Verde Resources, Inc 10-K for FY2021
Verde Resources, Inc. (VRDR)
About this 10-K
Verde Resources, Inc filed this 10-K on November 12, 2021, covering the fiscal year ended June 30, 2021 (FY2021).
Headline figures
Fiscal year ended June 30, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $0
- compared with $0 a year earlier
- Net loss
- $793.01K
- compared with a net loss of $309.4K a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from [______] to [______]
Commission file number:
(Exact name of registrant as specified in its charter) |
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(State or other jurisdiction of incorporation or organization) |
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(Address of principal executive offices) |
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Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
Securities registered pursuant to Section 12(b) of the Act: Title of Each Class |
| Name of Each Exchange On Which Registered |
N/A |
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Securities registered pursuant to Section 12(g) of the Act:
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 last 90 days.
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, 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 registration statement was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
Non-accelerated filer | ☐ | Smaller reporting company | |
(Do not check if a smaller reporting company) |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold of $0.013 (or the average bid and asked price of such common equity) as of the last business day of the registrant’s most recently completed second fiscal quarter, being December 31, 2020, was $1,310,303.38.
Indicate the number of shares outstanding of each of the registrant’s classes of common stock as of the latest practicable date.
DOCUMENTS INCORPORATED BY REFERENCE
None.
TABLE OF CONTENTS
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Part I
Explanatory Note
On March 4, 2020, pursuant to Section 36 of the Securities Exchange Act of 1934, the Securities and Exchange Commission issued Release No. 34-88318 (the “Order”) granting exemptions to registrants subject to the reporting requirements of the Exchange Act Section 13(a) or 15(d) due to circumstances related to the coronavirus disease 2019 (COVID-19).
On October 12, 2021, Verde Resources, Inc. furnished a Current Report on Form 8-K to indicate its reliance on the Order in connection with the Company’s Annual Report on Form 10-K for the year ended June 30, 2021.
The Company’s headquarters and operations are located in Hong Kong SAR and Malaysia. Due to the ongoing outbreak of the COVID-19 particularly in Malaysia, the Hong Kong SAR and Malaysia government initiated travel restrictions and mandatory quarantines to control the spread of COVID-19 within Hong Kong SAR, China and Malaysia. First of all, these measurements taken by the government agents have delayed the Company’s accounting department in obtaining and complying information which will be included in the Form 10-K. Secondly, it delayed the auditors to perform necessary audit procedures and complete audit report in a timely manner. As a result, the Company will be unable to file the Form 10-K by October 13, 2021.
The Company was trying hard to file the Form 10-K within 45 days after October 13, 2021. Because of government-imposed quarantines persisting, the Company could not carry out the preparations for its audit. Therefore, on October 12, 2021, Verde Resources, Inc. filed 8-K to report that it was unable to file Form 10-K within the required time because government-imposed quarantines prevented the Company from completing preparations for its audit.
The Company is herein filing the Form 10-K when all the required procedures and process were completed.
Cautionary Note Regarding Forward-Looking Statements
Except for historical information, this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements involve risks and uncertainties, including, among other things, statements regarding our business strategy, future revenues and anticipated costs and expenses. Such forward-looking statements include, among others, those statements including the words “expects,” “anticipates,” “intends,” “believes” and similar language. Our actual results may differ significantly from those projected in the forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those discussed in the sections “Business,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” You should carefully review the risks described in this Annual Report on Form 10-K and in other documents we file from time to time with the Securities and Exchange Commission. You are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this report. We undertake no obligation to publicly release any revisions to the forward-looking statements or reflect events or circumstances after the date of this document.
Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, there are a number of risks and uncertainties that could cause actual results to differ materially from such forward-looking statements.
All references in this Form 10-K to the “Company,” “Verde,” “we,” “us” or “our” are to Verde Resources, Inc.
Item 1. Business.
Overview
Verde Resources, Inc. (the “Company” or “VRDR”) was incorporated in the State of Nevada on April 22, 2010. The Company conducts business operations in Pahang Malaysia through Champmark Sdn Bhd (“CSB”), a privately limited liability company incorporated in Malaysia, which is a deemed subsidiary under the management control of our 100% subsidiary Gold Billion Global Limited (“GBL”), a company incorporated under the laws of the British Virgin Islands.
On October 25, 2013, we entered into an Assignment Agreement For the Assignment of Management Right in Merapoh Gold Mines in Malaysia (“Assignment Agreement”) with Federal Mining Resources Limited (“FMR”), a company incorporated under the laws of the British Virgin Islands.
FMR owns 85% equity interest in CSB, a privately limited liability company incorporated in Malaysia. CSB is the Mining Contractor of the Mining Lease for Site IV-1 at the Merapoh Gold Mine under the Contract for Work with MMC Corporation Berhad, the Permit Holder of the Mining Lease.
Under the terms of the Assignment Agreement, FMR has assigned its management rights of CSB’s mining operation in the Mining Lease to the Company, through its wholly-owned subsidiary Gold Billion Global Limited (“GBL”), in exchange for 80,000,000 shares of the Company’s common stock, which constituted 95.26% of our issued and outstanding capital stock as of and immediately after the consummation of the acquisition.
GBL was formed on February 7, 2013, by the Board of Directors of FMR to monitor the CSB operation. The acquisition of 100% of the issued and outstanding capital stock of GBL was agreed upon on October 18, 2013, and completed on October 25, 2013, subject to the approval of the Board of Directors and the audit of GBL.
On February 17, 2014, we entered into a Supplementary Agreement to the Assignment Agreement and completed a reverse acquisition of GBL pursuant to the Supplementary Agreement. As a result of the acquisition, the Company holds 100% equity interest in GBL and 85% variable interest in CSB. Our consolidated subsidiaries include GBL being our wholly-owned subsidiary and 85% of CSB being a variable interest entity (VIE) and deemed subsidiary of GBL. On April 1, 2014, GBL purchased 85% equity interest of CSB, and CSB became indirect subsidiary of the Company.
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On May 10, 2021, the Company announced the Sale and Purchase Agreement to acquire the assets of biofraction plant and the right to use intellectual property license in Sabah, Malaysia from Borneo Energy Sdn Bhd, in consideration of issuance of 166,666,667 share of the Company’s stock at $0.03 per share, valued at $5,000,000. 135,666,667 shares and 31,000,000 shares were issued on May 10, 2021 and July 1, 2021, respectively. The completion of the S&P Agreement is subject to all such acts necessary, including but not limited to due diligence exercise to ascertain the valuation of the assets of the biofraction plant and the right to use the licensed intellectual property in Sabah, Malaysia. The Company also announced the Share Sale Agreement on May 12, 2021 for the acquisition of the entire issued and paid-up share capital of Bio Resources Limited with Taipan International Limited, an unrelated third party, The Wision Project Limited (formerly known as “Borneo Resources Limited”), an unrelated third party, and other individuals unrelated third parties, in consideration of issuance of 321,500,000 shares of the Company’s restricted common stock at $0.03 per share, valued at $9,645,000, and the issuance of promissory notes with two-year term period with a principal amount of $20,355,000. 321,500,000 shares were issued on May 12, 2021 and the promissory notes were issued on May 12, 2021. The face value (principal) amount of $20,355,000 is repayable by May 12, 2023, and bearing zero coupon interest. The promissory note is priced at $16,290,550 considering the current market interest rate. This acquisition is currently in progress and the completion of the S&P Agreement is subject to all such acts necessary, including but not limited to auditing and due diligence exercise to ascertain the valuation of Bio Resources Limited.
On June 9, 2021, the Company entered into a Settlement of Debt Agreement (the “Debt Settlement Agreement”) with the Company’s creditors Beijing Changxin Wanlin Technology Co., Ltd, Federal Mining Resources Ltd, Federal Capital Investment Limited and Yorkshire Capital Limited (collectively the “Creditors”) to convert a total of USD 1,945,096 of the Company’s accounts payable to the Creditors into equity by increasing the share capital by means of a subscription for 64,836,533 new restricted shares of the Company’s common stock at a subscription price of $0.03 per share. As set out in the Debt Settlement Agreements, the new restricted shares for settlement of the account payable to Beijing Changxin Wanlin Technology Co., Ltd, Federal Mining Resources Ltd and Federal Capital Investment Limited issued to their nominee Internet.com Ltd on June 9, 2021.
On June 11, 2021, GBL entered into a Sale and Purchase of Assets Agreement (the “SPA Agreement”) to purchase a factory sit e from a Malaysia company Segama Ventures Sdn Bhd (“Segaman Ventures”), an unrelated third party , in order to expand the Company’s biofraction plant in Malaysia. Under the terms of the SPA Agreement, the acquisition is satisfied by cash payment of $1,600,000 in two instalments of $800,000 each, one payment upon signing the SPA Agreement, and the second payment within three (3) months from the date of the SPA Agreement. A deposit of $800,000 was paid to Segaman Ventures on June 10, 2021. This acquisition is currently in progress and the completion of the S&P Agreement is subject to all such acts necessary, including but not limited to due diligence exercise to ascertain the valuation of factory site. The consideration shall be refundable if the transaction fails to complete.
On June 17, 2021, the Company through its prospective indirect subsidiary Bio Resources Limited (“BRL”), a company incorporated under the laws of the Labuan, entered into a Shares Sale Agreement with Hermalisa Binti Mohamad Tahir (“Hermalisa”), a company incorporated under the laws of the Malaysia, to acquire the entire issued and paid-up share capital of Global Renewables. Under the terms of the Shares Sale Agreement, the consideration for the acquisition shall be satisfied in full by the payment of Malaysia Ringgit MYR 25,000 upon the execution of the Shares Sale Agreement. The acquisition of Global Renewables was subject to the successful completion of the acquisition of the entire issued and paid-up share capital of BRL. Therefore, the acquisition of Global Renewables will dependent upon the successful acquisition of BRL..
On June 18, 2021, GBL entered into a Shares Sale Agreement with Lamax Gold Limited (“LGL”), a company incorporated under the laws of the British Virgin Islands, in relation to acquisition of the remaining 15% of the issued and paid-up share capital of CSB. Prior to this acquisition, GBL owned 85% equity in CSB. Upon completion of the acquisition, GBL would own the entire issued and paid-up share capital of CSB. Under the terms of the Shares Sale Agreement, the consideration for the acquisition shall be satisfied in full by the payment of Malaysia Ringgit MYR 150,000 ($36,130) upon the execution of the Shares Sale Agreement. This acquisition is currently in progress and the completion of the S&P Agreement is subject to all such acts necessary, including but not limited to auditing and due diligence exercise to ascertain the valuation of 15% of the issued and paid-up share capital of CSB. A deposit of MYR 150,000 ($36,130) was paid to LGL on June 21, 2021. The consideration shall be refundable if the transaction fails to complete.
On August 10, 2021, the Company formed a wholly owned subsidiary, Verde Renewables, Inc., for the purpose of conducting business in Missouri (using palm waste to create biochar and related products). Another entity, Verde Estates, LLC, was also formed on August 10, 2021 to own property in Missouri. Verde Estates, LLC is a wholly owned subsidiary of Verde Renewables, Inc.
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Corporate History and Structure
Verde Resources, Inc. was incorporated on April 22, 2010, in the State of Nevada, U.S.A. The following persons were appointed to serve as directors and to assume the responsibilities of officers on October 17, 2013. Mr. Wu Ming Ding, as President and Director; Mr. Balakrishnan B S Muthu as Treasurer Chief Financial Officer, General Manager and Director; and Mr. Liang Wai Keen as Secretary. Mr. Wu and Mr. Muthu were added to the Board of Directors.
On April 1, 2014, the Board of Directors of Gold Billion Global Limited (“GBL”) notified Federal Mining Resources Limited (“FMR”) of the decision to exercise the right of option to purchase 85% equity interest of Champmark Sdn Bhd (“CSB”) under Management Agreement Section 3.2.4 dated July 1, 2013, between GBL and FMR. This acquisition was completed on April 1, 2014, with consideration of US$1, and GBL then became 85% shareholder of CSB.
Effective February 20, 2016, Mr. Wu Ming Ding resigned all of his positions as President and Director of the Company, with Mr. Balakrishnan B S Muthu being appointed President to fill the vacancy created. Effective February 20, 2016, Mr. Chen Ching was appointed Director of the Company and the entire Board of Directors now consists of Mr. Balakrishnan B S Muthu and Mr. Chen Ching.
Effective February 2, 2018, the Company’s Articles of Incorporation were amended to increase the authorized shares of the Company from 250,000,000 shares of common stock to 10,000,000,000 shares of common stock. A copy of the Certificate of Amendment was filed with the Nevada Secretary of State. The Form 8K announcing the increase of the authorized shares of the Company was filed with SEC on February 6, 2018.
