NRHI 10-Q
Natural Resource Holdings, Inc. (NRHI)
U.S.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
Mark One
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ______ to _______
Commission File No.
(Exact name of registrant as specified in its charter) |
| 5960 |
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(State or Other Jurisdiction of Incorporation or Organization) |
| (Primary Standard Industrial Classification Number) |
| (IRS Employer Identification Number) |
(Address and telephone number of principal executive offices)
Indicate by checkmark whether the issuer: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one)
Large accelerated filer | ☐ | Accelerated filer | ☐ |
☐ | Smaller reporting company | ||
(Do not check if a smaller reporting company) | Emerging growth company | ||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
Applicable Only to Issuer Involved in Bankruptcy Proceedings During the Preceding Five Years. N/A
Indicate by checkmark whether the issuer has filed all documents and reports required to be filed by Section 12, 13 and 15(d) of the Securities Exchange Act of 1934 after the distribution of securities under a plan confirmed by a court. Yes ☐ No ☒
Indicate the number of shares outstanding of each of the registrant’s classes of common stock as of the latest practicable date.
TABLE OF CONTENTS
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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| Table of Contents |
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
NATURAL RESOURCE HOLDINGS, INC.
CONDENSED BALANCE SHEETS
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| January 31, 2024 |
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| April 30, 2023 |
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ASSETS |
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Current Assets |
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Total Current Assets |
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Non-current Asset |
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Mining Property Rights |
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TOTAL ASSETS |
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LIABILITIES AND STOCKHOLDERS’ DEFICIT |
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Current Liabilities |
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Accounts payable and accrued liabilities |
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Accrued interest |
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Income tax Interest and penalty payable |
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Total Current Liabilities |
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Non-current Liabilities |
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Convertible note payable, net of note discount of $ |
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Loan payable |
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Total Liabilities |
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Stockholders’ Deficit |
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Common stock, par value $ |
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Additional paid-in capital |
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Accumulated deficit |
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Total Stockholders’ Deficit |
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TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT |
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The accompanying notes are an integral part of these unaudited condensed financial statements.
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| Table of Contents |
NATURAL RESOURCE HOLDINGS, INC.
CONDENSED STATEMENTS OF OPERATIONS
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| Three Months Ended |
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| Nine Months Ended |
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| January 31, |
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OPERATING EXPENSES |
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General and administrative expenses |
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Management salaries |
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Mining exploration |
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Total Operating Expenses |
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Loss from operations |
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OTHER EXPENSES |
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Interest expense |
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Other expenses, net |
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Loss before income taxes |
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Provision for income taxes |
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NET LOSS |
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NET LOSS PER SHARE: BASIC AND DILUTED |
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WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: BASIC AND DILUTED |
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The accompanying notes are an integral part of these unaudited condensed financial statements.
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| Table of Contents |
NATURAL RESOURCE HOLDINGS, INC.
CONDENSED STATEMENTS OF STOCKHOLDERS’ DEFICIT
FOR THE NINE MONTHS ENDED JANUARY 31, 2024 AND 2023
Nine Months Ended January 31, 2024
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Balance - April 30, 2023 |
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Issuance of common stock for management salaries |
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Net loss |
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Balance - July 31, 2023 |
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Issuance of common stock for settlement of debts |
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Net loss |
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Balance - October 31, 2023 |
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Net loss |
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Balance - January 31, 2024 |
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Nine Months Ended January 31, 2023
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Balance - April 30, 2022 |
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Net loss |
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Balance - July 31, 2022 |
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Net loss |
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Balance - October 31, 2022 |
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Net loss |
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Balance - January 31, 2023 |
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* Retroactively reflect reverse stock split of 1:20
The accompanying notes are an integral part of these unaudited condensed financial statements.
