DH ENCHANTMENT, INC. Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

November 14, 2022 at 11:10 pm IST

DH Enchantment, Inc. is a Nevada holding company with no operations of its own. DH Enchantment, Inc. conducts its operations through its Hong Kong subsidiary, Ho Shun Yi Limited ("HSY"). HSY was organized as a private limited liability company on July 9, 2018, in Hong Kong and is a wholly owned subsidiary of DH Investment Group Limited ("DHIG"). We acquired DHIG on July 26, 2021. HSY is engaged primarily in the sale and distribution of COVID-19 rapid antigen tester sets produced by third parties. HSY commenced operations in Hong Kong in October 2020 and sell its products primarily in Hong Kong.

Our investors will hold common stock of DH Enchantment, Inc., the Nevada holding company that has no operations of its own, and not in HSY, the Hong Kong operating company. This holding company structure presents unique risks as our investors may never directly hold equity interests in our Hong Kong subsidiary. Holding indirect equity interests in HSY, our Hong Kong subsidiary, is not as effective as holding a direct ownership interest as DH Enchantment, Inc. will be dependent upon contributions from our subsidiaries to finance the cash flow needs of DH Enchantment, Inc. DH Enchantment, Inc.'s ability to obtain contributions from its subsidiaries are significantly affected by regulations promulgated by Hong Kong authorities. Any limitation on the ability of our subsidiaries to transfer cash or assets to us could have a material adverse effect on our ability to conduct business. As a result, any change in the interpretation of existing rules and regulations or the promulgation of new rules and regulations that adversely affects our ability to transfer cash or assets may adversely affect our operations and or the value of our securities, including causing the value of our securities to significantly decline or become worthless. For a detailed description of the risks facing the Company associated with our structure, please refer to "Risk Factors- Our Hong Kong subsidiary may be subject to restrictions on paying dividends or making other payments to us, which may restrict its ability to satisfy liquidity requirements, conduct business and pay dividends to holders of DH Enchantment, Inc.'s common stock." and more generally, "Risk Factors - Risk Relating to Doing Business in Hong Kong." set forth in the Company's Annual Report on Form 10-K filed with the SEC on June 29, 2022 (the "Annual Report").

DH Enchantment, Inc. and HSY, our Hong Kong subsidiary, are not required to obtain permission from Hong Kong or Chinese authorities including the China Securities Regulatory Commission, or CSRC, or Cybersecurity Administration Committee, or CAC, to operate or to issue securities to foreign investors. In making this determination, we relied on the opinion of Ravenscroft & Schmierer, which is attached as Exhibit 5 to Amendment No. 6 to the Registration Statement on Form 10 filed with the SEC on June 27, 2022. DH Enchantment, Inc. and HSY are not subject to permission requirements from any other governmental agencies to approve HSY's operations. HSY has received all requisite permissions to operate its business. The business of HSY until now is not subject to cybersecurity review with the Cyberspace Administration of China, or CAC, given that: (i) HSY's products and services are offered not directly to individual users but through institutional customers; (ii) HSY does not possess a large amount of personal information in its business operations. In addition, we believe that HSY is not subject to merger control review by China's anti-monopoly enforcement agency due to the level of our revenues and the fact that we currently do not expect to propose or implement any acquisition of control of, or decisive influence over, any company with revenues within China of more than RMB400 million. Currently, these statements and regulatory actions have had no impact on HSY's daily business operation, our ability to accept foreign investments and the ability of DH Enchantment, Inc. to list its securities on an U.S. or other foreign exchange. However, in light of the recent statements and regulatory actions by the PRC and Hong Kong government, such as those related to Hong Kong's national security, the promulgation of regulations prohibiting foreign ownership of Chinese companies operating in certain industries, which are constantly evolving, and anti-monopoly concerns, we may be subject to the risks of uncertainty of any future actions of the PRC government in this regard. For example, if DH Enchantment, Inc. or HSY inadvertently concludes that such approvals are not required, or if applicable laws, regulations or interpretations change such that we are required to obtain approvals in the future, or if the PRC government disallows our holding company structure, these actions would likely result in a material change in our operations, including our ability to continue our existing holding company structure, carry on HSY's current business, accept foreign investments, and offer or continue to offer securities of DH Enchantment, Inc. to its investors. These adverse actions would likely cause the value of DH Enchantment, Inc.'s common stock to significantly decline or become worthless. We may also be subject to penalties and sanctions imposed by the PRC regulatory agencies, including the Chinese Securities Regulatory Commission, if we fail to comply with such rules and regulations, which would likely adversely affect the ability of DH Enchantment, Inc.'s securities to continue to trade on the Over-the-Counter Bulletin Board, which would likely cause the value of its securities to significantly decline or become worthless. For a detailed description of the risks facing the Company and HSY's operations in Hong Kong, please refer to "Risk Factors - Risk Factors Relating to Doing Business in Hong Kong." set forth in the Annual Report.