Effective March 31, 2021, Mr. Carl M. Craven was appointed Director of the Company and the entire Board of Directors now consists of Mr. Balakrishnan B S Muthu, Mr. Chen Ching and Mr. Carl M. Craven. The Form 8-K announcing the change in officers and directors were filed with SEC on April 1, 2021.
The following diagram illustrates our current corporate structure:
According to ASC 810-05-08 A, CSB is a deemed subsidiary of GBL where GBL controls the Board of Directors of CSB, rights to receive future benefits and residual value, and obligation to absorb loss and finance for CSB. GBL has the power to direct the activities of CSB that most significantly impact CSB’s economic performance and the obligation to absorb losses of CSB that could potentially be significant to the CSB or the right to receive benefits from CSB that could potentially be significant to CSB. GBL is the primary beneficiary of CSB because GBL can direct the activities of CSB through the common directors and 85% shareholder FMR. Under 810-23-42, 43, it is determined that CSB is de-facto agent of the principal GBL and so GBL will consolidate CSB from July 1, 2013. On April 1, 2014, GBL purchased 85% equity interest of CSB, and CSB became indirect subsidiary of the Company.
On June 18, 2021, GBL entered into a Shares Sale Agreement with Lamax Gold Limited (“LGL”), a company incorporated under the laws of the British Virgin Islands, in relation to acquisition of the remaining 15% of the issued and paid-up share capital of CSB. Prior to this acquisition, GBL owned 85% equity in CSB. Upon completion of the acquisition, GBL would own the entire issued and paid-up share capital of CSB. Under the terms of the Shares Sale Agreement, the consideration for the acquisition shall be satisfied in full by the payment of Malaysia Ringgit MYR 150,000 upon the execution of the Shares Sale Agreement. This acquisition is currently in progress and the completion of the S&P Agreement is subject to all such acts necessary, including but not limited to auditing and due diligence exercise to ascertain the valuation of 15% of the issued and paid-up share capital of CSB. A deposit of MYR 150,000 ($36,130) was paid to LGL on June 21, 2021. The consideration shall be refundable if the transaction fails to complete.
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Contractual Arrangements
Our exploration and mining business is currently provided through contractual arrangements with CSB through our wholly-owned subsidiary GBL.
CSB, the VIE of GBL, sells gold minerals directly to the registered gold trading company in Malaysia. We have been and are expected to continue to be dependent on our VIE to operate our exploration and mining business. GBL has entered into contractual arrangements with its VIE, which enable us to exercise effective control over the VIE, receive substantially all of the economic benefits from the VIE, and have the option to purchase equity interests in the VIE.
On July 1, 2013, the Company’s subsidiary GBL entered into a series of agreements (“VIE agreements”) with FMR and details of the VIE agreements are as follows:
| 1. | Management Agreement, FMR entrusted the management rights of its subsidiary CSB to GBL that include: | |
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| i.) | management and administrative rights over the day-to-day business affairs of CSB and the mining operation at Site IV-1 of the Merapoh Gold Mine; |
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| ii.) | final right for the appointment of members to the Board of Directors and the management team of CSB; |
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| iii.) | act as principal of CSB; |
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| iv.) | obligation to provide financial support to CSB; |
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| v.) | option to purchase an equity interest in CSB; |
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| vi.) | entitlement to future benefits and residual value of CSB; |
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| vii.) | right to impose no dividend policy; |
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| viii.) | human resources management. |
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| 2. | Debt Assignment, FMR assigned to GBL the sum of money in the amount of three hundred nine thousand three hundred thirty one dollars and ninety-two cents (US$ 309,331.92), now due to GBL from CSB under the financing obligation from the FMR to CSB. | |
With the above agreements, GBL demonstrates its ability to control CSB as the primary beneficiary and the operating results of the VIE was included in the condensed consolidated financial statements for the year ended June 30, 2014.
CSB holds the operating right to Merapoh Gold Mine (the “Mine”) with all regulatory and government operating licenses in Malaysia.
On April 1, 2014, GBL purchased 85% equity interest of CSB, and CSB became indirect subsidiary of the Company.
On June 18, 2021, GBL entered into a Shares Sale Agreement to acquire the remaining 15% of the issued and paid-up share capital of CSB. GBL would own the entire issued and paid-up share capital of CSB upon completion of the acquisition.
Stage of Operation
The Company does not own any title and/or concession right in any mines. The Company is undertaking natural mineral resource extraction management services.
The Company is in the process of negotiating with Malaysia state agency PKNP on a 2-year lease for a new mining location that is about 5 km from the current Merapoh mine site. For the period between January 2020 to December 2020, there was no production at the Merapoh Gold Mine. The objective of the Company is to improve the productivity at the new mine to ensure that the operation will be carried out effectively and efficiently at minimum cost.
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Current Mining Property and Location
Merapoh Gold Mine (the “Mine”)
The Merapoh Gold Mine is located in northern Pahang, with convenient road access through Kelantan directly to the mine site and is about 400 kilometers away from Kuala Lumpur. The Mine is located in the middle of Malaysia’s gold metallogenic belt. The central gold belt is the source of the majority of the gold deposits in the peninsula. It lies between the western and eastern tin belts and extends from Kelantan (Sungai Pergau, Sungai Galas) to Pahang (Merapoh, Kuala Lipis, Raub), Terengganu (Lubuk Mandi), Negri Sembilan and Johor (Gunung Ledang).
Mine Area:
Site IV-1 of the Merapoh Gold Mine consists of a mining area of 400 acres with mining lease.
Location and Access:
The Merapoh Gold Mine is about 280km from Kuala Lumpur, and 50km from Kuala Lipis, the former state capital of Pahang, accessible via secondary paved highways with a new major highway under construction was completed in 2018/19. The geological coordinates of the mine are 101 ° 58 ′ , 4 ° 35 ′.
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Type of Claim:
Champmark Sdn Bhd, the subsidiary of Gold Billion Global Limited, is the Mining Contractor of the Mining Lease for Site IV-1 of the Merapoh Gold Mine under the Contract for Work with MMC Corporation Berhad, the Permit Holder of the Mining Lease.
Identifying Information of the Merapoh Gold Mine:
Mining Right:
Mining Lease No.: ML 01/2020
Operational Mining Scheme No.: PTG.PHG.(ML).16/015/08/23.2019
Concession Period: From June 14, 2021 to June 13, 2023.
Regional Geology:
The Malaysia Central Gold Belt runs along the entire backbone of Peninsular Malaysia, extending further to the north. It was formed between the Sibumasu block in the west and Manabor block in the east that runs along major mineral deposits in Thailand, Myanmar and China. The regional gold deposits were made of Epithermal deposits that formed in a series of volcanic environment, where the tensional fractures along the subduction zone allows the intrusion of mineral rich acidic magma within deep faults.
Rock Formations and Mineralization:
Site IV-1 of the Merapoh Gold Mine covers an area of 400 acres with mineralization structure being Permian limestone dominating the South-East portion, felsic volcanic tuff in the Western portion of the area and intrusive dacite rock to the north-west of the area. Tectonic contact within the sheer zone of creates epithermal mineralization, forming a mineral rich vein along the contact zone. The mineralized zone is made of highly altered tuffacaous rock with abundant pyrite dissemination and a moderately spaced quartz vein.
Work Completed and Present Condition:
Lode gold exploration on Site IV-1 of Merapoh Gold Mine hashas commenced since 2011 and still in progress with both in-house drilling team and third party drilling services running in parallel to expedite data collection to generate a comprehensive JORC compliant gold reserve report. There was no gold ore extraction since 2019 and the company has been engaged on the sales of wash sand extracted from Site IV-1 of Merapoh Gold Mine to customers in Malaysia since January 2021.
Equipment, Infrastructure and Other Facilities of the Merapoh Gold Mine:
Parlongs
These are basic production plants and the processing method employed five high powered manual water guns, angled water buffering control and 5-lane carpeted sluice with lateral barriers. The processing capacity is between 40 - 45 tons per hour.
OPS 1
This is a modified production plant and the processing method employed four high powered manual water guns, tapered rotating screen scrubber, angled water flow buffering and 3-lane carpeted sluice with lateral barriers. The processing capacity is between 30 - 35 tons per hour.
GS 150
This is a non-self-propelled mobile production plant and the processing method employed fixed spray guns, 6m x 2m rotating screen scrubber, 6-lane carpeted sluice with lateral barriers and conveyer belt pebble dispenser. The processing capacity is between 25 - 30 tons per hour.
GS 120
This is a self-propelled mobile plant with concentrator and the processing method employed fixed spray guns, 4m x 3m rotating screen scrubber, fixed screen, conveyer belt pebble dispenser and triple concentrator processor. The processing capacity is between 15 - 20 tons per hour.
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Description of Processing Facilities:
Process for removing ore concentrates from the ore body
1. | The ore body is transported to the treatment plants in vehicles capable of hauling huge, heavy loads. |
2. | The ore body is separated into Ore Type 1 Stockpile and Ore Type 2 Stockpile. |
3. | The monitor washes finer gold bearing material off larger rocks which is screened on an inclined coarse wire screen. |
4. | An excavator is used to turn over the rocks so wash is removed from all sides of the coarse material. |
5. | A monitor pushes the rock down the inclined coarse screen where the course is removed and stockpiled at the bottom. |
6. | Finer material passes through the mesh screen into the sluice system and runs over the sluice. |
7. | The carpets are removed and taken to refining facility for gold recovery. |
8. | A suction pipe recovers water of the fine tailings pond for use in the system. |
Refining of the concentrate
1. | The carpets holding concentrate from the sluice are brought to a shed in the camp site where the gold is refined. |
2. | The first stage of the refining is to wash the gold containing concentrate into large bins. This is pumped to a jig and shaking table. |
3. | Nuggets are handpicked from the coarse fraction and the fine fraction is amalgamated to remove the gold. After distillation, gold from the amalgam and the coarse are melted with flux and the gold is poured into small bars. |
Current State of Exploration:
As of the date of this report, the Merapoh Gold Mine property is without known reserves.
The Merapoh Gold Mine commenced exploratory operation in alluvia mining and achieved its first gold pour in July 2011. Through the years of operation, the Company has performed ongoing exercises to improve upon the matching of processing method with the types of ore in order to optimize cost to recovery ratio. In July 2013, production was outsourced to a reputable subcontractor, and developed a resource management system to match ore against processes to achieve the most cost efficient and highest recovery production procedure.
There was no gold ore extraction of the Merapoh Gold Mine and no gold concentrate sold for the twelve months ended June 30, 2021. We have generated other income from the sales of wash sand to customers in Malaysia.
Our revenues have been derived from gold production from the Merapoh Gold Mine, but currently there is no production from that mine and we are not certain there will be production in the future. We have generated other revenues through seeking new customers of wash sand sales during January to June 2021. Management continues to search for mining opportunities to generate revenues in the future.
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Subcontractors
In an effort to enhance the efficiency of mine operations at the Merapoh Gold Mine, Champmark Sdn Bhd (“CSB”) entered into an Operation Term Sheet (“OTS”) agreement in July 2013 to outsource the exploitation works of alluvial gold resources at Site IV-1 of the Merapoh Gold Mine to a third party subcontractor Borneo Oil & Gas Corporation Sdn Bhd (“BOG”). However, BOG became the Company’s shareholder in January 29, 2014, and was no longer a third party subcontractor.
BOG has the experience and local knowledge in managing the exploitation of alluvial gold at the Merapoh Gold Mine. The Company currently intends to continue to outsource the exploitation of alluvial gold at our mine site to BOG as our third party subcontractor. The Company will provide necessary disclosure when any significant agreements have been made with the sub-contractor in the future.
Number of Employees
The Company had 1 employee during the year from July 1, 2020 to June 30, 2021.
Reports to Security Holders
The public may read and copy any materials filed with the SEC at the SEC’s Public Reference Room at 100 F Street NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The Company files its reports electronically with the SEC. The SEC maintains an Internet site that contains reports, proxy and information statements, and other electronic information regarding New Media and filed with the SEC at http://www.sec.gov.
Change of Control
On October 25, 2013, the Company entered into an Assignment Agreement for the Assignment of Management Right (“AAMA”) in Merapoh Gold Mines in Malaysia with Federal Mining Resources Limited (“FMR”). Under the terms of the Agreement and relevant subsequent Supplemental Agreement, FMR assigned its management rights to the Company Board of Directors of FMR agreed to transfer 1 share common stock of Gold Billion Global Limited (“GBL”) which represented all shares of common stock of GBL owned by the Investor, and the Company’s Board of Directors agreed to issue 80,000,000 million shares of common stock in full value as consideration. At the time of closing under the AAMA, the Investor transferred 100% ownership of GBL shares to the Company, and the Company issued 80,000,000 million shares of common stock to the shareholders of FMR in exchange for the GBL Shares. The effect of the transaction was to make GBL and its deemed subsidiaries become wholly-owned and 85.00% owned subsidiaries of the Company, and to cause a change of control of GBL. Following the closing, there was a change of control in the Company.
