10-K: Synergy Empire Limited Reports Fiscal Year 2024 Results, Shifts Focus to Consultancy

Synergy Empire Limited reports a significant decrease in revenue and a shift in business strategy towards consultancy services for the fiscal year ended March 31, 2024.

Summary

• Synergy Empire Limited's revenue decreased by 95.91% from $122,381 in 2023 to $5,000 in 2024.
• The company's gross profit margin increased to 100% in 2024 due to the absence of cost of sales, compared to 43.28% in 2023.
• General and administrative expenses increased from $587,642 in 2023 to $676,076 in 2024.
• The company reported a net income of $788,254 in 2024, compared to a net loss of $534,676 in 2023, primarily due to a gain from the disposal of subsidiaries.
• Cash and cash equivalents decreased from $9,868 in 2023 to $82 in 2024.
• The company used $132,747 in operating activities in 2024, compared to $306,088 in 2023.
• The company disposed of its subsidiaries, Lucky Star and SH Dessert, on January 1, 2024, leading to the discontinuation of its asset leasing business.
• Synergy Empire Limited is now focusing on providing consultancy services to restaurant owners, specializing in restaurant and kitchen management.

Sentiment

Score: 3

Explanation: The document indicates a significant downturn in the company's financial performance, a major shift in business strategy, and material weaknesses in internal controls. While there is a net income reported, it is primarily due to a one-off gain from the disposal of subsidiaries. The overall sentiment is negative due to the company's financial instability and operational challenges.

Positives

• The company achieved a net income of $788,254 in 2024, a significant turnaround from a net loss of $534,676 in 2023.
• The company's gross profit margin increased to 100% in 2024 due to the absence of cost of sales.
• The company has shifted its focus to consultancy services, leveraging the directors' experience in the food and beverage industry.

Negatives

• The company experienced a 95.91% decrease in revenue, from $122,381 to $5,000.
• Cash reserves decreased significantly to $82 by the end of fiscal year 2024.
• The company used $132,747 in operating activities in 2024.
• The company's current liabilities exceeded its current assets by $406,879.
• The company has an accumulated deficit of $958,879.

Risks

• The company's ability to continue as a going concern is dependent on improving profitability and securing financial support.
• The company has a negative working capital of $406,879.
• The company has identified material weaknesses in its internal controls over financial reporting.
• The company's cash position is not sufficient to support its daily operations.
• The company is dependent on a single customer for its consultancy revenue.

Future Outlook

The company is focusing on providing consultancy services to restaurant owners, specializing in restaurant and kitchen management, leveraging the directors' experience in the food and beverage industry.

Management Comments

• The board believes that the disposal of these subsidiaries would help reduce the Company's ongoing accumulated deficits, leading to more efficient operations in the long term.
• The company has decided to shift its focus to providing consultancy services to restaurant owners, specializing in restaurant and kitchen management.
• The Directors deep industry knowledge and practical experience will be invaluable in delivering tailored solutions that address the unique challenges encountered by restaurants.

Industry Context

The company operates in the competitive food and beverage industry, which has low barriers to entry. The company has observed an increasingly competitive environment in the food and beverage industry due to the low barriers to entry and shift in the paradigm of consumer behaviour and preference which the Company believes it is crucial to implement strategic rebranding and marketing activities to cope with industry and consumer demand.

Comparison to Industry Standards

• The company's significant revenue decline is worse than industry averages, which typically see more stable revenue streams.
• The shift to consultancy services is a departure from the company's previous business model, making direct comparisons to other food and beverage companies difficult.
• The company's negative working capital and accumulated deficit are concerning compared to industry benchmarks for financial health.
• The company's internal control weaknesses are a significant concern compared to industry standards for public companies.

Management Changes

Corporate Governance

Related Party Transactions

• On October 17, 2018, the Company sold and subsequently issued 900,000 shares of restricted common stock to Mr. Leong Will Liam, our Director, President, Secretary and Treasurer.
• On January 16, 2019, Synergy Empire Limited acquired 100% of the equity interests of Synergy Empire Holding Limited from Mr. Leong Will Liam.
• On December 31, 2018, SEHL acquired 100% of the equity interests of SEHK from our director, Leong Will Liam.
• On February 21, 2019, SEHK acquired 100% of the equity interests of Lucky Star F&B Sdn. Bhd. from CBA Capital Holdings Sdn. Bhd., a company owned and controlled by Mr. Leong Will Liam.
• As of March 31, 2024, the Company has an outstanding amount due to director, Mr. Hsien Loong Wong amounted $ 21,012.
• As of March 31, 2024, the Company has an outstanding loan payable to Mr. Leong Will Liam amount $376,844 and an outstanding loan payable to Synergy Empire HK amount $24,822.

Stakeholder Impact

• Shareholders have experienced a significant decrease in the value of their investment due to the company's poor financial performance.
• Employees may be impacted by the company's restructuring and shift in business focus.
• Customers of the company's previous restaurant operations are no longer served.
• Suppliers may be impacted by the company's discontinuation of its asset leasing business.

Next Steps

• The company will focus on developing its consultancy services business.
• The company is looking for a new strategic location to continue their business.
• The company plans to implement measures to remediate identified material weaknesses in internal controls.

Key Dates

Keywords

consultancy services, restaurant management, food and beverage, financial results, disposal of subsidiaries, revenue decline, net income, internal controls, going concern, Sweet Hut