There are prominent legal and operational risks associated with our operations being based in Hong Kong which could result in a material change in our operations and the value of DH Enchantment, Inc.'s securities. We are subject to risks arising from the legal system in China where there are risks and uncertainties regarding the enforcement of laws including where the Chinese government can change the rules and regulations in China and Hong Kong, including the enforcement and interpretation thereof, at any time with little to no advance notice and can intervene at any time with little to no advance notice. By way of example, the PRC government initiated a series of regulatory actions and statements to regulate business operations in China with little advance notice, including cracking down on illegal activities in the securities market, enhancing supervision over China-based companies listed overseas using variable interest entity structure, adopting new measures to extend the scope of cybersecurity reviews, and expanding the efforts in anti-monopoly enforcement. While these regulatory actions and statements currently do not impact our business or our ability to accept foreign investments or list our securities on a U.S. or foreign exchange, the Chinese government can change its rules and regulations and the enforcement and interpretation thereof with little to no advance notice. Such changes in Chinese internal regulatory mandates, such as the M&A rules, Anti-Monopoly Law, and the Data Security Law, may target the Company's corporate structure and negatively impact our ability to conduct business in Hong Kong, accept foreign investments, or list on an U.S. or other foreign exchange. These risks may significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless. Please see "Risk Factors - Risks Relating to Doing Business in Hong Kong." set forth in the Annual Report.

The recent joint statement by the SEC and PCAOB, and the Holding Foreign Companies Accountable Act (HFCAA) all call for additional and more stringent criteria to be applied to emerging market companies upon assessing the qualification of their auditors, especially the non-U.S. auditors who are not inspected by the PCAOB. Trading in our securities may be prohibited under the Holding Foreign Companies Accountable Act and the Accelerating the Holding Foreign Companies Account Act if the PCAOB determines that it cannot inspect or investigate completely our auditor, and that as a result an exchange may determine to delist our securities. On June 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act which would reduce the number of consecutive non-inspection years required for triggering the prohibitions under the HFCAA from three years to two thus reducing the time before our securities may be prohibited from trading or being delisted. Our auditor is not subject to the determinations announced by the PCAOB on December 16, 2021. However, in the event the Malaysian authorities subsequently take a position disallowing the PCAOB to inspect our auditor, then we would need to change our auditor to avoid having our securities delisted. Please see "Risk Factors- The Holding Foreign Companies Accountable Act requires the Public Company Accounting Oversight Board (PCAOB) to be permitted to inspect the issuer's public accounting firm within three years. This three- year period will be shortened to two years if the Accelerating Holding Foreign Companies Accountable Act is enacted. There are uncertainties under the PRC Securities Law relating to the procedures and requisite timing for the U.S. securities regulatory agencies to conduct investigations and collect evidence within the territory of the PRC. If the U.S. securities regulatory agencies are unable to conduct such investigations, they may suspend or de-register DH Enchantment, Inc.'s registration with the SEC and delist its securities from applicable trading market within the US." set forth in the Annual Report.

In addition to the foregoing risks, we face various legal and operational risks and uncertainties arising from doing business in Hong Kong and China as summarized below and in "Risk Factors - Risks Factors Relating to Doing Business in Hong Kong." set forth in the Annual Report.