The Transaction was accounted for as a “reverse merger,” since FMR owned a majority of the outstanding shares of VRDR’s common stock immediately following the execution of the transaction. The Company was deemed to be the accounting acquirer in the reverse merger. Consequently, the assets and liabilities and the historical operations that were reflected in the financial statements for periods prior to the transaction were those of the Company and its deemed subsidiaries, and were recorded at the historical cost basis of the Company. After completion of the transaction, the Company’s consolidated financial statements were include the assets and liabilities of the Company and its subsidiaries, the historical operations of the Company and its subsidiaries, and the operations of the Company and its subsidiaries from the closing date of the transaction.
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Item 1A. Risk Factors
Risks Associated with Verde Resources, Inc.
We are dependent on certain key personnel and loss of these key personnel could have a material adverse effect on our business, financial condition and results of operations.
Messrs. Balakrishnan Muthu, our current principal executive officer and financial officer, has extensive contacts and experience in the gold exploration and natural resource industry in Malaysia, and we are dependent upon his abilities and services to develop and market our business. He is responsible for overseeing all of our day-to-day business operations of our operating company, CSB, and its subsidiaries and VIEs, including the mining operations and negotiations for the sales of any gold concentrates extracted. We may not be able to retain the executive officers/managers for any given period of time. The loss of their services could have a material adverse effect upon our business operations, financial condition and results of operations. In addition, we must attract, recruit and retain a sizeable workforce of technically competent employees in Malaysia to run our mining operations. Our ability to effectively implement our proposed business strategies and expand our operations will depend upon the successful recruitment and retention of additional highly skilled and experienced management and other key personnel in Malaysia. If we cannot maintain highly experienced and skilled management teams, our business could fail and you could lose any investment you make in our shares.
Since our business consists of managing gold mining projects, the drop in the price of gold would negatively impact our asset values, cash flows, potential revenues and profits.
We plan to pursue opportunities in properties with gold mineralized material or reserves with exploration potential. Our potential future revenues are expected to be derived from the production and sale of gold from these properties, or from the sale of some of these properties. The value of any gold reserves or other mineralized materials, and the value of any potential mineral production will vary in direct proportion to changes in those mineral prices. The price of gold has fluctuated widely as a result of numerous factors beyond our control. The effect of these factors on the price of gold and other minerals, and therefore the economic viability of any of our projects, cannot accurately be predicted. Any drop in the price of gold and other minerals we may produce would negatively affect our asset values, cash flows and potential revenues and profits.
We may not be able to find commercially viable reserves.
Mineral exploration and development involve a high degree of risk and few properties that are explored are ultimately developed into producing mines. The reserve estimates, if any, are based only on prefeasibility studies that are inherited with the following drawbacks:
| - | Limited amount of drilling completed to date; |
| - | The process testing is limited to small pilot plants and bench scale testing; |
| - | Difficulty in obtaining expected metallurgical recoveries when scaling up to production scale from pilot plant scale; |
| - | Preliminary nature of the mine plans and processing concepts; |
| - | Preliminary nature of operating and capital cost estimates |
| - | Metallurgical flow sheets and recoveries still in development; |
| - | Limited history of prefeasibility studies that might be underestimating capital and operating costs. |
We cannot assure that any future mineral exploration and development activities will result in any discoveries of proven or probable reserves as defined by the SEC. Further, we cannot provide any assurance that, even if we discover commercial quantities of mineralization, a mineral property will be brought into commercial production. Development of our mineral property will follow only upon obtaining sufficient funding and satisfactory exploration results.
We may not be able to successfully compete with other mineral exploration and mining companies.
We compete with other mineral exploration and mining companies or individuals, including large, well established mining companies with substantial capabilities and financial resources in Malaysia, to research and acquire rights to mineral properties containing gold and other minerals. There is a limited supply of desirable mineral lands available for claim staking, lease or other acquisition in Malaysia. We do not know if we will be able to successfully acquire any prospective mineral properties against competitors with substantially greater financial resources than we have. If we cannot successfully acquire other mining properties to manage and explore and generally expand our business operations, our results of operations, financial condition and future revenues could be reduced and you could suffer a loss of any investment made in our shares.
We have a history of losses and we may not achieve or sustain profitability, particularly if we were to lose large contracts, and there is substantial doubt about our ability to continue as a going concern. Unless we increase our mining production or secure new sources, we may not be able to meet expenses and our business may fail
Our production of gold has steadily decreased over the past two years. This is a result of lower production of gold from our mine. Our revenues have been derived from gold production from the Merapoh Gold Mine, but currently there is no production from that mine and we are not certain there will be production in the future. We are also considering acquiring other mining properties to increase our overall production and income. However, if we are not successful in increasing production, either through new methods at our exiting mine, or by securing rights at other gold properties, we may not have sufficient revenues to maintain our business, and our business may fail.
Impact of recent COVID-19 outbreak has increased uncertainty of our business operation
The recent COVID-19 has affected our operation in Malaysia as the government announced stringent restrictions to lock down the country to stop further outbreak of the COVID-19 transmission, Many governmental departments that the company have dealing with are closed and not accepting new application. That has caused delay for the company in obtaining new mining lease. The Malaysia Government Movement Control Order has also disrupted our planning and allocation of our workforce.
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We are subject to the many risks of doing business internationally, including but not limited to the difficulty of enforcing liabilities in foreign jurisdictions.
We are a Nevada corporation and, as such, are subject to the jurisdiction of the State of Nevada and the United States courts for purposes of any lawsuit, action or proceeding by investors. An investor would have the ability to effect service of process in any action against the Company within the United States. In addition, we are registered as a foreign corporation doing business in Malaysia, and as such, are subject to the local laws of Malaysia governing an investors’ ability to bring actions in foreign courts and enforce liabilities against a foreign private issuer, or any person, based on U.S. federal securities laws.
Investors may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing original actions in Malaysia based upon U.S. laws, including the federal securities laws or other foreign laws against us or our management.
All of our current operations are conducted in Malaysia, and all of our directors and officers are nationals and residents of Malaysia and other foreign countries. All or substantially all of the assets of these persons are located outside the United States and in other foreign countries. As a result, it may not be possible to effect service of process within the United States or elsewhere outside Malaysia upon these persons. In addition, uncertainty exists as to whether the courts of Malaysia would recognize or enforce judgments of U.S. courts obtained against us or such officers and/or directors predicated upon the civil liability provisions of the securities laws of the United States or any state thereof, or be competent to hear original actions brought in Malaysia against us or such persons predicated upon the securities laws of the United States or any state thereof.
Failure to comply with the United States Foreign Corrupt Practices Act could subject us to penalties and other adverse consequences.
We are subject to the United States Foreign Corrupt Practices Act, which generally prohibits U.S. companies from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business. In addition, we are required to maintain records that accurately and fairly represent our transactions and have an adequate system of internal accounting controls. Foreign companies, including some that may compete with us, are not subject to these prohibitions, and therefore may have a competitive advantage over us. Our executive officers and employees have not been subject to the United States Foreign Corrupt Practices Act prior to 2010. If our employees or other agents are found to have engaged in such practices, we could suffer severe penalties and other consequences that may have a material adverse effect on our business, financial condition and results of operations.
Mining risks and insurance could negatively effect on our profitability.
The business of mining for gold is generally subject to a number of risks and hazards including environmental hazards, industrial accidents, labor disputes, unusual or unexpected geological conditions, pressures, cave-ins, changes in the regulatory environment, and natural phenomena such as inclement weather conditions, floods, blizzards and earthquakes. At the present time, we have in effect statutory required social insurance for all employees and mine workers. There is currently no other insurance in place for the mining site and management, and, even if we were to purchase additional insurance, we cannot be sure that such insurance would be available to us, or that we could afford the premiums. Insurance coverage may not continue to be available or may not be adequate to cover any resulting liability. In addition, insurance against risks such as environmental pollution or other hazards as a result of exploration and production is not generally available to companies in the mining industry on acceptable terms. We might also become subject to liability for pollution or other hazards which we may not be insured against, or which we may elect not to insure against, because of premium costs or other reasons. Any losses from any of these events may cause us to incur significant costs that could have a material adverse effect upon our financial performance and results of operations, which could negatively impact any investment you make in our shares.
If we fail to maintain effective internal controls over financial reporting, the price of our common stock may be adversely affected.
Malaysian companies may not always adopt a Western style of management and financial reporting concepts and practices, which includes strong corporate governance, internal controls and computer, financial and other control systems. In addition, we may have difficulty in hiring and retaining a sufficient number of qualified employees to work in Malaysia. As a result of these factors, we may experience difficulty in establishing management, legal and financial controls, collecting financial data and preparing financial statements, books of account and corporate records and instituting business practices that meet Western standards for foreign subsidiaries. As a result, we may experience difficulties in implementing and maintaining adequate internal controls as required under Section 404 of the Sarbanes-Oxley Act of 2002. This could result in significant deficiencies or material weaknesses in our internal controls, which could impact the reliability of our financial statements and prevent us from complying with SEC rules and regulations and the requirements of the Sarbanes-Oxley Act of 2002. Any actual or perceived weaknesses and conditions that need to be addressed in our internal control over financial reporting, disclosure of management’s assessment of our internal controls over financial reporting or disclosure of our public accounting firm’s attestation to or report on management’s assessment of our internal controls over financial reporting may have an adverse impact on the price of our common stock.
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Our independent registered auditors have expressed substantial doubt about our ability to continue as a going concern.
Our audited financial statements included in this report include an explanatory paragraph that indicates that they were prepared assuming that we would continue as a going concern. We have suffered recurring net losses, and records an accumulated deficits as of June 30, 2021. These conditions raise substantial doubts about our ability to continue as a going concern. Our plan for continuing as a going concern included improving our profitability, and obtaining additional debt financing, loans from existing directors and shareholders and private placements of capital stock for additional funding to meet our operating needs. There can be no assurance that we will be successful in our plans described above or in attracting equity or alternative financing on acceptable terms, or if at all. These consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern.
Changes in interest rates could negatively impact our results of operations, stockholders’ equity (deficit) and fair value of net assets.
Our investment activities and credit guarantee activities expose us to interest rate and other market risks. Changes in interest rates, up or down, could adversely affect our net interest yield. Although the yield we earn on our assets and our funding costs tend to move in the same direction in response to changes in interest rates, either can rise or fall faster than the other, causing our net interest yield to expand or compress. For example, due to the timing of maturities or rate reset dates on variable-rate instruments, when interest rates rise, our funding costs may rise faster than the yield we earn on our assets. This rate change could cause our net interest yield to compress until the effect of the increase is fully reflected in asset yields. Changes in the slope of the yield curve could also reduce our net interest yield.
Interest rates can fluctuate for a number of reasons, including changes in the fiscal and monetary policies of the federal government and its agencies, such as the Federal Reserve. Federal Reserve policies directly and indirectly influence the yield on our interest-earning assets and the cost of our interest-bearing liabilities. The availability of derivative financial instruments (such as options and interest rate and foreign currency swaps) from acceptable counterparties of the types and in the quantities needed could also affect our ability to effectively manage the risks related to our investment funding. Our strategies and efforts to manage our exposures to these risks may not be effective in the future, which could negatively impact our results of operations and the price of our common stock.
We may be exposed to risks relating to management’s conclusion that our disclosure controls and procedures and internal controls over financial reporting are ineffective.
We do not have an independent audit committee and our Board of Directors may be unable to fulfill the functions of such a committee, which may compromise the management of our business. Our Board of Directors functions as our audit committee and is comprised of two directors, none of whom are considered to be “independent” in accordance with the requirements of Rule 10A-3 under the Securities Exchange Act of 1934. An independent audit committee plays a crucial role in the corporate governance process, assessment of the Company’s processes relating to its risks and control environment, oversight of financial reporting, and evaluation of internal and independent audit processes. The lack of an independent audit committee may prevent the Board of Directors from being independent in its judgments and decisions and its ability to pursue the committee’s responsibilities, which could compromise the management of our business.
If we fail to maintain effective internal controls over financial reporting, the price of our common stock may be adversely affected.