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| Table of Contents |
NATURAL RESOURCE HOLDINGS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
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CASH FLOWS FROM OPERATING ACTIVITIES |
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Net loss |
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Adjustments to reconcile net loss to net cash from operating activities: |
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Stock based compensation |
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Amortization on note discount |
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Changes in operating assets and liabilities: |
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Prepaid expense |
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Accounts payable and accrued liabilities |
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Accrued interest |
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Net cash used in operating activities |
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CASH FLOWS FROM INVESTING ACTIVITY |
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Acquisition of mining property rights |
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Net cash used in investing activity |
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CASH FLOWS FROM FINANCING ACTIVITY |
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Proceeds from issuance of promissory notes from unaffiliated party |
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Net cash provided by financing activity |
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Net change in cash and cash equivalents |
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Cash and cash equivalents - beginning of period |
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Cash and cash equivalents - end of period |
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Supplemental Cash Flow Disclosures |
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Cash paid for interest |
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Cash paid for income taxes |
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Supplemental Disclosures of Non-Cash Investing and Financing Activities |
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Issuance of convertible notes for conversion of debts |
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Issuance of common stock for management salaries |
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The accompanying notes are an integral part of these unaudited condensed financial statements.
| 6 |
| Table of Contents |
NATURAL RESOURCE HOLDINGS, INC.
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
JANUARY 31, 2024
NOTE 1 - ORGANIZATION AND BUSINESS OPERATIONS
Natural Resource Holdings, Inc. (the “Company”) was incorporated in Nevada on April 19, 2016. We were a development stage company that intended to develop an online beauty sample subscription service.
On November 26, 2020, the Company completed an acquisition of working interests in certain mining properties. The mining property right was fully impaired during the year ended April 30, 2022.
On October 18, 2022, majority of the Company’s shareholders approved a reverse stock split of our issued and outstanding shares of common stock on a basis of up to twenty (20) old shares for one (1) new share of common stock. The reverse stock split was approved by FINRA for approval on February 21, 2023. The financial statements retroactively reflect the reverse stock split.
On January 8, 2023, the Company entered into an agreement with a surveying consulting firm for mining and mineral exploration and surveying services on Potter County, PA Utica Shale area oil and gas properties.
On February 14, 2023, the Company’s name changed to Natural Resources Holdings, Inc. and the Company trading symbol changed to “NRHI” effective March 21, 2023.
We are currently focusing on mining business.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited interim financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the nine months ended January 31, 2024 are not necessarily indicative of the results that may be expected for the year ending April 30, 2024. Notes to the unaudited interim financial statements that would substantially duplicate the disclosures contained in the audited financial statements for fiscal year 2023 have been omitted. This report should be read in conjunction with the audited financial statements and the footnotes thereto for the fiscal year ended April 30, 2023 included in the Company’s Form 10-K as filed with the Securities and Exchange Commission on July 31, 2023.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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 the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Fair Value of Financial Instruments
ASC 820 “Fair Value Measurements and Disclosures” establishes a three-tier fair value hierarchy, which prioritizes the inputs in measuring fair value. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market.
These tiers include:
Level 1: defined as observable inputs such as quoted prices in active markets;
Level 2: defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and
Level 3: defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.
| 7 |
| Table of Contents |
The carrying value of accounts payable and accrued liabilities, accrued interest, current portion of long-term debt, other party loan and loan from director approximates its fair value due to their short-term maturity.
Mining Property
Costs of lease, exploration, carrying and retaining unproven mineral properties are expensed as incurred. The Company expenses all mineral exploration costs as incurred as it is still in the exploration stage. If the Company identifies proven and probable reserves in its investigation of its properties and upon development of a plan for operating a mine, it would enter the development stage and capitalize future costs until production is established. When a property reaches the production stage, the related capitalized costs are amortized on a units-of-production basis over the proven and probable reserves following the commencement of production.
Interest expense allocable to the cost of developing mining properties and to construct new facilities is capitalized until assets are ready for their intended use.
To date, the Company has not established the commercial feasibility of any exploration prospects; therefore, all exploration costs are being expensed.
ASC 930-805, “Extractive Activities-Mining: Business Combinations” states that mineral rights consist of the legal right to explore, extract, and retain at least a portion of the benefits from mineral deposits. Mining assets include mineral rights which are considered tangible assets under ASC 930-805. ASC 930-805 requires that mineral rights be recognized at fair value as of the acquisition date. As a result, the direct costs to acquire mineral rights are initially capitalized as tangible assets. Mineral rights include costs associated with acquiring patented and unpatented mining claims.
ASC 930-805 provides that in measuring the fair value of mineral assets, an acquirer should take into account both:
| (a) | The value beyond proven and probable reserves (“VBPP”) to the extent that a market participant would include VBPP in determining the fair value of the assets. |
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| (b) | The effects of anticipated fluctuations in the future market price of minerals in a manner that is consistent with the expectations of market participants. |
The Company assesses the carrying costs of the capitalized mineral properties for impairment under ASC 360-10, “Impairment of long-lived assets”, and evaluates its carrying value under ASC 930-360, “Extractive Activities - Mining”, annually. An impairment is recognized when the sum of the expected undiscounted future cash flows is less than the carrying amount of the mineral properties. Impairment losses, if any, are measured as the excess of the carrying amount of the mineral properties over its estimated fair value.