     ·  Adverse changes in economic and political policies of the PRC government
        could have a material and adverse effect on overall economic growth in
        China and Hong Kong, which could materially and adversely affect our
        business.
     ·  DH Enchantment, Inc. is a holding company and will rely on dividends paid
        by its subsidiaries for its cash needs. Any limitation on the ability of
        its subsidiaries to make payments to DH Enchantment, Inc. could have a
        material adverse effect on our ability to conduct business. We do not
        anticipate paying dividends in the foreseeable future; you should not buy
        stock of DH Enchantment, Inc. if you expect dividends.
     ·  There is a possibility that the PRC could prevent our cash maintained in
        Hong Kong from leaving or the PRC could restrict the deployment of the
        cash into our business or for the payment of dividends. We rely on
        dividends from our Hong Kong subsidiary for our cash and financing
        requirements, such as the funds necessary to service any debt we may
        incur. Any such controls or restrictions may adversely affect our ability
        to finance our cash requirements, service debt or make dividend or other
        distributions to our shareholders. Please see "Risk Factors - Our Hong
        Kong subsidiary may be subject to restrictions on paying dividends or
        making other payments to us, which may restrict its ability to satisfy
        liquidity requirements, conduct business and pay dividends to holders of
        DH Enchantment, Inc.'s common stock."; "Risk Factors - PRC regulation of
        loans to and direct investment in PRC entities by offshore holding
        companies and governmental control of currency conversion may delay or
        prevent us from using the proceeds we receive from offshore financing
        activities to make loans to or make additional capital contributions to
        our Hong Kong subsidiary, which could materially and adversely affect our
        liquidity and our ability to fund and expand business."; "Risk Factors -
        Because our holding company structure creates restrictions on the payment
        of dividends or other cash payments, our ability to pay dividends or make
        other payments is limited." and "Transfers of Cash to and from our
        Subsidiaries." set forth in the Annual Report.