Malaysian companies may not always adopt a Western style of management and financial reporting concepts and practices, which includes strong corporate governance, internal controls and computer, financial and other control systems. In addition, we may have difficulty in hiring and retaining a sufficient number of qualified employees to work in Malaysia. As a result of these factors, we may experience difficulty in establishing management, legal and financial controls, collecting financial data and preparing financial statements, books of account and corporate records and instituting business practices that meet Western standards for foreign subsidiaries. As a result, we may experience difficulties in implementing and maintaining adequate internal controls as required under Section 404 of the Sarbanes-Oxley Act of 2002. This could result in significant deficiencies or material weaknesses in our internal controls, which could impact the reliability of our financial statements and prevent us from complying with SEC rules and regulations and the requirements of the Sarbanes-Oxley Act of 2002. Any actual or perceived weaknesses and conditions that need to be addressed in our internal control over financial reporting, disclosure of management’s assessment of our internal controls over financial reporting or disclosure of our public accounting firm’s attestation to or report on management’s assessment of our internal controls over financial reporting may have an adverse impact on the price of our common stock.
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The audit report included in our Annual Report is prepared by an auditor who is not inspected by the Public Company Accounting Oversight Board and as such, our investors are deprived of the benefits of such inspection. The Company could be delisted if it is unable to timely meet the PCAOB inspection requirements established by the Holding Foreign Companies Accountable Act.
As a public company with securities quoted on the OTQB, we will be required to have our financial statements audited by an independent registered public accounting firm registered with the PCAOB. A requirement of being registered with the PCAOB is that if requested by the SEC or PCAOB, such accounting firm is required to make its audits and related audit work papers be subject to regular inspections to assess its compliance with the applicable professional standards. Since our auditor is located in Hong Kong and China, a jurisdiction where the PCAOB has been unable to conduct inspections without the approval of the Chinese authorities due to various state secrecy laws and the revised Securities Law, the PCAOB currently does not have free access to inspect the work of our auditor. This lack of the PCAOB inspections in China prevents the PCAOB from fully evaluating audits and quality control procedures of our auditor. As a result, we and investors in our ordinary shares are deprived of the benefits of such PCAOB inspections, which could cause investors in our stock to lose confidence in our audit procedures and the quality of our financial statements.
On December 18, 2020, the Holding Foreign Companies Accountable Act, or HFCAA, was enacted. In essence, the act requires the SEC to prohibit securities of any foreign companies from being listed on U.S. securities exchanges or traded “over-the-counter” if a company retains a foreign accounting firm that cannot be inspected by the PCAOB for three consecutive years, beginning in 2021. Our independent registered public accounting firm is located in and organized under the laws of Hong Kong and China, a jurisdiction where the PCAOB is currently unable to conduct inspections without the approval of the Chinese authorities, and therefore our auditors are not currently inspected by the PCAOB.
On March 24, 2021, the SEC adopted interim final amendments, which will become effective 30 days after publication in the Federal Register, relating to the implementation of certain disclosure and documentation requirements of the HFCAA. The interim final amendments will apply to registrants that the SEC identifies as having filed an annual report with an audit report issued by a registered public accounting firm that is located in a foreign jurisdiction and that the PCAOB has determined it is unable to inspect or investigate completely because of a position taken by an authority in that jurisdiction. Before any registrant will be required to comply with the interim final amendments, the SEC must implement a process for identifying such registrants. As of the date of this Amendment, the SEC is seeking public comment on this identification process. Consistent with the HFCAA, the amendments will require any identified registrant to submit documentation to the SEC establishing that the registrant is not owned or controlled by a government entity in that jurisdiction, and will also require, among other things, disclosure in the registrant’s annual report regarding the audit arrangements of, and government influence on, such registrant.
On June 22, 2021, the U.S. Senate passed a bill which, if passed by the U.S. House of Representatives and signed into law, would reduce the number of consecutive non-inspection years required for triggering the prohibitions under the HFCAA from three years to two.
The SEC may propose additional rules or guidance that could impact us if our auditor is not subject to PCAOB inspection. For example, on August 6, 2020, the President’s Working Group on Financial Markets, or the PWG, issued the Report on Protecting United States Investors from Significant Risks from Chinese Companies to the then President of the United States. This report recommended that the SEC implement five recommendations to address companies from jurisdictions that do not provide the PCAOB with sufficient access to fulfil its statutory mandate. Some of the concepts of these recommendations were implemented with the enactment of the HFCAA. However, some of the recommendations were more stringent than the HFCAA. For example, if a company was not subject to PCAOB inspection, the report recommended that the transition period before a company would be delisted would end on January 1, 2022.
It is unclear when the SEC will complete its rulemaking, when such rules will become effective and what, if any, of the PWG recommendations will be adopted. The enactment of the HFCAA and the implications of any additional rulemaking efforts to increase U.S. regulatory access to audit information in China could cause investor uncertainty for affected SEC registrants, including us, and the market price of our stock could be materially adversely affected. Additionally, whether the PCAOB will be able to conduct inspections of our auditors in the next three years, or at all, is subject to substantial uncertainty and depends on a number of factors out of our control. If we are unable to meet the PCAOB inspection requirement in time, our stock will not be permitted for trading “over-the counter” either. Such a delisting would substantially impair your ability to sell or purchase our stock when you wish to do so, and the risk and uncertainty associated with delisting would have a negative impact on the price of our stock. Also, such a delisting would significantly affect our ability to raise capital on terms acceptable to us, or at all, which would have a material adverse impact on our business, financial condition and prospects.
We may be exposed to risks relating to management’s conclusion that our disclosure controls and procedures and internal controls over financial reporting are ineffective.
We do not have an independent audit committee and our Board of Directors may be unable to fulfill the functions of such a committee, which may compromise the management of our business. Our Board of Directors functions as our audit committee and is comprised of two directors, none of whom are considered to be “independent” in accordance with the requirements of Rule 10A-3 under the Securities Exchange Act of 1934. An independent audit committee plays a crucial role in the corporate governance process, assessment of the Company’s processes relating to its risks and control environment, oversight of financial reporting, and evaluation of internal and independent audit processes. The lack of an independent audit committee may prevent the Board of Directors from being independent in its judgments and decisions and its ability to pursue the committee’s responsibilities, which could compromise the management of our business.
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Risks Associated with Our Common Stock
Our shares are defined as “penny stock.” The rules imposed on the sale of the shares may affect your ability to resell any shares you may purchase, if at all.
Our shares are defined as a “penny stock” under the Securities and Exchange Act of 1934, and rules of the Commission. The Exchange Act and such penny stock rules generally impose additional sales practice and disclosure requirements on broker-dealers who sell our securities to persons other than certain accredited investors who are, generally, institutions with assets in excess of $5,000,000 or individuals with net worth in excess of $1,000,000 or annual income exceeding $200,000, or $300,000 jointly with spouse, or in transactions not recommended by the broker-dealer. For transactions covered by the penny stock rules, a broker-dealer must make a suitability determination for each purchaser and receive the purchaser’s written agreement prior to the sale. In addition, the broker-dealer must make certain mandated disclosures in penny stock transactions, including the actual sale or purchase price and actual bid and offer quotations, the compensation to be received by the broker-dealer and certain associated persons, and deliver certain disclosures required by the Commission. Consequently, the penny stock rules may affect the ability of broker-dealers to make a market in or trade our common stock, and may also affect your ability to resell any shares you may purchase.
Market for penny stock has suffered in recent years from patterns of fraud and abuse
Stockholders should be aware that, according to SEC Release No. 34-29093, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include:
| • | Control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; |
| • | Manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; |
| • | Boiler room practices involving high-pressure sales tactics and unrealistic price projections by inexperienced salespersons; |
| • | Excessive and undisclosed bid-ask differential and markups by selling broker-dealers; and, |
| • | The wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the resulting inevitable collapse of those prices and with consequential investor losses. |
Our management is aware of the abuses that have occurred historically in the penny stock market. Although we do not expect to be in a position to dictate the behavior of the market or of broker-dealers who participate in the market, management will strive within the confines of practical limitations to prevent the described patterns from being established with respect to our securities. The occurrence of these patterns or practices could increase the volatility of our share price.
Inability and unlikelihood to pay dividends
To date, we have not paid, nor do we intend to pay in the foreseeable future, dividends on our common stock, even if we become profitable. Earnings, if any, are expected to be used to advance our activities and for general corporate purposes, rather than to make distributions to stockholders. Prospective investors will likely need to rely on an increase in the price of Company stock to profit from his or her investment. There are no guarantees that any market for our common stock will ever develop or that the price of our stock will ever increase.
Since we are not in a financial position to pay dividends on our common stock and future dividends are not presently being contemplated, investors are advised that return on investment in our common stock is restricted to an appreciation in the share price. The potential or likelihood of an increase in share price is questionable at best.
Item 1B. Unresolved Staff Comments.
None.
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Item 2. Properties.
We do not currently own any properties.
On October 25, 2013, we entered into an Assignment Agreement For the Assignment of Management Right in Merapoh Gold Mines in Malaysia (“Assignment Agreement”) with Federal Mining Resources Limited (“FMR”), a company incorporated under the laws of the British Virgin Islands.
FMR owns 85% equity interest in Champmark Sdn Bhd (“CSB”), a privately limited liability company incorporated in Malaysia. CSB is the Mining Contractor of the Mining Lease for Site IV-1 at the Merapoh Gold Mine under the Contract for Work with MMC Corporation Berhad, the Permit Holder of the Mining Lease.
On June 18, 2021, GBL entered into a Shares Sale Agreement to acquire the remaining 15% of the issued and paid-up share capital of CSB. GBL would own the entire issued and paid-up share capital of CSB upon completion of the acquisition.
As at June 30, 2021, the property and equipment owned by CSB are summarized, at net book values as follows:
Land and Building |
| $ | 1 |
|
Plant and Machinery |
| $ | - |
|
Office equipment |
| $ | - |
|
Project equipment |
| $ | - |
|
Computer |
| $ | 554 |
|
Motor Vehicle |
| $ | - |
|
|
| $ | 555 |
|
Item 3. Legal Proceedings.
None
Item 4. Mine Safety Disclosures.
Pursuant to Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“ Dodd-Frank Act “), issuers that are operators, or that have a subsidiary that is an operator, of a coal or other mine in the United States are required to disclose in their periodic and annual reports filed with the SEC information regarding specified health and safety violations, orders and citations, related assessments and legal actions, and mining-related fatalities under the regulation of the Federal Mine Safety and Health Act of 1977. The Company did not have any mines in the United States during the year ended June 30, 2021.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information
Our common stock is now quoted on the OTCQB, under the symbol “VRDR”. Our stock was approved for quotation on the OTCBB on September 26, 2012. However, the Company’s common stock did not begin active trading until October, 2013.
The following table sets forth the high and low bid prices for our common stock per quarter as reported by the OTCBB since trading began October 7, 2013, based on our fiscal year end June 30, 2021. These prices represent quotations between dealers without adjustment for retail mark-up, markdown or commission, and may not represent actual transactions.
Fiscal Quarter Ended |
| High |
|
| Low |
| ||
|
|
|
|
|
|
| ||
June 30, 2020 |
| $ | 0.13 |
|
| $ | 0.0021 |
|
September 30, 2020 |
| $ | 0.014 |
|
| $ | 0.01 |
|
December 31, 2020 |
| $ | 0.04 |
|
| $ | 0.01 |
|
March 31, 2021 |
| $ | 1.00 |
|
| $ | 0.01 |
|
June 30, 2021 |
| $ | 0.14 |
|
| $ | 0.02 |
|
September 30, 2021 |
| $ | 0.08 |
|
| $ | 0.045 |
|
As of November 12, 2021, we had 106 shareholders of record of our common stock and 810,742,109 shares issued and outstanding.
Dividend Policy
We have not paid any cash dividends on our common stock and have no present intention of paying any dividends on the shares of our common stock. Our current policy is to retain earnings, if any, for use in our operations and in the development of our business. Our future dividend policy will be determined from time to time by our board of directors.
Equity Compensation Plan Information
None.
Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities
We did not sell any equity securities which were not registered under the Securities Act during the year ended June 30, 2021, that were not otherwise disclosed on our quarterly reports on Form 10-Q or our current reports on Form 8-K filed during the fiscal year ended June 30, 2021 except the following transaction.:
On May 10, 2021, the Company announced the Sale and Purchase Agreement to acquire the assets of biofraction plant and the right to use intellectual property license in Sabah, Malaysia from Borneo Energy Sdn Bhd, in consideration of issuance of 166,666,667 share of the Company’s stock at $0.03 per share, valued at $5,000,000. 135,666,667 shares and 31,000,000 shares were issued on May 10, 2021 and July 1, 2021, respectively. The completion of the S&P Agreement is subject to all such acts necessary, including but not limited to due diligence exercise to ascertain the valuation of the assets of the biofraction plant and the right to use the licensed intellectual property in Sabah, Malaysia. The Company also announced the Share Sale Agreement on May 12, 2021 for the acquisition of the entire issued and paid-up share capital of Bio Resources Limited with Taipan International Limited, an unrelated third party, The Wision Project Limited (formerly known as “Borneo Resources Limited”), an unrelated third party, and other individuals unrelated third parties, in consideration of issuance of 321,500,000 shares of the Company’s restricted common stock at $0.03 per share, valued at $9,645,000, and the issuance of promissory notes with two-year term period with a principal amount of $20,355,000. 321,500,000 shares were issued on May 12, 2021 and the promissory notes were issued on May 12, 2021. The face value (principal) amount of $20,355,000 is repayable by May 12, 2023, and bearing zero coupon interest. The promissory note is priced at $16,290,550 considering the current market interest rate. This acquisition is currently in progress and the completion of the S&P Agreement is subject to all such acts necessary, including but not limited to auditing and due diligence exercise to ascertain the valuation of Bio Resources Limited.
On June 4, 2021, the Company issued a total of 65,900,000 restricted common shares for US$1,647,500 at US$0.025 per share to six non-US shareholders.
On June 9, 2021, the Company entered into a Settlement of Debt Agreement (the “Debt Settlement Agreement”) with the Company’s creditors Beijing Changxin Wanlin Technology Co., Ltd, Federal Mining Resources Ltd, Federal Capital Investment Limited and Yorkshire Capital Limited (collectively the “Creditors”) to convert a total of USD 1,945,096 of the Company’s accounts payable to the Creditors into equity by increasing the share capital by means of a subscription for 64,836,533 new restricted shares of the Company’s common stock at a subscription price of $0.03 per share. As set out in the Debt Settlement Agreements, the new restricted shares for settlement of the account payable to Beijing Changxin Wanlin Technology Co., Ltd, Federal Mining Resources Ltd and Federal Capital Investment Limited issued to their nominee Internet.com Ltd on June 9, 2021.
On June 10, 2021, the Company issued a total of 4,690,500 restricted common shares at US$0.03 per share to each of the two directors, of which 2,095,233 restricted common shares to Balakrishnan B S Muthu and 2,595,267 restricted common shares to Chen Ching to serve as the Company’s director for a one-year term from July 2020 to June 30, 2021. An aggregate of $140,715 for this transaction was recognized as stock-based compensation under selling, general and administrative expenses during the year ended June 30, 2021.
On June 10, 2021, the Company issued a total of 13,009,500 restricted common shares at US$0.03 per share to five consultants under the Consultant Agreements, of which 3,695,233 restricted common shares to Vincent Yong Tuck Seng, 3,695,233 restricted common shares to Lai Kui Shing Andy, 2,095,233 restricted common shares to Chan Hoi Kwong Paul, 2,095,233 restricted common shares to Sylvia Chan and 1,428,568 restricted common shares to Ng Tung to serve as the consultants of the Company for a one-year term from June 10, 2021 to June 9, 2022. An aggregate of $34,716 was recognized as stock-based compensation according the service period under selling, general and administrative expenses during the year ended June 30, 2021.
On June 11, 2021, GBL entered into a Sale and Purchase of Assets Agreement (the “SPA Agreement”) to purchase a factory site from a Malaysia company Segama Ventures Sdn Bhd (“Segaman Ventures”), an unrelated third party, in order to expand the Company’s biofraction plant in Malaysia. Under the terms of the SPA Agreement, the acquisition is satisfied by cash payment of $1,600,000 in two instalments of $800,000 each, one payment upon signing the SPA Agreement, and the second payment within three (3) months from the date of the SPA Agreement. This acquisition is currently in progress and the completion of the S&P Agreement is subject to all such acts necessary, including but not limited to due diligence exercise to ascertain the valuation of factory site.
On June 17, 2021, the Company through its prospective indirect subsidiary Bio Resources Limited (“BRL”), a company incorporated under the laws of the Labuan, entered into a Shares Sale Agreement with Hermalisa Binti Mohamad Tahir (“Hermalisa”), a company incorporated under the laws of the Malaysia, to acquire the entire issued and paid-up share capital of Global Renewables. Under the terms of the Shares Sale Agreement, the consideration for the acquisition shall be satisfied in full by the payment of Malaysia Ringgit MYR 25,000 upon the execution of the Shares Sale Agreement. The acquisition of Global Renewables was subject to the successful completion of the acquisition of the entire issued and paid-up share capital of BRL. Therefore, the acquisition of Global Renewables will dependent upon the successful acquisition of BRL.
On June 18, 2021, the Company issued a total of 58,100,000 restricted common shares for US$1,452,500 at US$0.025 per share to twenty-four non-US shareholders.
Purchase of Equity Securities by the Issuer and Affiliated Purchasers
We did not purchase any of our shares of common stock or other securities during our fiscal year ended June 30, 2021.
Item 6. [Reserved].
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion should be read in conjunction with our audited financial statements and the related notes that appear elsewhere in this annual report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to those discussed below and elsewhere in this annual report, particularly in the section entitled “Risk Factors” of this annual report.
Our audited financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.
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Results of Operations
The following table provides selected financial data about our company for the year ended June 30, 2021 and June 30, 2020.
Statement of Operation |
| June 30, |
|
| June 30, |
|
|
|
| |||||||
|
| 2021 |
|
| 2020 |
|
| Change |
| |||||||
|
| USD |
|
| USD |
|
| USD |
|
| % |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Revenue |
| $ | - |
|
| $ | - |
|
|
|
|
| $ | - |
| |
Cost of revenue |
|
| - |
|
|
| - |
|
|
|
|
|
| - |
| |
Gross Profit |
|
| - |
|
|
| - |
|
|
|
|
|
| - |
| |
Operating Expenses |
|
| (574,174 | ) |
|
| (309,402 | ) |
|
| (264,772 | ) |
|
| 85.6 | % |
Loss from operation |
|
| (574,174 | ) |
|
| (309,402 | ) |
|
| (264,772 | ) |
|
| 85.6 | % |
Interest expense |
|
| (245,392 | ) |
|
| - |
|
|
| (245,392 | ) |
|
| N/A |
|
Other income |
|
| 26,559 |
|
|
| - |
|
|
| 26,559 |
|
|
| N/A |
|
Net loss before income tax |
|
| (793,007 | ) |
|
| (309,402 | ) |
|
| (483,605 | ) |
|
| 156.3 | % |
Provision of Income Tax |
|
| - |
|
|
| - |
|
|
| - |
|
|
| N/A |
|
Net loss |
|
| (793,007 | ) |
|
| (309,402 | ) |
|
| (483,605 | ) |
|
| 156.3 | % |
Net loss attributable to non-controlling interests |
|
| 18,158 |
|
|
| 10,745 |
|
|
| 7,413 |
|
|
| 69 | % |
Net loss attributable to shareholders of the group |
| $ | (774,849 | ) |
| $ | (298,657 | ) |
|
| (476,192 | ) |
|
| (159.4 | )% |
Revenue
The revenue derived from the sales of gold mineral to customers in Malaysia. We have generated $0 and $0 revenues for the year ended June 30, 2020 and 2021, respectively, and have recorded a gross profit of $0 and $0 for the year ended June 30, 2020 and 2021. The Company did not generate any revenue for the year ended June 30, 2021 and 2020.
Cost of revenue
The cost of revenue was remain $nil mainly due to no revenue during the year ended June 30, 2021.
Operating Expenses
Operating expenses comprised mainly of salaries, office costs, legal and professional fees and travelling expenses. We have incurred $309,402 and $574,174 in operating expenses through June 30, 2020 and June 30, 2021. Operating expenses increased by 85.6%, or $264,772, primarily due to increase of professional fees charged for the potential acquisition and increase of directors’ emolument for the year ended June 30, 2021.
Interest expense
In May 2021, we issued the promissory notes for the acquisition of Bio Resources Limited. The Company recorded $245,392 and $nil interest expense on the promissory notes for the year ended June 30, 2021 and 2020, respectively.
Other income We have other income $0 and $26,559 for the year ended June 30, 2020 and 2021. We generated other income from the sales of wash sand to customers in Malaysia since January 2021.
Plan of Operation
Our Industry and Principal Markets
The report by BMI Research states that global gold mine output growth will pick up in the next few years, supported by higher gold prices and solid projects in key countries. BMI Research forecasts global gold production to increase from 105moz in 2018 to 125moz by 2026, averaging 2.3% annual growth. While a steady pace of growth, this represents a slight deceleration in growth rate compared with the previous eight-year average of 3.1%.
Subcontractor
In an effort to enhance the efficiency of mine operations at the Merapoh Gold Mine, Champmark Sdn Bhd (“CSB”) entered into an Operation Term Sheet (“OTS”) agreement in July 2013, to outsource the exploitation works of alluvial gold resources at Site IV-1 of the Merapoh Gold Mine to a third party subcontractor Borneo Oil & Gas Corporation Sdn Bhd (“BOG”).
BOG has the experience and local knowledge in managing the exploitation of alluvial gold at the Merapoh Gold Mine. The Company currently intends to continue to outsource the exploitation of alluvial gold at our mine site to BOG as our third party subcontractor. The Company will provide necessary disclosure when any significant agreements have been made with the sub-contractor in the future.
BOG became the Company’s shareholder in January 29, 2014, and was no longer a third party subcontractor.
Expansion Plans
The Company is in the process of negotiating with Malaysia state agency PKNP on a 2-year lease for a new mining location that is about 5 km from the current Merapoh mine site. The leasing premium has been paid but the mining lease certificate will only be issued upon clearance from the Malaysia Forest Department, which is expected in early 2022 subject to review on COVID-19 “Movement Control Order” by the Malaysian government.
For the current Site IV-1 of the Merapoh Gold Mine, our mining operation would focus on mining other resources such as limestones.
The Company believes that there are excellent growth opportunities for its business outside Malaysia. We are constantly exploring for potential acquisition of mining projects in other parts of the world.
| 18 |
| Table of Contents |
As our business is affected by the fluctuations of gold prices, the Company intends to diversify its product line by acquiring mining projects with potential for different mineral resources other than gold. We continue to hold discussions with other mining companies for potential collaboration to carry out exploration and exploitation works on other mineral resources in Southeast Asia regions. Apart from the mining industry, the Company is taking steps to look into investment opportunities in the non-mining areas that include the bioenergy industry and the food & beverage sector.
The Company is diversifying into the green industry with its acquisition of Bio Resources Ltd (“BRL”), the beneficial and/or registered proprietor of the intellectual property known as “Catalytic Biofraction Process”, which is a slow pyrolysis process using a proprietary catalyst to depolymerise palm biomass wastes (empty fruit bunches or palm kernel shells) in temperature range of 350 degC to 500 degC to yield commercially valuable bio products: bio-oil, wood vinegar (pyroligneous acid), biochar and bio-syngas. The intellectual property is a second-generation pyrolysis process where non-food feedstock like the palm biomass wastes is used as feedstock. The success of venturing into the green industry is dependent on the completion of the acquisition subject to auditing and due diligence exercise to ascertain the valuation of BRL.
Apart from the green industry, the Company is also working on a partnership with MRX Technologies, a market leader in commercial extraction systems for cannabis and hemp. The partnership includes an agreement for Verde Resources to white-label THC-free CBD products from MRX Technologies.
Limited Operating History; Need for Additional Capital
There is limited historical financial information about us upon which to base an evaluation of our performance. We cannot guarantee we will be successful in our business operations. Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources, possible delays in the exploration of our properties, and possible cost overruns due to price and cost increases in services.
We have no assurance that future financing will be available to us on acceptable terms. If financing is not available on satisfactory terms, we may be unable to continue, develop or expand our operations. Equity financing could result in additional dilution to existing shareholders.
Liquidity and Capital Resources
The following table provides selected cash flow data about our company for the year ended June 30, 2021 and 2020.
Cash Flow Date |
| June 30, 2021 |
|
| June 30, 2020 |
| ||
|
|
|
|
|
|
| ||
Net Cash Used in operating activities |
| $ | (126,011 | ) |
| $ | (213,763 | ) |
Net Cash Used in investing activities |
| $ | (905,575 | ) |
| $ | (828 | ) |
Net Cash Generated from financing activities |
| $ | 3,100,000 |
|
| $ | 11,810 |
|
Effect of exchange rate changes on cash and cash equivalents |
| $ | 25,181 |
|
| $ | 216,146 |
|
Net increase in cash and cash equivalents |
| $ | 2,093,595 |
|
| $ | 13,365 |
|
Cash and cash equivalents at beginning of year |
| $ | 24,027 |
|
| $ | 10,662 |
|
Cash and cash equivalents at end of year |
| $ | 2,117,622 |
|
| $ | 24,027 |
|
For the year ended June 30, 2021, the Company had incurred net loss from operation of $793,007 which posted a negative impact to the company’s cash flow. The reconciliation on non-cash items such as share base compensation, interest expenses, depreciation and amortization provides positive impact on cash.
