of outstanding marketing expenses
and sales and service tax payable.
Deposit received consist of deposit from lease agreement.
8.
AMOUNT DUE TO A DIRECTOR
As
of March 31, 2022, the Company has an outstanding loan payable to Mr. Leong Will Liam amounted $1,066,422. Of which including an amount
due to Synergy Empire HK, amounted $24,822.
For
the nine months ended December 31, 2022, Mr. Leong Will Liam has further advanced $281,406 to the Company for working capital purpose.
As
of December 31, 2022, the Company has an outstanding loan payable to Mr. Leong Will Liam amounted $1,314,934, of which including an amount
due to Synergy Empire HK, amounted $24,822.
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, 2022 | |
$ | 1,041,600 | |
Loan from Director | |
| 281,406 | |
Foreign currency translation | |
| (32,894 | ) |
Balance as of December 31, 2022 | |
$ | 1,290,112 | |
Balance as of December 31, 2022 - Amount due to Synergy Empire HK | |
| 24,822 | |
Balance as of December 31, 2022 - Total amount due to director | |
$ | 1,314,934 | |
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 rate of 6.00% accrued
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 December 31 and March 31, 2022 can be summarized as follow:
SUMMARY
OF OUTSTANDING BALANCE OF BUSINESS LOANS
| |
As of December 31, 2022 | | |
As of March 31, 2022 | |
Bank borrowing (Current portion) | |
$ | 12,197 | | |
$ | 16,936 | |
Bank borrowing (Non-current portion) | |
| - | | |
| 8,445 | |
Total | |
$ | 12,197 | | |
$ | 25,381 | |
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 nine months ended December 31, 2022, the Company repaid $11,838 in bank borrowings.
For
the nine months ended December 31, 2021, the Company repaid $11,524 in bank borrowings.
Maturities
of the loan for each of the two years and thereafter are as follows:
SCHEDULE
OF MATURITIES OF LOAN
Year ending March 31 | |
| | |
2023 | |
$ | 12,197 | |
Total | |
$ | 12,197 | |
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, 2022 | |
| 296,760 | |
Amortization for the nine months ended December 31, 2022 | |
| (36,744 | ) |
Adjustment for discount rate | |
| - | |
Adjustment for discontinuation of tenancy | |
| (246,669 | ) |
Foreign exchange translation | |
| (13,347 | ) |
Balance as of December 31, 2022 | |
| - | |
For
the nine months ended December 31, 2022 and 2021, the amortization of the operating lease right of use asset amounted $36,744 and $48,922,
respectively.
Lease Liability | |
| | |
Balance as of March 31, 2022 | |
| 297,108 | |
Imputed interest | |
| 8,254 | |
Gross repayment | |
| (44,362 | ) |
Adjustment for discontinuation of tenancy | |
| (247,638 | ) |
Foreign exchange translation | |
| (13,362 | ) |
Balance as of December 31, 2022 | |
| - | |
Lease liability current portion | |
| - | |
Lease liability non-current portion | |
$ | - | |
Other
information:
SCHEDULE
OF LEASE OTHER INFORMATION
| |
For the nine months ended December 31 | |
| |
2022 | | |
2021 | |
Cash paid for amounts included in the measurement of lease liabilities: | |
| | | |
| | |
Operating cash flow to operating lease | |
$ | 43,283 | | |
$ | 61,251 | |
Right-of-use assets obtained in exchange for operating lease liabilities | |
| - | | |
| - | |
Remaining lease term for operating lease (years) | |
| - | | |
| 3.65 | |
Weighted average discount rate for operating lease | |
| - | % | |
| 5.70 | % |
As
at December 31, 2022, the Company has terminated all the tenancy agreement.
11.
CONCENTRATION OF RISK
For
the three and nine months ended December 31, 2022 and 2021, there was no customer who accounted for 10% or more of the Company’s
revenues nor with significant outstanding receivables.