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     ·  PRC regulation of loans to and direct investments in PRC entities by
        offshore holding companies may delay or prevent us from using the
        proceeds of this offering to make loans or additional capital
        contributions to DH Enchantment, Inc.'s operating subsidiary in Hong
        Kong.
     ·  Substantial uncertainties exist with respect to the interpretation of the
        PRC Foreign Investment Law and how it may impact the viability of our
        current corporate structure, corporate governance and business
        operations.
     ·  We are subject to the risks arising from the legal system in China. The
        Chinese government can change the rules and regulations in China and Hong
        Kong, including the enforcement and interpretation thereof, at any time
        with little to no advance notice and can intervene at any time with
        little to no advance notice. HSY is currently not required to obtain
        approval from Chinese authorities to list on U.S. exchanges. However, if
        the subsidiaries of DH Enchantment, Inc. or the holding company were
        required to obtain approval in the future, or we erroneously conclude
        that approvals were not required, or HSY was denied permission from
        Chinese authorities to operate or to list on U.S. exchanges, we will not
        be able to continue listing on a U.S. exchange and the value of DH
        Enchantment, Inc. common stock would likely significantly decline or
        become worthless, which would materially affect the interest of the
        investors. There is a risk that the Chinese government may intervene or
        influence HSY's operations at any time, or may exert more control over
        offerings conducted overseas and/or foreign investment in Hong Kong-based
        issuers, which could result in a material change in our operations and/or
        the value of DH Enchantment, Inc.'s securities. Further, any actions by
        the Chinese government to exert more oversight and control over offerings
        that are conducted overseas and/or foreign investment in China-based
        issuers would likely significantly limit or completely hinder our ability
        to offer or continue to offer DH Enchantment, Inc. securities to
        investors and cause the value of such securities to significantly decline
        or be worthless. Please see "Risk Factors-We face the risk that changes
        in the policies of the PRC government could have a significant impact
        upon the business we may be able to conduct in the Hong Kong and the
        profitability of such business." and "Substantial uncertainties and
        restrictions with respect to the political and economic policies of the
        PRC government and PRC laws and regulations could have a significant
        impact upon the business that we may be able to conduct in Hong Kong and
        accordingly on the results of our operations and financial condition."
        set forth in the Annual Report.
     ·  Governmental control of currency conversion may limit our ability to
        utilize our revenues effectively and affect the value of your investment.
     ·  HSY may become subject to a variety of laws and regulations in the PRC
        regarding privacy, data security, cybersecurity, and data protection. HSY
        may be liable for improper use or appropriation of personal information
        provided by our customers.
     ·  Under the Enterprise Income Tax Law, we may be classified as a "Resident
        Enterprise" of China. Such classification will likely result in
        unfavorable tax consequences to us and our non-PRC shareholders.
     ·  PRC regulation of loans to, and direct investments in, Hong Kong entities
        by offshore holding companies may delay or prevent us from using proceeds
        from this offering and/or future financing activities to make loans or
        additional capital contributions to our Hong Kong operating subsidiary.
     ·  Failure to comply with PRC regulations relating to the establishment of
        offshore special purpose companies by PRC residents may subject our PRC
        resident Shareholders to personal liability, may limit our ability to
        acquire Hong Kong and PRC companies or to inject capital into our Hong
        Kong subsidiary, may limit the ability of our Hong Kong subsidiary to
        distribute profits to us or may otherwise materially and adversely affect
        us.
     ·  The recent joint statement by the SEC and PCAOB, and the Holding Foreign
        Companies Accountable Act (HFCAA) all call for additional and more
        stringent criteria to be applied to emerging market companies upon
        assessing the qualification of their auditors, especially the non-U.S.
        auditors who are not inspected by the PCAOB. Trading in our securities
        may be prohibited under the Holding Foreign Companies Accountable Act if
        the PCAOB determines that it cannot inspect or investigate completely our
        auditor, and that as a result an exchange may determine to delist our
        securities. On June 22, 2021, the U.S. Senate passed the Accelerating
        Holding Foreign Companies Accountable Act which would reduce the number
        of consecutive non-inspection years required for triggering the
        prohibitions under the HFCAA from three years to two thus reducing the
        time before our securities may be prohibited from trading or being
        delisted. On December 2, 2021, the U.S. Securities and Exchange
        Commission adopted rules to implement the HFCAA. Pursuant to the HFCAA,
        the Public Company Accounting Oversight Board (PCAOB) issued its report
        notifying the Commission that it is unable to inspect or investigate
        completely accounting firms headquartered in mainland China or Hong Kong
        due to positions taken by authorities in mainland China and Hong Kong.
        Our auditor is not subject to the determinations announced by the PCAOB
        on December 16, 2021. However, in the event the Malaysian authorities
        subsequently take a position disallowing the PCAOB to inspect our
        auditor, then we would need to change our auditor to avoid having our
        securities delisted. Please see "Risk Factors- The Holding Foreign
        Companies Accountable Act requires the Public Company Accounting
        Oversight Board (PCAOB) to be permitted to inspect the issuer's public
        accounting firm within three years. This three-year period will be
        shortened to two years if the Accelerating Holding Foreign Companies
        Accountable Act is enacted. There are uncertainties under the PRC
        Securities Law relating to the procedures and requisite timing for the
        U.S. securities regulatory agencies to conduct investigations and collect
        evidence within the territory of the PRC. If the U.S. securities
        regulatory agencies are unable to conduct such investigations, they may
        suspend or de-register DH Enchantment, Inc.'s registration with the SEC
        and delist its securities from applicable trading market within the US."
        set forth in the Annual Report.








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     ·  You may be subject to PRC income tax on dividends from us or on any gain
        realized on the transfer of shares of our common stock.
     ·  We face uncertainties with respect to indirect transfers of equity
        interests in PRC resident enterprises by their non-PRC holding companies.
     ·  DH Enchantment, Inc. is organized under the laws of the State of Nevada
        as a holding company that conducts its business through a number of
        subsidiaries organized under the laws of foreign jurisdictions such as
        Hong Kong and the British Virgin Islands. This may have an adverse impact
        on the ability of U.S. investors to enforce a judgment obtained in U.S.
        Courts against these entities, bring actions in Hong Kong against us or
        our management or to effect service of process on the officers and
        directors managing the foreign subsidiaries.
     ·  U.S. regulatory bodies may be limited in their ability to conduct
        investigations or inspections of our operations in Hong Kong.
     ·  There are significant uncertainties under the EIT Law relating to the
        withholding tax liabilities of PRC subsidiary, and dividends payable by a
        PRC subsidiary to offshore subsidiaries may not qualify to enjoy certain
        treaty benefits.