Based on the Company’s evaluation, no impairment has been recorded on the mineral properties for the period ended January 31, 2024.
On January 8, 2023, the Company incurred mining exploration expense of $
During the three months ended January 31, 2024, the Company purchased a mining claim (the Montreal Star Property) of $
Intangible Assets
The Company accounts for intangible assets (including mining right) in accordance with ASC 350 “Intangibles-Goodwill and Other.”
ASC 350 requires that goodwill and other intangibles with indefinite lives be tested for impairment annually or on an interim basis if events or circumstances indicate that the fair value of an asset has decreased below its carrying value. In addition, ASC 350 requires that goodwill be tested for impairment at the reporting unit level (operating segment or one level below an operating segment) on an annual basis and between annual tests when circumstances indicate that the recoverability of the carrying amount of goodwill may be in doubt. Application of the goodwill impairment test requires judgment, including the identification of reporting units, assigning assets and liabilities to reporting units, assigning goodwill to reporting units, and determining the fair value. Significant judgments required to estimate the fair value of reporting units include estimating future cash flows, determining appropriate discount rates and other assumptions. Changes in these estimates and assumptions or the occurrence of one or more confirming events in future periods could cause the actual results or outcomes to materially differ from such estimates and could also affect the determination of fair value and/or goodwill impairment at future reporting dates.
The cost of intangible assets with determinable useful lives is amortized to reflect the pattern of economic benefits consumed, either on a straight-line or accelerated basis over the estimated periods benefited. Patents, technology and other intangibles with contractual terms are generally amortized over their respective legal or contractual lives. When certain events or changes in operating conditions occur, an impairment assessment is performed and lives of intangible assets with determinable lives may be adjusted.
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| Table of Contents |
Revenue Recognition
The Company recognized revenue from the sales of mineral products produced from mining operations in accordance with ASC 606,”Revenue Recognition” following the five steps procedure:
Step 1: The contract has been signed by both parties or when the invoice has been generated and provided to the customer
Step 2: The performance obligations are stated or implied in the contract or invoice
Step 3: The transaction price has been identified in the contract or invoice
Step 4: The Company has allocated the transaction price to the performance obligations pursuant to the contract or invoice
Step 5: The Company satisfied the performance obligations when the mineral products delivered to the purchaser
The Company recognized revenue from the royalty revenue in accordance with ASC 606,”Revenue Recognition” following the five steps procedure:
Step 1: The contract has been signed by both parties for royalty fees
Step 2: The performance obligations are stated or implied in the contract
Step 3: The transaction price has been identified in the contract
Step 4: The Company has allocated the transaction price to the performance obligations pursuant to the contract
Step 5: The Company has satisfied the performance obligations at the same period as the sales that generate the royalty payment.
Inherent in the fair value calculation of an ARO are numerous assumptions and judgments including the ultimate settlement amounts, inflation factors, credit adjusted discount rates, timing of settlement, and changes in the legal, regulatory, environmental and political environments. To the extent future revisions to these assumptions impact the fair value of the existing ARO liability, a corresponding adjustment is made to the mining property balance. Settlements greater than or less than amounts accrued as ARO are recorded as a gain or loss upon settlement.
Income Tax
Income taxes are accounted for under the asset and liability 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 bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The 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. A valuation allowance on deferred tax assets is established when management considers it is more likely than not that some portion or all of the deferred tax assets will not be realized.
Tax benefits from an uncertain tax position are only recognized if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate resolution. Interest and penalties related to unrecognized tax benefits are recorded as incurred as a component of income tax expense. The Company has not recognized any tax benefits from uncertain tax positions for any of the reporting periods presented.