For
the three and nine months ended December 31, 2022 and 2021, 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 nine months ended December 31, 2022 and 2021 were comprised of the following:
SCHEDULE
OF INCOME (LOSS) BEFORE INCOME TAXES
| |
For the nine months ended December 31 | |
| |
2022 | | |
2021 | |
Tax jurisdictions from: | |
| | | |
| | |
– Local | |
$ | (69,532 | ) | |
$ | (23,806 | ) |
| |
| | | |
| | |
– Foreign, representing: | |
| | | |
| | |
Marshall Islands (non-taxable jurisdiction) | |
| (1,800 | ) | |
| - | |
Hong Kong | |
| - | | |
| - | |
Malaysia | |
| (448,834 | ) | |
| (281,672 | ) |
Loss before income taxes | |
$ | ) | |
$ | ) |
Provision
for income taxes consisted of the following:
SUMMARY
OF PROVISION FOR INCOME TAX
| |
For the nine months ended
December 31
| |
| |
2022 | | |
2021 | |
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 December 31, 2022, the operations in the United States
of America incurred $260,452 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 2042, if unutilized. The Company has provided for a full valuation allowance of approximately
$54,695 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 2022 tax rate for company with paid-up capital of MYR 2,500,000 (approximately $567,872) 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
$136,289) taxable profit with the remaining balance being taxed at 24%.
For
the nine months ended December 31, 2022, Lucky Star F&B Sdn. Bhd. and SH Desserts Sdn. Bhd. incurred a loss of $229,951 and $218,883
respectively, which can be carried forward for seven years to offset its taxable income.
As
of December 31, 2022, the operations in Malaysia generated $1,854,201 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 $315,214 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 December 31, 2022 and
March 31, 2022:
SCHEDULE
OF DEFERRED TAX ASSETS AND LIABILITIES
| |
As of | | |
As of | |
| |
December 31, 2022 | | |
March 31, 2022 | |
Deferred tax assets: | |
| | | |
| | |
| |
| | | |
| | |
Net operating loss carryforwards | |
$ | | | |
$ | | |
– United States of America | |
| 54,695 | | |
| 40,093 | |
– Marshall Islands | |
| - | | |
| - | |
– Malaysia | |
| 315,214 | | |
| 238,867 | |
| |
| 369,909 | | |
| 278,960 | |
Less: valuation allowance | |
| (369,909 | ) | |
| (278,960 | ) |
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 $369,909 as of December 31, 2022. For nine months ended December
31, 2022, the valuation allowance increased by $90,949, primarily relating to the loss incurred by the Company, Lucky Star F&B Sdn.
Bhd. and SH Desserts Sdn. 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.
As
of March 31, 2021, the Company have an issued and outstanding share of common stock of 1,000,000 with an authorized share of common stock
of 450,000,000 with a par value of $0.0001. In addition, the Company have an authorized share of preference stock of 50,000,000 with
a par value of $0.0001, however no share of preference stock was issued and outstanding as of March 31, 2021.
During
the year ended March 31, 2022, the Company reduce authorized share capital for both common stock of 450,000,000 to 5,000,000 and preferred
stock of 50,000,000 to 500,000, while par value remains the same for both common and preferred stock. As of December 31, 2022, the Company
have an issued and outstanding share of common stock of 1,000,000 while no preferred share was issued and outstanding.
14.
FOREIGN CURRENCY EXCHANGE RATE
The
Company cannot guarantee that the current exchange rate will remain stable, therefore there is a possibility that the Company could post
the same amount of income for two comparable periods and because of the fluctuating exchange rate post higher or lower income depending
on exchange rate converted into US$ at the end of the financial year. The exchange rate could fluctuate depending on changes in political
and economic environments without notice.
15.
SEGMENT REPORTING
ASC
280, “Segment Reporting” establishes standards for reporting information about operating segments on a basis consistent with
the Company’s internal organization structure as well as information about services categories, business segments and major customers
in financial statements. The Company has single reportable segment based on business unit, food and beverage business and three reportable
segments based on country, United States, Marshall Islands and Malaysia.
In
accordance with the “Segment Reporting” Topic of the ASC, the Company’s chief operating decision maker has been identified
as the Chief Executive Officer and President, who reviews operating results to make decisions about allocating resources and assessing
performance for the entire Company. Existing guidance, which is based on a management approach to segment reporting, establishes requirements
to report selected segment information quarterly and to report annually entity-wide disclosures about products and services, major customers,
and the countries in which the entity holds material assets and reports revenue. All material operating units qualify for aggregation
under “Segment Reporting” due to their similar customer base and similarities in economic characteristics; nature of products
and services; and procurement, manufacturing and distribution processes.