                 Transfers of Cash to and from Our Subsidiaries

DH Enchantment, Inc. is a Nevada holding company with no operations of its own. DH Enchantment, Inc. conducts its operations in Hong Kong primarily through HSY, DH Enchantment, Inc.'s subsidiary in Hong Kong. DH Enchantment, Inc. may rely on dividends to be paid by its Hong Kong subsidiary to fund its cash and financing requirements, including the funds necessary to pay dividends and other cash distributions to its shareholders, to service any debt it may incur and to pay its operating expenses. In order for DH Enchantment, Inc. to pay dividends to its shareholders, it will rely on payments made from it Hong Kong subsidiary to DH Enchantment, Inc. As of the date of this prospectus, DH Enchantment, Inc. does not have bank accounts. There has been no dividends, distributions or any other cash flows or transfers of assets made among the holding company or the subsidiaries and no dividends, distributions or any other cash flows or transfers of assets made to U.S. investors.

DH Enchantment, Inc. does not intend to make dividends or distributions to investors of DH Enchantment, Inc. in the foreseeable future.

We currently intend to retain all available funds and future earnings, if any, for the operation and expansion of our business and do not anticipate declaring or paying any dividends in the foreseeable future. Any future determination related to our dividend policy will be made at the discretion of our board of directors after considering our financial condition, results of operations, capital requirements, contractual requirements, business prospects and other factors the board of directors deems relevant, and subject to the restrictions contained in any future financing instruments.

DH Enchantment, Inc. (Nevada corporation)

Subject to the Nevada Revised Statutes and our bylaws, the board of directors of DH Enchantment, Inc. may authorize and declare a dividend to shareholders at such time and of such an amount as they think fit if they are satisfied, on reasonable grounds, that immediately following the dividend the value of the assets of DH Enchantment, Inc. will exceed its liabilities and it will be able to pay its debts as they become due. There is no further Nevada statutory restriction on the amount of funds which may be distributed by DH Enchantment, Inc.by dividend to its U.S. investors. DH Enchantment, Inc. is permitted under the Nevada laws to provide funding to its subsidiary in Hong Kong and the British Virgin Islands through loans or capital contributions without restrictions on the amount of the funds.

DH Investment Group Limited (British Virgin Islands)

DH Investment Group Limited is permitted under the laws of BVI to provide funding to and receive funding from DH Enchantment, Inc. and Ho Shun Yi Limited through dividend distributions or other payments of cash without restrictions on the amount of the funds. There are no BVI law restrictions on DH Investment Group's ability to receive and provide funding from DH Enchantment Inc. and Ho Shun Yi Limited.

Ho Shun Yi Limited (Hong Kong)

Ho Shun Yi Limited is permitted under the laws of Hong Kong to provide funding to and receive funding from DH Enchantment, Inc. and DH Investment Group Limited through dividend distributions or other payments of cash without restrictions on the amount of the funds. If DH Enchantment, Inc.'s Hong Kong subsidiary incurs debt on its own behalf in the future, the instruments governing the debt may restrict its ability to pay dividends or make other distributions to us. There are no HK law restrictions on HSY's ability to transfer cash to or receive cash from the BVI or Nevada entity in the event HSY incurs debt.

Under the current practice of the Inland Revenue Department of Hong Kong, no tax is payable in Hong Kong in respect of dividends paid by Ho Shun Yi. The laws and regulations of the PRC do not currently have any material impact on transfer of cash from DH Enchantment, Inc. to Ho Shun Yi Limited or from Ho Shun Yi Limited to DH Enchantment, Inc. There are no restrictions or limitation under the laws of Hong Kong imposed on the conversion of HK dollar into foreign currencies and the remittance of currencies out of Hong Kong or across borders and to U.S investors.





PRC Laws

There is a possibility that the PRC could prevent our cash maintained in Hong Kong from leaving or the PRC could restrict the deployment of the cash into our business or for the payment of dividends. Any such controls or restrictions may adversely affect our ability to finance our cash requirements, service debt or make dividend or other distributions to our shareholders. Please see "Risk Factors - Our Hong Kong subsidiary may be subject to restrictions on paying dividends or making other payments to us, which may restrict its ability to satisfy liquidity requirements, conduct business and pay dividends to holders of DH Enchantment, Inc.'s common stock."; "Risk Factors - PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay or prevent us from using the proceeds we receive from offshore financing activities to make loans to or make additional capital contributions to our Hong Kong subsidiary, which could materially and adversely affect our liquidity and our ability to fund and expand business."; "Risk Factors - Because our holding company structure creates restrictions on the payment of dividends or other cash payments, our ability to pay dividends or make other payments is limited."