The Company has not filed income tax returns from year ended April 30, 2016 through April 30, 2020. $
Related Party Balances and Transactions
The Company follows FASB ASC 850, “Related Party Disclosures,” for the identification of related parties and disclosure of related party transaction. (Note 5)
| 9 |
| Table of Contents |
Basic and Diluted Income (Loss) Per Share
The Company computes income (loss) per share in accordance with FASB ASC 260, “Earnings per Share” which requires presentation of both basic and diluted earnings per share on the face of the statement of operations. Basic loss per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of outstanding common shares during the period. Diluted income (loss) per share gives effect to all dilutive potential common shares outstanding during the period. Dilutive loss per share excludes all potential common shares if their effect is anti-dilutive.
As of January 31, 2024 and January 31, 2023, convertible notes were dilutive instruments and were not included in the calculation of diluted loss per share as their effect would be antidilutive:
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Convertible note payable |
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As of January 31, 2024 and January 31, 2023, the total convertible shares from convertible notes totaling $
Recent accounting pronouncements
In August 2020, the FASB issued ASU 2020-06, ASC Subtopic 470-20 “Debt-Debt with “Conversion and Other Options” and ASC subtopic 815-40 “Hedging-Contracts in Entity’s Own Equity”. The standard reduced the number of accounting models for convertible debt instruments and convertible preferred stock. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting; and, (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. ASU2020-06 removes from U.S. GAAP the separation models for (1) convertible debt with a cash conversion feature (“CCF”) and (2) convertible instruments with a beneficial conversion feature (“BCF”). With the adoption of ASU2020-06, entities will not separately present in equity an embedded conversion feature these debts. The amendments in this update are effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company has chosen to early adopt this standard on its year ended April 30, 2022 financial statements and did not record BCF on the issuance of convertible notes with conversion rate below the Company’s market stock price on the date of note issuance.
In June 2016, the FASB issued Accounting Standards Update No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which introduced the expected credit losses methodology for the measurement of credit losses on financial assets measured at amortized cost basis, replacing the previous incurred loss methodology. In November 2019, the FASB issued ASU 2019-10 highlighted the adoption timeline. For smaller reporting entities, Topic 326 is effective for annual periods beginning after December 15, 2022, including interim periods within those fiscal years, of which is effective for the Company on April 1, 2023. The adoption of this standard did not have a material impact on the Company's financial statements.
Other 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.
Management has considered all recent accounting pronouncements issued. The Company’s management believes that these recent pronouncements will not have a material effect on the Company’s financial statements.
NOTE 3 - GOING CONCERN
The Company’s financial statements have been prepared assuming that it will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.
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As reflected in the financial statements, the Company had an accumulated deficit of $
The Company is attempting to commence operations and generate sufficient revenue; however, the Company’s cash position may not be sufficient to support the Company’s daily operations. Management intends to raise additional funds by way of a private or public offering. While the Company believes in the viability of its strategy to commence operations and generate sufficient revenue and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate sufficient revenue and its ability to raise additional funds by way of a public or private offering.
The financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
NOTE 4 – MINING PROPERTY RIGHTS
During the three months ended January 31, 2024, the Company purchased a mining claim (the Montreal Star Property) of $
Mining Property Right |
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Less: Impairment |
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Carrying Amount |
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The Company has acquired the mining property rights on the two mining properties which consist of the legal right to explore, extract and also expect to retain at least a portion of the benefits from mineral deposits. The plan is to start drilling tests and the mining operations will commence once it is viable to do so. Currently, the Company is in the process of engaging an exploration company to handle the project. The surveying and exploration proposals consist of drilling vertical holes into the ground to identify the best locations to mine. There are proposals to drill from 6 to 50 holes, and the Company is still evaluating the proposals to find the best plan. The
NOTE 5 - RELATED PARTY TRANSACTIONS
On July 1, 2021, the Company issued a promissory note of $
In December 2020, the Company acquired several gold mining claims in Canada. The Company planned for exploration on the properties. Due to Covid and economic downturn, the Company was unable to proceed with the mining property exploration. Upon the expiration of the two years term of the property mining rights, the Company decided not to extend beyond the original term of the mining rights and was fully impaired during year ended April 30, 2022.