SCHEDULE
OF SEGMENT REPORTING INFORMATION BY BUSINESS UNIT
| |
For the Nine Months Ended and As of December 31, 2022 | |
By Business Unit | |
Food & Beverage Business | | |
Total | |
Revenue | |
$ | 113,750 | | |
$ | 113,750 | |
| |
| | | |
| | |
Cost of revenue | |
| (69,081 | ) | |
| (69,081 | ) |
General and administrative expenses | |
| (563,612 | ) | |
| (563,612 | ) |
| |
| | | |
| | |
Loss from operations | |
| (518,943 | ) | |
| (518,943 | ) |
| |
| | | |
| | |
Total assets | |
$ | 76,630 | | |
$ | 76,630 | |
Capital expenditure | |
$ | 11,434 | | |
$ | 11,434 | |
| |
For the Nine Months Ended and As of December 31, 2021 | |
By Business Unit | |
Food & Beverage Business | | |
Total | |
Revenue | |
$ | 82,404 | | |
$ | 82,404 | |
| |
| | | |
| | |
Cost of revenue | |
| (26,474 | ) | |
| (26,474 | ) |
General and administrative expenses | |
| (393,377 | ) | |
| (393,377 | ) |
| |
| | | |
| | |
Loss from operations | |
| (337,447 | ) | |
| (337,447 | ) |
| |
| | | |
| | |
Total assets | |
$ | 683,076 | | |
$ | 683,076 | |
Capital expenditure | |
$ | 45,380 | | |
$ | 45,380 | |
SCHEDULE
OF SEGMENT REPORTING INFORMATION BY COUNTRY
| |
For the Nine Months Ended and As of December 31, 2022 | |
By Country | |
United States | | |
Marshall | | |
Malaysia | | |
Total | |
Revenue | |
$ | - | | |
$ | - | | |
$ | 113,750 | | |
$ | 113,750 | |
| |
| | | |
| | | |
| | | |
| | |
Cost of revenue | |
| - | | |
| - | | |
| (69,081 | ) | |
| (69,081 | ) |
General and administrative expenses | |
| (69,532 | ) | |
| (1,800 | ) | |
| (492,280 | ) | |
| (563,612 | ) |
| |
| | | |
| | | |
| | | |
| | |
Loss from operations | |
| (69,532 | ) | |
| (1,800 | ) | |
| (447,611 | ) | |
| (518,943 | ) |
| |
| | | |
| | | |
| | | |
| | |
Total assets | |
$ | 95 | | |
$ | - | | |
$ | 76,535 | | |
$ | 76,630 | |
Capital expenditure | |
$ | - | | |
$ | - | | |
$ | 11,434 | | |
$ | 11,434 | |
| |
For the Nine Months Ended and As of December 31, 2021 | |
By Country | |
United States | | |
Malaysia | | |
Total | |
Revenue | |
$ | - | | |
$ | 82,404 | | |
$ | 82,404 | |
| |
| | | |
| | | |
| | |
Cost of revenue | |
| - | | |
| (26,474 | ) | |
| (26,474 | ) |
General and administrative expenses | |
| (26,740 | ) | |
| (366,637 | ) | |
| (393,377 | ) |
| |
| | | |
| | | |
| | |
Loss from operations | |
| (26,740 | ) | |
| (310,707 | ) | |
| (337,447 | ) |
| |
| | | |
| | | |
| | |
Total assets | |
$ | 24,009 | | |
$ | 659,067 | | |
$ | 683,076 | |
Capital expenditure | |
$ | - | | |
$ | 45,380 | | |
$ | 45,380 | |
16. SIGNIFICANT EVENTS
On October 31, 2022, the Company has terminated all the tenancy agreements
before the due date of the agreements and therefore do not generate any revenue for November and December 2022. On November 30, 2022,
the Company has entered into a lease agreement with a third party, Sweet Bakery & Dessert Cafe Sdn Bhd to lease their assets to the
third party. The leasing period is commencing from January 1, 2023 to December 31, 2023. The Company did not cease its business operation nor sell the operating assets. The Company is looking for a new
strategic location to continue their business while leasing out their assets to the third party.
17.
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 December 31, 2022 up through the date the Company presented these unaudited financial statements.