Current PRC regulations permit PRC subsidiaries to pay dividends to Hong Kong subsidiaries only out of their accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations. In addition, each of our subsidiaries in China is required to set aside at least 10% of its after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of its registered capital. Each of such entity in China is also required to further set aside a portion of its after-tax profits to fund the employee welfare fund, although the amount to be set aside, if any, is determined at the discretion of its board of directors. Although the statutory reserves can be used, among other ways, to increase the registered capital and eliminate future losses in excess of retained earnings of the respective companies, the reserve funds are not distributable as cash dividends except in the event of liquidation. As of the date of this prospectus, we do not have any PRC subsidiaries.

The PRC government also imposes controls on the conversion of RMB into foreign currencies and the remittance of currencies out of the PRC. Therefore, we may experience difficulties in completing the administrative procedures necessary to obtain and remit foreign currency for the payment of dividends from our profits, if any. Furthermore, if our subsidiaries in the PRC incur debt on their own in the future, the instruments governing the debt may restrict their ability to pay dividends or make other payments. If we or our subsidiaries are unable to receive all of the revenues from our operations, we may be unable to pay dividends on our common stock.

Cash dividends, if any, on our common stock will be paid in U.S. dollars. If we are considered a PRC tax resident enterprise for tax purposes, any dividends we pay to our overseas shareholders may be regarded as China-sourced income and as a result may be subject to PRC withholding tax at a rate of up to 10.0%.

If in the future we have PRC subsidiaries, certain payments from such PRC subsidiaries to Hong Kong subsidiaries will be subject to PRC taxes, including business taxes and VAT. As of the date of this prospectus, we do not have any PRC subsidiaries, and our Hong Kong subsidiary has not made any transfers, dividends or distributions to date. We do not expect our Hong Kong subsidiaries to make any such transfers, dividends or distributions in the foreseeable future.

Pursuant to the Arrangement between Mainland China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and Tax Evasion on Income, or the Double Tax Avoidance Arrangement, the 10% withholding tax rate may be lowered to 5% if a Hong Kong resident enterprise owns no less than 25% of a PRC entity. However, the 5% withholding tax rate does not automatically apply and certain requirements must be satisfied, including, without limitation, that (a) the Hong Kong entity must be the beneficial owner of the relevant dividends; and (b) the Hong Kong entity must directly hold no less than 25% share ownership in the PRC entity during the 12 consecutive months preceding its receipt of the dividends. In current practice, a Hong Kong entity must obtain a tax resident certificate from the Hong Kong tax authority to apply for the 5% lower PRC withholding tax rate. As the Hong Kong tax authority will issue such a tax resident certificate on a case-by-case basis, we cannot assure you that we will be able to obtain the tax resident certificate from the relevant Hong Kong tax authority and enjoy the preferential withholding tax rate of 5% under the Double Taxation Arrangement with respect to dividends to be paid by a PRC subsidiary to its immediate holding company. As of the date of this prospectus, we do not have a PRC subsidiary. In the event that we acquire or form a PRC subsidiary in the future and such PRC subsidiary desires to declare and pay dividends to our Hong Kong subsidiary, our Hong Kong subsidiary will be required to apply for the tax resident certificate from the relevant Hong Kong tax authority. In such event, we plan to inform the investors through SEC filings, such as a current report on Form 8-K, prior to such actions. See "Risk Factors - Risk Factors Relating to Doing Business in Hong Kong." set forth in the Annual Report.





PRC Laws

We are at a development stage company and reported a net loss of $273,026 and $260,701 for the six months ended September 30, 2022 and 2021, respectively. We had current assets of $45,928 and current liabilities of $754,942 as of September 30, 2022. As of March 31, 2022, we had current assets of $121,433 and current liabilities of $479,067. We have prepared our unaudited condensed financial statements for the six months ended September 30, 2022 and 2021 assuming that we will continue as a going concern. Our continuation as a going concern is dependent upon improving our profitability and the continuing financial support from our stockholders. Our sources of capital in the past have included the sale of equity securities, which include common stock sold in private transactions and short-term and long-term debts.