On July 31, 2021, the Company issued a promissory note of $
On October 31, 2021, the Company issued a promissory note of $
On January 31, 2022, the Company issued a promissory note of $
On February 4, 2022, the Company’s director sold the promissory notes with aggregate principal of $
On June 7, 2023, the Company issued
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NOTE 6 – CONVERTIBLE NOTE PAYABLE
As of January 31, 2024 and April 30, 2023, the convertible note payable was shown as follows:
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Convertible Note - January 2024 |
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Less debt discount |
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On February 11, 2022, the Company entered into an agreement with the unaffiliated note holder of the promissory note of $
On April 30, 2022, the Company issued a convertible note of $
On July 31, 2022, the Company issued a convertible note of $
On October 31, 2022, the Company issued a convertible note of $
On January 31, 2023, the Company issued a convertible note of $
On April 30, 2023, the Company issued a convertible note of $
On July 31, 2023, the Company issued a convertible note of $
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On October 31, 2023, the Company issued a convertible note of $
On January 31, 2024, the Company issued a convertible note of $
During the nine months ended January 31, 2024 and 2023, interest expense of $
During the nine months ended January 31, 2024 and 2023, amortization on note discount of $
As of January 31, 2024 and April 30, 2023, the convertible notes payable, net of note discount of $
NOTE 7 - LOAN PAYABLE
The Company has outstanding long-term loan payable of $
Interest expense was $
As of January 31, 2024 and April 30, 2023, accrued interest was $
NOTE 8 - STOCKHOLDER’S EQUITY
The Company has
On October 18, 2022, the sole director of the Company approved a reverse stock split of our issued and outstanding shares of common stock on a basis of up to twenty (20) old shares for one (1) new share of common stock. The reverse stock split was approved by FINRA for approval on February 21, 2023. The financial statements retroactively reflect the reverse stock split.
On June 7, 2023, the Company issued
On September 13, 2023, the Company issued
As of January 31, 2024 and April 30, 2023, the Company had
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| Table of Contents |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
FORWARD-LOOKING STATEMENTS
This annual report contains forward-looking statements. These statements relate to future events or our future financial performance. These statements often can be identified by the use of terms such as “may,” “will,” “expect,” “believe,” “anticipate,” “estimate,” “approximate” or “continue,” or the negative thereof. We intend that such forward-looking statements be subject to the safe harbors for such statements. We wish to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Any forward-looking statements represent management’s best judgment as to what may occur in the future. However, forward-looking statements are subject to risks, uncertainties and important factors beyond our control that could cause actual results and events to differ materially from historical results of operations and events and those presently anticipated or projected. We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statement or to reflect the occurrence of anticipated or unanticipated events.
GENERAL
We were incorporated in the State of Nevada on April 16, 2016. On November 26, 2020, the Company completed an acquisition of working interests in certain mining properties. The mining property right was fully impaired during the year ended April 30, 2022. On January 8, 2023, the Company entered into an agreement with a surveying consulting firm for mining and mineral exploration and surveying services on Potter County, PA Utica Shale area oil and gas properties. On February 14, 2023, the Company’s name changed to Natural Resources Holdings, Inc. We are currently focusing on mining business.
EMPLOYEES AND EMPLOYMENT AGREEMENTS
At present, we have no employees other than our officer and director. We presently do not have pension, health, annuity, insurance, stock options, profit sharing or similar benefit plans; however, we may adopt such plans in the future. There are presently no personal benefits available to any officers, directors or employees.
Results of Operations
We have incurred recurring losses to date. Our financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in operation.
We expect we will require additional capital to meet our long-term operating requirements. We expect to raise additional capital through, among other things, the sale of equity or debt securities.
The following summary of our operations should be read in conjunction with our unaudited condensed financial statements for the three months and nine months ended January 31, 2024 and 2023, which are included herein.
Three Months Ended January 31, 2024 and 2023
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Operating Expenses |
| $ | (6,594 | ) |
| $ | (11,626 | ) |
| $ | 5,032 |
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| (43 | %) |
Other Expenses |
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| (1,366 | ) |
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| (1,974 | ) |
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| 608 |
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| (31 | %) |
Net Loss |
| $ | (7,960 | ) |
| $ | (13,600 | ) |
| $ | 5,640 |
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| (41 | %) |
During the three months ended January 31, 2024 and 2023, the Company did not earn any revenue.
Net loss for the three months ended January 31, 2024 was $7,960 compared to $13,600 for the three months ended January 31, 2023. The decrease in net loss during the three months ended January 31, 2024 was due to a decrease in operating expenses and other expenses.