The net cash used by operating activities decreased from $213,763 to $126,011 for the years ended June 30, 2020 and 2021, respectively. The operation loss of $793,007 was partially offset by the noncash expenses such as $170 in depreciation, $2,636 in amortization, $175,431 in stock-based compensation and $245,392 in interest expenses on promissory notes. In the operating assets and liabilities, the net increase in current assets resulted from increase of other receivables at $26,559, net off with a decrease of $11,700 on other deposit and prepayment whereas the net increase in current liabilities resulted from $265,930 increase from advances from sub-contractor & related parties offset by $7,701 decrease of accrued liabilities and other payables.
The net cash used by investing activities increased from $828 to $905,575 for the years ended June 30, 2020 and 2021, respectively. There was a negative cash flow of $905,575 from the payment of acquisition of equity interest, right of use assets, and fixed assets, and advanced to related parties was $6,691 for the year ended June 30, 2021,
There was a positive cash flow of $3,100,000 from the issuance of common stock for the year ended June 30, 2021, compared to $12,000 proceeds from the issuance of common stock offset by $190 repayments of bank loans end up with a positive cash flow of $11,810 for the year ended June 30, 2020. The overall cash flow effect was positive.
The cash and cash equivalents at the end of June 30, 2021, was increased by $2,093,595 with $2,117,622 as ending balance.
The cash flow situation will not allow for operations in the coming next 12 months by self-generated cash provided from operating activities. The Company needs to increase cash flow supplies with a long term plan until the Company makes sustainable profits and has a positive cash flow. Otherwise, loans from related parties may be a temporary solution, although we have no written loan agreements. There is no guarantee that we will be able to secure adequate financing. If we fail to secure sufficient funds, our business activities may be curtailed, or we may cease to operate.
Off-Balance Sheet Arrangements
We do not have any 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 investors.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
As a “smaller reporting company”, we are not required to provide the information required by this Item.
| 19 |
| Table of Contents |
Item 8. Financial Statements and Supplementary Data
VERDE RESOURCES, INC.
INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2021
|
| Page |
|
|
|
|
|
| F-1 |
| |
|
|
|
|
| F-2 |
| |
|
|
|
|
| F-3 |
| |
|
|
|
|
Consolidated Statements of Changes in Shareholders’ Equity (Deficit) |
| F-4 |
|
|
|
|
|
| F-5 |
| |
|
|
|
|
| F-6 |
|
20 |
| 中正達會計師事務所 Centurion ZD CPA & Co.Certified Public Accountants (Practising) Unit 1304, 13/F., Two Harbourfront, 22 Tak Fung Street, Hunghom, Hong Kong 香港紅磡德豐街22號海濱廣場二期13樓1304室 Tel : (852) 2126 2388 Fax: (852) 2122 9078 |
Report of Independent Registered Public Accounting Firm
To: | The board of directors and stockholders of |
| Verde Resources, Inc. (“the Company”) |
Opinion of the Financial Statements
We have audited the accompanying consolidated balance sheets of Verde Resources, Inc. and its subsidiaries (the “Company”) as of June 30, 2021 and 2020, and the related consolidated statements of operations, changes in stockholders’ equity (deficit) and cash flows for each of the two years in the period ended June 30, 2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company at June 30, 2021 and 2020, and the consolidated results of its operations and its cash flows for each of the two years in the period ended June 30, 2021, in conformity with accounting principles generally accepted in the United States of America.
Consideration of the Company’s Ability to Continue as a Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 15 to the consolidated financial statements, the Company has suffered recurring net losses, and records an accumulated deficits as of June 30, 2021. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 15. These consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Basis of Presentation and Going Concern – Disclosure
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 15 to the consolidated financial statements, the Company has an accumulated deficit from recurring net losses as of June 30, 2021. The Company has contractual obligations such as commitments for acquisition of property, plant and equipment, and subsidiaries and promissory notes (collectively “obligations”). Currently management’s forecasts and related assumptions illustrate their ability to meet the obligations through management of expenditures and, if necessary, obtaining additional debt financing, loans from existing directors and shareholders and private placements of capital stock for additional funding to meet its operating needs. Should there be constraints on the ability to access such financing, the Company can manage cash outflows to meet the obligations through reductions in capital expenditures and other operating expenditures.
We identified management’s assessment of the Company’s ability to continue as a going concern as a critical audit matter. Management made judgments to conclude that it is probable that the Company’s plans will be effectively implemented and will provide the necessary cash flows to fund the Company’s obligations as they become due. Specifically, the judgments with the highest degree of impact and subjectivity in determining it is probable that the Company’s plans will be effectively implemented included its ability to reduce capital expenditures and other operating expenditures, its ability to access funding from the capital market and its ability to obtaining loans from existing directors and shareholders. Auditing the judgments made by management required a high degree of auditor judgment and an increased extent of audit effort.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included the following, among others: (i) evaluating the probability that the Company will be able to access funding from the capital market; (ii) evaluating the probability that the Company will be able to reduce capital expenditures and other operating expenditures if required and (iii) evaluating the probability that the Company will be able to obtain the loan from existing directors and shareholders.
/s/ Centurion ZD CPA & Co.
Centurion ZD CPA & Co.
We have served as the Company’s auditor since 2014.
Hong Kong, China
November 12, 2021
| F-1 |
| Table of Contents |
Verde Resources, Inc
Consolidated Balance Sheets
(in US$ except for number of shares)
|
| As at June 30, |
|
| As at June 30, |
| ||
|
| 2021 |
|
| 2020 |
| ||
ASSETS |
|
|
|
|
|
| ||
Current Assets |
|
|
|
|
|
| ||
Cash and cash equivalents |
| $ |
|
| $ |
| ||
Other receivables |
|
|
|
|
|
| ||
Advanced to related parties |
|
|
|
|
|
| ||
Other deposit & prepayment |
|
|
|
|
|
| ||
Total Current Assets |
| $ |
|
| $ |
| ||
Non-current Assets |
|
|
|
|
|
|
|
|
Property, plant and equipment |
| $ |
|
| $ |
| ||
Right of use assets |
|
|
|
|
|
| ||
Deposit paid for acquisition of subsidiaries |
|
|
|
|
|
| ||
Deposit paid for acquisition of property, plant and equipment |
|
|
|
|
|
| ||
Total non-current Assets |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
TOTAL ASSETS |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY(DEFICIT) |
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
Accounts payable |
| $ |
|
| $ |
| ||
Advanced from related parties |
|
|
|
|
|
| ||
Accrual and other payables |
|
|
|
|
|
| ||
Total Current Liabilities |
| $ |
|
| $ |
| ||
Non-current Liabilities |
|
|
|
|
|
|
|
|
Promissory notes |
| $ |
|
| $ |
| ||
Total Non-current Liabilities |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’ EQUITY(DEFICIT) |
|
|
|
|
|
|
|
|
Preferred stock, par value $ |
|
|
|
|
|
| ||
Common stock, par value $ |
| $ |
|
| $ |
| ||
Additional paid-in capital |
|
|
|
|
|
| ||
Accumulated deficit |
|
| ( | ) |
|
| ( | ) |
Accumulated other comprehensive income |
|
|
|
|
|
| ||
Non-controlled interest |
|
| ( | ) |
|
| ( | ) |
Total Stockholders’ Equity(Deficit) |
| $ |
|
| $ | ( | ) | |
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY(DEFICIT) |
| $ |
|
| $ |
| ||
The accompanying notes are an integral part of these consolidated financial statements.
| F-2 |
| Table of Contents |
Verde Resources, Inc.
Consolidated Statements of Operations
(In US$ except for number of shares)
|
| For the year |
|
| For the year |
| ||
|
| Ended |
|
| Ended |
| ||
|
| June 30, 2021 |
|
| June 30, 2020 |
| ||
|
|
|
|
|
|
| ||
REVENUES |
|
|
|
|
|
| ||
Revenue |
| $ |
|
| $ |
| ||
Cost of revenue |
|
|
|
|
|
| ||
Gross profit |
|
|
|
|
|
| ||
|
|
|
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|
|
OPERATING EXPENSES: |
|
|
|
|
|
|
|
|
Selling, general & administrative expenses |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS |
| $ | ( | ) |
| $ | ( | ) |
|
|
|
|
|
|
|
|
|
INTEREST EXPENSE |
|
| ( | ) |
|
|
| |
|
|
|
|
|
|
|
|
|
OTHER INCOME |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
NET LOSS BEFORE INCOME TAX |
| $ | ( | ) |
| $ | ( | ) |
|
|
|
|
|
|
|
|
|
Provision of Income Tax |
|
|
|
|
|
| ||
NET LOSS |
| $ | ( | ) |
| $ | ( | ) |
|
|
|
|
|
|
|
|
|
Net loss attributable to non-controlling interests |
|
|
|
|
|
| ||
Net loss attributable to shareholders of Verde Resources, Inc. |
| $ | ( | ) |
| $ | ( | ) |
|
|
|
|
|
|
|
|
|
NET LOSS |
| $ | ( | ) |
| $ | ( | ) |
Other comprehensive income (loss) |
|
|
|
|
|
|
|
|
Foreign currency translation adjustment |
|
| ( | ) |
| $ | |
|
Comprehensive loss |
|
| ( | ) |
|
| ( | ) |
Less: Comprehensive (gain) loss attributable to non-controlling interests |
| $ | ( | ) |
| $ |
| |
Comprehensive loss attributable to Verde Resources, Inc. |
| $ | ( | ) |
| $ |
| |
|
|
|
|
|
|
|
|
|
Basic and Diluted Loss per Common Share |
| $ | ( | ) |
| $ | ( | ) |
|
|
|
|
|
|
|
|
|
Weighted Average Number of Common Shares Outstanding |
|
|
|
|
|
|
|
|
Basic and diluted |
|
|
|
|
|
| ||
*Less than $0.01 per share
The accompanying notes are an integral part of these consolidated financial statements.
| F-3 |
| Table of Contents |
Verde Resources, Inc.
Statement of Changes in Stockholders’ Equity (Deficit)
For the years ended June 30, 2021 and 2020
(In US$ except for number of shares)
|
| Common Shares |
|
| Additional Paid-In |
|
| Accumulated |
|
| Non-Controlling |
|
| Accumulated Other Comprehensive |
|
|
| |||||||||||
|
| Shares |
|
| Amount |
|
| Capital |
|
| Deficit |
|
| Interest |
|
| Income |
|
| Total |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Balance - June 30, 2019 |
|
|
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) |
| $ |
|
| $ | ( | ) | ||||
|
|
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|
Shares issued |
|
|
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|
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| |||||||
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|
|
|
|
|
|
Net loss for the period |
|
| - |
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) |
|
|
|
|
| ( | ) | |||
|
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|
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|
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|
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|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation gain |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance - June 30, 2020 |
|
|
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) |
| $ |
|
| $ | ( | ) | ||||
|
|
|
|
|
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|
|
|
|
|
|
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|
Shares issued for debt repayment and acquisition |
|
|
|
|
|
|
|
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|
|
|
|
|
|
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|
Shares issued to directors |
|
|
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Shares issued to service providers |
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Shares issued in private placement |
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Net loss for the period |
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| - |
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Foreign currency translation loss |
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Balance - June 30, 2021 |
|
| 779,742,109 |
|
| $ |
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| $ |
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| $ | ( | ) |
| $ | ( | ) |
| $ |
|
| $ | 15,769,925 |
| |||
The accompanying notes are an integral part of these consolidated financial statements.
| F-4 |
| Table of Contents |
Verde Resources, Inc.