Results of Operations.

Three Months Ended September 30, 2022 Compared to the Three Months Ended September 30, 2021





The following table sets forth selected financial information from our
statements of comprehensive loss for the three months ended September 30, 2022
and 2021:



                                          For the Three Months Ended
                                                September 30,
                                          2022                2021
Revenue                               $      4,835       $        46,073
Cost of Revenue                             (1,006 )             (34,495 )
General and administrative expenses         (9,208 )            (179,601 )
Other Income (Expenses), net                (2,664 )              (1,970 )
Net Loss                              $     (8,043 )     $      (169,993 )








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Revenues

The Company generates revenues of $4,835 and $46,073 for the three months ended September 30, 2022 and 2021, respectively.





Cost of Revenues

Cost of revenues for the three months ended September 30, 2022 and 2021 was $1,006 and $34,495, respectively.

General and Administrative Expenses ("G&A")

G&A for the three months ended September 30, 2022 and 2021, were $9,208 and $179,601, respectively. Operating expenses for the three months ended September 30, 2022 and 2021 consisted primarily of G&A of $3,884 and $42,035 and professional fee of $5,324 and $137,566, respectively.





Other Expenses

Other expenses for the three months ended September 30, 2022 and 2021, were $2,664 and $1,970, respectively. Other expenses for the three months ended September 30, 2022 consisted primarily of other income of $70, net off by an interest expense of $2,734. Other expenses for the three months ended September 30, 2021 consisted primarily of other income of $45, net off by an interest expense of $2,015.





Net Loss

As a result of the above factors, the Company incurred a net loss of $8,043 and $169,993 for the three months ended September 30, 2022 and 2021, respectively.

Foreign Currency Translation (Loss) Gain

The Company had $1,712 in foreign currency translation loss during the three months ended September 30, 2022 as compared to $254 in foreign currency translation gain during the three months ended September 30, 2021, reflecting a change of $1,966. Such increase in foreign currency translation loss was primarily caused by the currency exchange rate fluctuation.

Six Months Ended September 30, 2022 Compared to the Six Months Ended September 30, 2021





The following table sets forth selected financial information from our
statements of comprehensive loss for the six months ended September 30, 2022 and
2021:



                                        For the Six Months Ended
                                              September 30,
                                          2022              2021
Revenue                               $       6,581      $  145,885
Cost of Revenue                              (2,235 )      (122,724 )
Sales and marketing expenses               (226,366 )             -
General and administrative expenses         (59,364 )      (281,271 )
Other Income (Expenses), net                  8,358          (2,591 )
Net Loss                              $    (273,026 )    $ (260,701 )








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Revenues

The Company generates revenues of $6,581 and $145,885 for the six months ended September 30, 2022 and 2021, respectively.





Cost of Revenues

Cost of revenues for the six months ended September 30, 2022 and 2021 was $2,235 and $122,724, respectively.





Sales and marketing expenses

We incurred sales and marketing expenses of $226,366 and $0 for the six months ended 30, 2022 and 2021, respectively. During the year ended March 31, 2022, we engaged with two consultants for expanding sale channels and developing marketing strategies, analyzing and evaluating consumer data services for a term of six months, with a compensation of 19,684,019 shares to be issued upon the completion of the service contracts. The fair value of these shares was $452,732, based on the current market price at the effective date of the agreement and is being amortized over the service period.

General and Administrative Expenses ("G&A")

G&A for the six months ended September 30, 2022 and 2021, were $59,364 and $281,271, respectively. Operating expenses for the six months ended September 30, 2022 and 2021 consisted primarily of G&A of $4,098 and $80,383 and professional fee of $55,266 and $200,888, respectively.





Other Income (Expenses)

Other income (expenses) for the six months ended September 30, 2022 and 2021, were $8,358 and $(2,591), respectively. Other income for the six months ended September 30, 2022 consisted primarily of other income of $12,667, net off by an interest expense of $4,309. Other expenses for the six months ended September 30, 2021 consisted primarily of other income of $45, net off by an interest expense of $2,636.