Nine Months Ended January 31, 2024 and 2023
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Operating Expenses |
| $ | (2,022,484 | ) |
| $ | (29,394 | ) |
| $ | (1,993,090 | ) |
| 6781 | % |
Other Expenses |
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| (5,209 | ) |
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| (5,762 | ) |
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| 553 |
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| (10 | %) |
Net Loss |
| $ | (2,027,693 | ) |
| $ | (35,156 | ) |
| $ | (1,992,537 | ) |
| 5668 | % |
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| Table of Contents |
During the nine months ended January 31, 2024 and 2023, the Company did not earn any revenue.
Net loss for the nine months ended January 31, 2024 was $2,027,693 compared to $35,156 for the nine months ended January 31, 2023. The increase in net loss during the nine months ended January 31, 2024 was due to an increase in operating expenses. During the nine months ended January 31, 2024, the Company incurred stock based compensation of $2,000,000 for the issuance of 5,000,000 shares of common stock to the Director of the Company valued as management salaries.
Liquidity and Capital Resources
Working Capital
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Current Assets |
| $ | - |
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Current Liabilities |
| $ | 153,164 |
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| $ | 165,198 |
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| $ | (12,034 | ) |
| (7.3 | %) | |
Working Capital Deficiency |
| $ | (153,164 | ) |
| $ | (165,198 | ) |
| $ | 12,034 |
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| (7.3 | %) | |
We had no current assets as of January 31, 2024 and April 30, 2023. Our total current liabilities as of January 31, 2024 were $153,164 as compared to total current liabilities of $165,198 as of April 30, 2023. Our working capital deficiency as of January 31, 2024 was $153,164 as compared $165,198 as of April 30, 2023 due to the decrease in accounts payable and accrued liabilities.
Cash Flows
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Cash flows used in operating activities |
| $ | (37,144 | ) |
| $ | (31,825 | ) |
| $ | (5,319 | ) |
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| 17 | % |
Cash flows used in investing activity |
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| (39,237 | ) |
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| - |
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| (39,237 | ) |
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| 100 | % |
Cash flows provided by financing activity |
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| 76,381 |
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| 31,825 |
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| 44,556 |
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| 140 | % |
Net changes in cash |
| $ | - |
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| $ | - |
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| $ | - |
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Cash Flows from Operating Activities
Net cash used in operating activities was $37,144 for the nine months ended January 31, 2024 compared with $31,825 for the nine months ended January 31, 2023.
During the nine months ended January 31, 2024, the net cash used in operating activities was attributed to net loss of $2,027,693, decreased by stock based compensation of $2,000,000 and amortization of note discount of $2,583, and increased by net changes in operating assets and liabilities of $12,034.
During the nine months ended January 31, 2023, the net cash used in operating activities was attributed to net loss of $35,156, decreased by amortization of note discount of $2,583, and increased by net changes in operating assets and liabilities of $748.
Cash Flows from Investing Activity
During the nine months ended January 31, 2024, the net cash used in investing activity was $39,237 for acquisition of mining property rights.
There were no investing activity during the nine months ended January 31, 2023.
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Cash Flows from Financing Activity
During the nine months ended January 31, 2024 and 2023, net cash from financing activity was $76,381 and $31,825 derived from proceed from issuance of promissory notes to unaffiliated party, respectively.
Going Concern
The Company’s financial statements have been prepared assuming that it will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.
As reflected in the financial statements, the Company had an accumulated deficit of $2,442,817, and working capital deficit of $153,164 at January 31, 2024.
The Company is attempting to commence operations and generate sufficient revenue; however, the Company’s cash position may not be sufficient to support the Company’s daily operations. Management intends to raise additional funds by way of a private or public offering. While the Company believes in the viability of its strategy to commence operations and generate sufficient revenue and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate sufficient revenue and its ability to raise additional funds by way of a public or private offering.
The financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
Plan of Operation and Funding
We expect that working capital requirements will continue to be funded through a combination of our existing funds and further issuances of securities. Our working capital requirements are expected to increase in line with the growth of our business.
Existing working capital, further advances and debt instruments, and anticipated cash flow are expected to be adequate to fund our operations over the next six months. We have no lines of credit or other bank financing arrangements. Generally, we have financed operations to date through the proceeds of the private placement of equity and debt instruments. In connection with our business plan, management anticipates additional increases in operating expenses and capital expenditures relating to: (i) acquisition of software; (ii) developmental expenses associated with a start-up business; and (iii) marketing expenses. We intend to finance these expenses with further issuances of securities, and debt issuances. Thereafter, we expect we will need to raise additional capital and generate revenues to meet long-term operating requirements. Additional issuances of equity or convertible debt securities will result in dilution to our current shareholders. Further, such securities might have rights, preferences or privileges senior to our common stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, we may not be able to take advantage of prospective new business endeavours or opportunities, which could significantly and materially restrict our business operations.