Consolidated Statements of Cash Flows
|
| For the year |
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| For the year |
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| Ended |
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| Ended |
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| June 30, 2021 |
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| June 30, 2020 |
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Cash flows from operating activities: |
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Net loss |
| $ | ( | ) |
| $ | ( | ) |
Adjustments to reconcile loss to net cash used in operations |
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Depreciation |
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Amortization |
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Stock-based compensation |
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Interest expenses |
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Changes in operating assets and liabilities |
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(Increase) decrease in: |
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Other receivables |
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Other deposit & prepayment |
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| ( | ) | |
Increase (decrease) in: |
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Accounts payable |
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| - |
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Accrued liabilities and other payables |
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Advanced from sub-contractor & related parties |
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Net cash used in operating activities |
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Cash flows from investing activities: |
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Payments of deposit paid for equity acquisition and property, plant and equipment |
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| ( | ) |
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Advanced to related parties |
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Acquisitions of right of use assets |
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| ( | ) |
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Payments of acquisition of property, plant and equipment |
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| ( | ) | |
Net cash used in investing activities |
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Cash flows from financing activities: |
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Repayments of bank loans |
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Proceeds from issuance of common stock |
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Net cash provided by financing activities |
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Net increase / (decrease) in cash and cash equivalents |
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Effect of exchange rate changes on cash |
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Net increase in cash and cash equivalents |
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Cash and cash equivalents at beginning of year |
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Cash and cash equivalents at end of year |
| $ |
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| $ |
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Cash paid during the year for: |
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Taxes paid |
| $ | |
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| $ | |
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Interest paid |
| $ | |
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| $ | |
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Supplementary non-cash investing and financing activities: |
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Issuance of common stock |
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- offset accounts payable (note 7) |
| $ |
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| $ |
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- offset advanced from related parties (note 7) |
| $ |
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| $ |
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- deposit paid for acquisition of subsidiaries (note 6) |
| $ |
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| $ |
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- deposit paid for acquisition of property, plant and equipment (note 6) |
| $ |
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| $ |
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The accompanying notes are an integral part of these consolidated financial statements.
| F-5 |
| Table of Contents |
Verde Resources, Inc .
Notes to Consolidated Financial Statements
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Verde Resources, Inc. (the “Company” or “VRDR”) was incorporated on April 22, 2010, in the State of Nevada, U.S.A. The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America, and the Company’s fiscal year end is June 30.
Gold Billion Global Limited (“Gold Billion” or “GBL”) was incorporated in British Virgin Islands on February 7, 2013. GBL is setup by the Board of Director of Federal Mining Resources Limited (“FMR”). The major operation of GBL is to manage and monitor the mineral exploration and mining projects of FMR.
On July 1, 2013, FMR has assigned its rights and obligation on Champmark Sdn Bhd (“CSB”) to GBL. Four of the five members of CSB Board of Directors were appointed by FMR, with two of the GBL Board of Directors currently sitting on the CSB Board. According to ASC 810-05-08 A, CSB is a deemed subsidiary of GBL where it has controlled the CSB Board of Directors, has assigned rights to receive future benefits and residual value, and obligation to absorb loss and finance for CSB by GBL. GBL has the power to direct the activities of CSB that most significantly impact CSB’s economic performance and the obligation to absorb losses of CSB that could potentially be significant to the CSB or the right to receive benefits from CSB that could potentially be significant to CSB. GBL is the primary beneficiary of CSB because it has been assigned with all relevant rights and obligation and can direct the activities of CSB through the common directors and the 85% shareholder, FMR. Under 810-23-42, 43, it is determined that CSB is de-facto agent of GBL and GBL is the de-facto principal of CSB. GBL will start to consolidate CSB from July 1, 2013 and the Company will consolidated GBL and CSB from October 25, 2013 onwards.
On February 17, 2014, the Company entered into a Supplementary Agreement to the Assignment Agreement and completed an acquisition of GBL pursuant to the Supplementary Agreement. The acquisition was a reverse acquisition in accordance with ASC 805-40 “Reverse Acquisitions”. The legal parent was VRDR which was the accounting acquiree while GBL was the accounting acquirer. There was a
As a result of the acquisition, the Company holds
On March 17, 2014, the Company through GBL and its deemed subsidiary CSB entered into a Sub-Contract Agreement with Borneo Oil & Gas Corporation Sdn Bhd (“BOG”) for the engagement of its sub-contractor services to carry out exploration and exploitation works on alluvial and lode gold resources at Site IV-1 of the Merapoh Mine. The Sub-Contract Agreement is for a period of 5 years with a renewal for another
On April 1, 2014, GBL purchased
Effective August 27, 2014, the Company’s Articles of Incorporation were amended to increase the authorized shares of the Company from
Effective February 20, 2016, Mr. Wu Ming Ding resigned all of his positions as President and Director of the Company with Mr. Balakrishnan B S Muthu being appointed President to fill the vacancy created. Effective February 20, 2016, Mr. Chen Ching was appointed Director of the Company and the entire Board of Directors now consists of Mr. Balakrishnan B S Muthu and Mr. Chen Ching. The SC 14F1 and Form 8-K announcing the change in officers and directors were filed with SEC on February 10, 2016 and February 22, 2016 respectively.
Effective February 2, 2018, the Company’s Articles of Incorporation were amended to increase the authorized shares of the Company from
On May 10, 2021, the Company announced the Sale and Purchase Agreement to acquire the assets of biofraction plant and the right to use intellectual property license in Sabah, Malaysia from Borneo Energy Sdn Bhd, in consideration of issuance of
On June 9, 2021, the Company entered into a Settlement of Debt Agreement (the “Debt Settlement Agreement”) with the Company’s creditors Beijing Changxin Wanlin Technology Co., Ltd, Federal Mining Resources Ltd, Federal Capital Investment Limited and Yorkshire Capital Limited (collectively the “Creditors”) to convert a total of USD
| F-6 |
| Table of Contents |
On June 11, 2021, GBL entered into a Sale and Purchase of Assets Agreement (the “SPA Agreement”) to purchase a factory site from a Malaysia company Segama Ventures Sdn Bhd (“Segaman Ventures”), an unrelated third party, in order to expand the Company’s biofraction plant in Malaysia. Under the terms of the SPA Agreement, the acquisition is satisfied by cash payment of $
On June 17, 2021, the Company through its prospective indirect subsidiary Bio Resources Limited (“BRL”), a company incorporated under the laws of the Labuan, entered into a Shares Sale Agreement with Hermalis Binti Mohmad Tahir (“Hermalis”), a company incorporated under the laws of the Malaysia, to acquire the entire issued and paid-up share capital of Global Renewables. Under the terms of the Shares Sale Agreement, the consideration for the acquisition shall be satisfied in full by the payment of Malaysia Ringgit MYR 25,000 upon the execution of the Shares Sale Agreement. The acquisition of Global Renewables was subject to the successful completion of the acquisition of the entire issued and paid-up share capital of BRL. Therefore, the acquisition of Global Renewables will dependent upon the successful acquisition of BRL.
On June 18, 2021, GBL entered into a Shares Sale Agreement with Lamax Gold Limited (“LGL”), a company incorporated under the laws of the British Virgin Islands, in relation to acquisition of the remaining
On August 10, 2021, the Company formed a wholly owned subsidiary, Verde Renewables, Inc., for the purpose of conducting business in Missouri (using palm waste to create biochar and related products). Another entity, Verde Estates, LLC, was also formed on August 10, 2021 to own property in Missouri. Verde Estates, LLC is a wholly owned subsidiary of Verde Renewables, Inc.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America (GAAP). These consolidated financial statements are expressed in United States dollars ($). Financial statements prepared in accordance with GAAP contemplate the realization of assets and the satisfaction of liabilities in the normal course of business. These condensed consolidated audited financial statements include all adjustments that, in the opinion of management, are necessary in order to make the financial statements not misleading.
Basis of Consolidation
The consolidated financial statements include the financial statements of Verde Resources, Inc., its wholly owned subsidiary Gold Billion Global Limited (“GBL”) and 85% of the indirect subsidiary Champmark SDN BHD (“CSB”). All inter-company balances and transactions between the Company and its subsidiary and indirect subsidiary have been eliminated upon consolidation.
The Company has adopted ASC Topic 810-10-5-8, “Variable Interest Entities”, which requires a variable interest entity or VIE to be consolidated by a company if that company is subject to a majority of the risk of loss for the VIE or is entitled to receive a majority of the VIE’s residual returns.
Variable Interest Entity and Indirect Subsidiary
On July 1, 2013, the Company’s subsidiary, GBL entered into a series of agreements (“VIE agreements”) with FMR and details of the VIE agreements are as follows:
| 1. | Management Agreement, FMR entrusted the management rights of its subsidiary CSB to GBL that include: |
| i) | management and administrative rights over the day-to-day business affairs of CSB and the mining operation at Site IV-1 of the Merapoh Gold Mine; |
| ii) | final right for the appointment of members to the Board of Directors and the management team of CSB; |
| iii) | act as principal of CSB; |
| iv) | obligation to provide financial support to CSB; |
| v) | option to purchase an equity interest in CSB; |
| vi) | entitlement to future benefits and residual value of CSB; |
| vii) | right to impose no dividend policy; |
| viii) | human resources management. |
| 2. | Debt Assignment, FMR assigned to GBL the sum of money in the amount of US Dollars One Hundred Nine Thousand Eight Hundred One And Cents Seventy-Two Only (US$ |
With the above agreements, GBL demonstrates its ability to control CSB as the primary beneficiary and the operating results of the VIE was included in the condensed consolidated financial statements for the year ended June 30, 2014.
On April 1, 2014, the Board of Director of GBL notified FMR upon the decision to exercise the right of option to purchase
On June 18, 2021, GBL entered into a Shares Sale Agreement to acquire the remaining
Operating leases
In February 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU 2016-02, Leases (Topic 842), which is effective for annual reporting periods (including interim periods) beginning after December 15, 2018, and early adoption is permitted. The Company adopted the Topic 842 on July 1, 2019 using a modified retrospective and has elected not to recast comparative period in the consolidated financial statements. The Company leases its facility, which are classified as operating leases in accordance with Topic 842. Under Topic 842, lessees are required to recognize the following for all leases (with the exception of short-term leases) on the commencement date: (i) lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (ii) right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. At the commencement date, the Company recognizes the lease liability at the present value of the lease payments not yet paid, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate for the same term as the underlying lease. The right-of-use asset is recognized initially at cost, which primarily comprises the initial amount of the lease liability, plus any initial direct costs incurred, consisting mainly of brokerage commissions, less any lease incentives received. All right-of-use assets are reviewed for impairment. There was no impairment for right-of-use lease assets as of June 30, 2021.
| F-7 |
| Table of Contents |
Use of Estimates
The preparation of financial statements in conformity with 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 amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company’s periodic filings with the Securities and Exchange Commission include, where applicable, disclosures of estimates, assumptions, uncertainties and markets that could affect the financial statements and future operations of the Company.
Cash and Cash Equivalents
Cash and cash equivalents include cash in banks, which are readily convertible to known amounts of cash and which, in the opinion of management, are subject to an insignificant risk of loss in value. The Company had $
Concentrations of Credit Risk
The Company’s financial instruments that are exposed to concentrations of credit risk primarily consist of its cash and cash equivalents and related party payables it will likely incur in the near future. The Company places its cash and cash equivalents with financial institutions of high credit worthiness. At times, its cash and cash equivalents with a particular financial institution may exceed any applicable government insurance limits. The Company’s management plans to assess the financial strength and credit worthiness of any parties to which it extends funds, and as such, it believes that any associated credit risk exposures are limited.
Risks and Uncertainties
The Company operates in the resource exploration industry that is subject to significant risks and uncertainties, including financial, operational, technological, and other risks associated with operating a resource exploration business, including the potential risk of business failure.
Property and equipment
Property and equipment are stated at cost. The straight-line depreciation method is used to compute depreciation over the estimated useful lives of the assets with a 5% estimated residual values, as follows:
| Useful Lives |
| |
Land & Buildings |
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| |
Machinery |
| ||
Furniture, fixture and electronic equipment |
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Expenditures for maintenance and repairs, which do not materially extend the useful lives of the assets, are charged to expense as incurred. Expenditures for major renewals and betterment which substantially extend the useful life of assets are capitalized. The cost and related accumulated depreciation of assets retired or sold are removed from the respective accounts, and any gain or loss is recognized in the consolidated statements of income and other comprehensive income in other income or expenses.