Net Loss

As a result of the above factors, the Company incurred a net loss of $273,026 and $260,701 for the six months ended September 30, 2022 and 2021, respectively.

Foreign Currency Translation (Loss) Gain

The Company had $1,770 in foreign currency translation loss during the six months ended September 30, 2022 as compared to $261 in foreign currency translation gain during the six months ended September 30, 2021, reflecting a change of $2,031. Such increase in foreign currency translation loss was primarily caused by the currency exchange rate fluctuation.

Liquidity and Capital Resources

The following summarizes the key component of our cash flows for the six months ended September 30, 2022 and 2021.





                                                         For the Six Months Ended
                                                               September 30,
                                                           2022              2021
Net cash used in operating activities                  $    (85,948 )     $ (210,337 )
Net cash provided by investing activities              $          -       $        -
Net cash provided by financing activities              $     17,939       $  212,822

Net (decrease) increase in cash and cash equivalents $ (69,935 ) $ 2,746

Net cash used in operating activities was $85,948 for the six months ended September 30, 2022, compared to the net cash used in operating activities of $210,337 for the six months ended September 30, 2021. The decrease of $124,389 or 59% of net cash used in operating activities was primarily due to the decreased in accounts receivable and increased in accrual and other payables during the six months ended September 30, 2022., offset by the increase in net loss.

For the six months ended September 30, 2022, net cash used in operating activities consisted primarily of a net loss of $273,026, offset by an decrease in prepayments and other receivable of $5,570 and increase in accrual and other payables of $181,508.

For the six months ended September 30, 2021, net cash used in operating activities consisted primarily of a net loss of $260,701, offset by an decrease in prepayments and other receivable of $197 and increase in accrual and other payables of $50,167.

Net cash provided by financing activities was $17,939 and $212,822 for the six months ended September 30, 2022 and 2021, respectively, representing a decrease of $194,883 or 92%. The decrease in net cash provided by financing activities was primarily due to decrease in advance from a shareholder, cash proceeds from issuing promissory notes and repayment of promissory notes in the six months ended September 30, 2022.

For the six months ended September 30, 2022, net cash provided by financing activities consisted primarily of a cash proceeds from issuing promissory notes of $57,321 and advance from a director of $10,296, offset by a repayment of promissory note of 49,678.

For the six months ended September 30, 2021, net cash provided by financing activities consisted primarily of a cash proceeds from issuing promissory notes of $77,052, advance from a director of $2,213 and advance from a shareholder of $133,557.





Working Capital:

As of September 30, 2022 and March 31, 2022, we had cash and cash equivalent of $41,461 and $111,396, respectively. As of September 30, 2022 and March 31, 2022, we have incurred accumulated operating losses of $1,544,958 and $1,271,932, respectively. As of September 30, 2022 and March 31, 2022, we had working capital deficit of $709,014 and $357,634, respectively.





Going Concern

We require additional funding to meet the Company's ongoing obligations and to fund anticipated operating losses. The continuation of the Company as a going concern is dependent upon the continued financial support from its stockholders, and our ability to continue as a going concern is dependent on raising capital to fund its initial business plan and ultimately to attain profitable operations. These consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty.

We expect to incur marketing and professional and administrative expenses as well as expenses associated with maintaining our filings with the Commission. We will require additional funds during this time and will seek to raise the necessary additional capital. If we are unable to obtain additional financing, we may be required to reduce the scope of our business development activities, which could harm our business plans, financial condition and operating results. Additional funding may not be available on favorable terms, if at all. We intend to continue to fund the business by way of equity or debt financing and advances from related parties. Any inability to raise capital as needed would have a material adverse effect on our business, financial condition and results of operations.

If we cannot raise additional funds, we will have to cease business operations. As a result, our common stock investors would lose all of their investment.









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Basis of preparation

Our financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis. The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.





Use of estimates

The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting periods. Management makes these estimates using the best information available at the time the estimates are made; however actual results could differ materially from those estimates.





Income Taxes

We account for income taxes as outlined in ASC 740, "Income Taxes". Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled.

Off-balance Sheet Arrangements

As of September 30, 2022, there were no off-balance sheet arrangements.

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US25241A1034

DH ENCHANTMENT, INC. Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

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