Contractual Obligations
As a “smaller reporting company”, we are not required to provide tabular disclosure obligations.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.
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Critical Accounting Policies
The preparation of financial statements in accounting principles generally accepted in the United States of America 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 and the reported amounts of revenues and expenses during the reporting period. A change in managements’ estimates or assumptions could have a material impact on our financial condition and results of operations during the period in which such changes occurred. Actual results could differ from those estimates. Our financial statements reflect all adjustments that management believes are necessary for the fair presentation of their financial condition and results of operations for the periods presented.
Mining Property
Costs of lease, exploration, carrying and retaining unproven mineral properties are expensed as incurred. The Company expenses all mineral exploration costs as incurred as it is still in the exploration stage. If the Company identifies proven and probable reserves in its investigation of its properties and upon development of a plan for operating a mine, it would enter the development stage and capitalize future costs until production is established. When a property reaches the production stage, the related capitalized costs are amortized on a units-of-production basis over the proven and probable reserves following the commencement of production. Interest expense allocable to the cost of developing mining properties and to construct new facilities is capitalized until assets are ready for their intended use.
To date, the Company has not established the commercial feasibility of any exploration prospects; therefore, all exploration costs are being expensed.
ASC 930-805, “Extractive Activities-Mining: Business Combinations” states that mineral rights consist of the legal right to explore, extract, and retain at least a portion of the benefits from mineral deposits. Mining assets include mineral rights which are considered tangible assets under ASC 930-805. ASC 930-805 requires that mineral rights be recognized at fair value as of the acquisition date. As a result, the direct costs to acquire mineral rights are initially capitalized as tangible assets. Mineral rights include costs associated with acquiring patented and unpatented mining claims.
ASC 930-805 provides that in measuring the fair value of mineral assets, an acquirer should take into account both:
(a) The value beyond proven and probable reserves (“VBPP”) to the extent that a market participant would include VBPP in determining the fair value of the assets.
(b) The effects of anticipated fluctuations in the future market price of minerals in a manner that is consistent with the expectations of market participants.
Revenue Recognition
The Company recognized revenue from the sales of mineral products produced from mining operations in accordance with ASC 606,”Revenue Recognition” following the five steps procedure:
Step 1: The contract has been signed by both parties or when the invoice has been generated and provided to the customer
Step 2: The performance obligations are stated or implied in the contract or invoice
Step 3: The transaction price has been identified in the contract or invoice
Step 4: The Company has allocated the transaction price to the performance obligations pursuant to the contract or invoice
Step 5: The Company satisfied the performance obligations when the mineral products delivered to the purchaser
The Company recognized revenue from the royalty revenue in accordance with ASC 606,”Revenue Recognition” following the five steps procedure:
Step 1: The contract has been signed by both parties for royalty fees
Step 2: The performance obligations are stated or implied in the contract
Step 3: The transaction price has been identified in the contract
Step 4: The Company has allocated the transaction price to the performance obligations pursuant to the contract
Step 5: The Company has satisfied the performance obligations at the same period as the sales that generate the royalty payment
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Recent Accounting Pronouncements
Management has considered all recent accounting pronouncements issued. Our company’s management believes that these recent pronouncements will not have a material effect on our financial statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As a “smaller reporting company”, we are not required to provide the information required by this Item.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer (our principal executive officer, principal financial officer and principal accounting officer), has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a- 15(e) and 15d- 15(e) under the Securities Exchange Act of 1934, as amended (Exchange Act)), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, our Chief Executive Officer has concluded that as of such date, our disclosure controls and procedures were not effective such that the information relating to us required to be disclosed in our Securities and Exchange Commission (“SEC”) reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
During the period covered by this report there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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| Table of Contents |
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 1A. Risk Factors
As a “smaller reporting company”, we are not required to provide the information required by this Item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None
Item 6. Exhibits
| Certification of Chief Executive Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act | |
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Natural Resource Holdings, Inc. |
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Dated: March 13, 2024 | By: | /s/ Lian Yao Bin |
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| Lian Yao Bin, President and Chief Executive Officer and Chief Financial Officer | |
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