Accounts Receivable
Accounts receivable are recognized and carried at net realizable value. An allowance for doubtful accounts will be recorded in the period when a loss is probable based on an assessment of specific evidence indicating troubled collection, historical experience, accounts aging, ongoing business relation and other factors. Accounts are written off after exhaustive efforts at collection. If accounts receivable are to be provided for, or written off, they would be recognized in the consolidated statement of operations within operating expenses. At June 30, 2021 and June 30, 2020, the Company has no allowance for doubtful accounts, as per management’s judgment based on their best knowledge. As of June 30, 2021 and June 30, 2020, the longest credit term for certain customers are
Provision for Doubtful Accounts
The Company maintains an allowance for doubtful accounts to reserve for potentially uncollectible receivables and reviews accounts receivable by amounts due by customers which are past due to identify specific customers with known disputes or collectability issues. In determining the amount of the reserve, the Company makes judgments about the creditworthiness of customers based on past collection experience and ongoing credit risk evaluations. At June 30, 2021 and June 30, 2020 there was no allowance for doubtful accounts.
| F-8 |
| Table of Contents |
Fair Value
ASC Topic 820 “Fair Value Measurement and Disclosures” establishes a three-tier fair value hierarchy, which prioritizes the inputs used 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. |
The Company’s financial instruments consist of cash and cash equivalents, trade receivables, other receivables, payables, and short term and long term debt. The carrying values of cash and cash equivalents, trade receivables, other receivables, and payables approximate their fair value due to their short maturities. The carrying value of long term debt approximates the fair value of debt of similar terms and remaining maturities available to the company.
The Company’s non-financial assets are measured on a recurring basis. These non-financial assets are measured for impairment annually on the Company’s measurement date at the reporting unit level using Level 3 inputs. For most assets, ASC 820 requires that the impact of changes resulting from its application be applied prospectively in the year in which the statement is initially applied.
The Company’s non-financial assets measured on a non-recurring basis include the Company’s property, plant and equipment and finite-use intangible assets which are measured for recoverability when indicators for impairment are present. ASC 820 requires companies to disclose assets and liabilities measured on a non-recurring basis in the period in which the re-measurement at fair value is performed.
Foreign Currency Translation
The Company’s reporting currency is the United States dollar (“$”) and the accompanying consolidated financial statements have been expressed in United States dollars. The Company’s functional currency is the Malaysian Ringgit ( “MYR”) which is a functional currency as being the primary currency of the economic environment in which their operations are conducted.
In accordance with ASC Topic 830 “Translation of Financial Statements” , capital accounts of the consolidated financial statements are translated into United States dollars from MYR at their historical exchange rates when the capital transactions occurred. Assets and liabilities are translated at the exchange rates as of balance sheet date. Income and expenditures are translated at the average exchange rate of the respective year. The resulting exchange differences are recorded in the consolidated statement of operations.
|
| June 30, 2021 |
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| June 30, 2020 |
| ||
Year-end MYR : $1 exchange rate |
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Average MYR : $1 exchange rate |
|
| 0.2429 |
|
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|
| |
Stock-Based Compensation
The Company accounts for stock-based compensation in accordance with ASC 718-10 “Compensation-Stock Compensation” which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors including employee stock options, restricted stock units, and stock appreciation rights are based on estimated fair values. Stock-based compensation expense recognized during the period is based on the value of the portion of share-based payment awards that is ultimately expected to vest during the period.
The Company accounts for non-employee stock-based awards at fair value in accordance with the measurement and recognition criteria of ASC 505-50 “Equity-Based Payments to Non-Employees.
Comprehensive Income
Comprehensive income is defined to include all changes in equity except those resulting from investments by owners and distributions to owners. Among other disclosures, all items that are required to be recognized under current accounting standards as components of comprehensive income are required to be reported in a financial statement that is presented with the same prominence as other financial statements. Comprehensive income includes net income and the foreign currency translation changes.
Related Party
Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control or significant influence, such as a family member or relative, shareholder, or a related corporation.
Non-controlling Interest
The Company’s non-controlling interest represents the minority shareholder’s ownership interest related to the Company’s subsidiary, CSB. The Company reports its non-controlling interest in subsidiaries as a separate component of equity in the Consolidated Balance Sheets and reports both net loss attributable to the non-controlling interest and net loss attributable to the Company’s common shareholders on the face of the Consolidated Statements of Operations. The Company’s equity interest in CSB is
| F-9 |
| Table of Contents |
Segment Reporting
The Company currently engages in one operation segment: Gold Mining. The expenses incurred were consisting principally of management services. The Company’s major operation is located in Malaysia.
Mineral Acquisition and Exploration Costs
The Company has been primarily engaged in the acquisition, exploration, and development of mining properties. The Company was no longer considered an exploration stage company after the reverse take-over with its subsidiary GBL.
Mineral property acquisition and exploration costs are expensed as incurred. When it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves, the costs incurred to develop such property are capitalized. Such costs will be amortized using the units-of-production method over the estimated life of the probable reserves.
Environmental Expenditures
The operations of the Company have been, and may in the future be affected from time to time in varying degree by changes in environmental regulations, including those for future reclamation and site restoration costs. Both the likelihood of new regulations and their overall effect upon the Company vary greatly and are not predictable. The Company’s policy is to meet or, if possible, surpass standards set by relevant legislation by application of technically proven and economically feasible measures.
Environmental expenditures that relate to ongoing environmental and reclamation programs are charged against earnings as incurred or capitalized and amortized depending on their future economic benefits. All of these types of expenditures incurred since inception have been charged against earnings due to the uncertainty of their future recoverability. Estimated future reclamation and site restoration costs, when the ultimate liability is reasonably determinable, are charged against earnings over the estimated remaining life of the related business operation, net of expected recoveries.
Revenue Recognition
In accordance with the ASC Topic 606, “Revenue from Contracts with Customers”, the Company recognizes revenue when persuasive evidence of an arrangement exists, transfer of title has occurred or services have been rendered, the selling price is fixed or determinable and collectibility is reasonably assured.
The Company derives revenues primarily from the sales of gold mineral or other minerals to registered gold trading companies or other customers in Malaysia. The Company generally recognizes its revenues in accordance with the following core principles: at the time of gold or minerals sales, the contract with customers and the performance obligations are identified. The transaction and selling price is determined by the prevailing market value of gold bullion quoted by the leading registered gold trading company in Malaysia or at an agreed price. Sales invoice will be prepared to reflect the proper transaction price based on the performance obligation allocation. After delivery is completed and the performance obligation is satisfied, sales invoice will be presented to the customers and so revenue is then recognized accordingly.
| F-10 |
| Table of Contents |
Income Taxes
The provision for income taxes is determined in accordance with the provisions of ASC Topic 740, “Accounting for Income Taxes” (“ASC 740”). Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Any effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
ASC 740 prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their financial statements uncertain tax positions taken or expected to be taken on a tax return. Under ASC 740, tax positions must initially be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions must initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts. As of June 30, 2021 and June 30, 2020, the Company did not have any significant unrecognized uncertain tax positions.
Recent Accounting Pronouncements
Recent Adopted Accounting Standards
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements for Level 1, Level 2 and Level 3 instruments in the fair value hierarchy. The guidance is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted for any eliminated or modified disclosures. The Company applied the new standard beginning January 1, 2020. The adoption of this standard did not have an impact on the Company’s consolidated financial position, results of operations and cash flows.
Recently issued accounting pronouncements not yet adopted
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326), which requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost. Adoption of the ASUs is on a modified retrospective basis. As a smaller reporting company, the standard will be effective for the Company for interim and annual reporting periods beginning after December 15, 2022. The Company is currently evaluating the impact that the standard will have on our consolidated financial statements and related disclosures.
In January 2017, the FASB issued ASU No. 2017-04, simplifying the Test for Goodwill Impairment. The guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The guidance should be adopted on a prospective basis. As a smaller reporting company, the standard will be effective for the Company for interim and annual reporting periods beginning after December 15, 2022, with early adoption permitted. The Company is currently evaluating the impact of adopting this standard on our consolidated financial statements.
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistent application among reporting entities. The guidance is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years, with early adoption permitted. Upon adoption, we must apply certain aspects of this standard retrospectively for all periods presented while other aspects are applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. The Company is evaluating the impact this update will have on our financial statements.
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) (“ASU 2020-04”). ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. The Company continues to evaluate the impact of the guidance and may apply the elections as applicable as changes in the market occur.
In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470- 20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity. This ASU (1) simplifies the accounting for convertible debt instruments and convertible preferred stock by removing the existing guidance in ASC 470-20, Debt: Debt with Conversion and Other Options, that requires entities to account for beneficial conversion features and cash conversion features in equity, separately from the host convertible debt or preferred stock; (2) revises the scope exception from derivative accounting in ASC 815-40 for freestanding financial instruments and embedded features that are both indexed to the issuer’s own stock and classified in stockholders’ equity, by removing certain criteria required for equity classification; and (3) revises the guidance in ASC 260, Earnings Per Share, to require entities to calculate diluted earnings per share (EPS) for convertible instruments by using the if-converted method. In addition, entities must presume share settlement for purposes of calculating diluted EPS when an instrument may be settled in cash or shares.
For SEC filers, excluding smaller reporting companies, ASU 2020-06 is 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. For all other entities, ASU 2020-06 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Entities should adopt the guidance as of the beginning of the fiscal year of adoption and cannot adopt the guidance in an interim reporting period. The Company is currently evaluating the impact that ASU 2020-06 may have on its consolidated financial statements and related disclosures.
NOTE 3 - CASH AND CASH EQUIVALENT
The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. As of June 30, 2021 and June 30, 2020 cash and cash equivalents consisted of bank deposits in banks in Malaysia and petty cash on hands.
| F-11 |
| Table of Contents |
NOTE 4 - OTHER RECEIVABLE, AND ADVANCED TO RELATED PARTIES -
Other receivables
Other receivables at June 30, 2021 and June 30, 2020 consist of the following items:
|
| June 30 |
|
| June 30 |
| ||
|
| 2021 |
|
| 2021 |
| ||
|
|
|
|
|
|
| ||
Other receivable |
| $ |
|
| $ |
| ||
Less: allowance for doubtful debts |
|
|
|
|
|
| ||
|
| $ |
|
| $ |
| ||
Advanced to related parties
Advanced from related parties at June 30, 2021 and June 30, 2020 consist of the following items:
|
| June 30, 2021 |
|
| June 30, 2020 |
| ||
Advanced to Global Renewable Sdn Bhd (#1) (note 1) |
| $ |
|
| $ |
| ||
______________
(#1) Balakrishnan B.S. Muthu is the common director of Global Renewable Sdn Bhd and the Company. The advances are related to ordinary business transactions and bear no interest or collateral, repayable and renewable under normal business advancement terms.
NOTE 5 - OPERATING LEASE
As of June 30, 2021, the Company leases minings space under a non-cancelable operating lease, with terms of two years. Lease expense for lease payment is recognized on a straight-line basis over the lease term.
On June 14 2021, a lump sum payment of RM260,500 ($
The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.
The table below presents the operating lease related assets and liabilities recorded on the balance sheets.
|
| June 30, |
| |
Balance as at the beginning of period |
| $ |
| |
Addition |
|
|
| |
Amortization charge for the year |
|
| ( | ) |
Foreign exchange adjustment |
|
|
| |
Balance as of June 30, 2021 |
| $ |
| |
Amortization charge of rights of use lease assets was $2,636 and $nil for the years ended June 30, 2021 and 2020.
Lease term and discount rate |
|
| ||
|
|
| ||
|
| June 30, 2021 |
| |
Weighted-average remaining lease term - years |
|
|
| |
| F-12 |
| Table of Contents |
NOTE 6 - DEPOSIT AND PREPAYMENT
At June 30, 2021 and June 30, 2020 deposit and prepayment consists of the following:
|
| June 30, |
|
| June 30, |
| ||
|
| 2021 |
|
| 2020 |
| ||
|
|
|
|
|
|
| ||
Deposits paid for acquisition of subsidiaries |
|
|
|
|
|
| ||
- Bio Resources Limited (#1) |
| $ |
|
| $ |
| ||
- Champmark Sdn Bhd (#2) |
|
|
|
| $ |
| ||
|
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Deposits paid for acquisition of property, plant and equipment |
|
|
|
|
|
|
|
|
- Intellectual property license (#3) |
|
|
|
|
|
| ||
- Factory site (#4) |
|
|
|
|
|
| ||
|
| $ |
|
| $ |
| ||
___________
(#1) The Company announced the Share Sale Agreement on May 12, 2021 for the acquisition of the entire issued and paid-up share capital of Bio Resources Limited from Taipan International Limited, an unrelated third party, The Wision Project Limited (formerly known as “Borneo Resources Limited”), an related third party, and other individuals unrelated third parties, in consideration of issuance of
(#2) On June 18, 2021, GBL entered into a Shares Sale Agreement with Lamax Gold Limited (“LGL”), a company incorporated under the laws of the British Virgin Islands, in relation to acquisition of the remaining 15% of the issued and paid-up share capital of CSB. Prior to this acquisition, GBL owned
(#3) On May 10, 2021, the Company announced the Sale and Purchase Agreement to acquire the assets of biofraction plant and the right to use intellectual property license in Sabah, Malaysia from Borneo Energy Sdn Bhd, in consideration of issuance of
(#4) On June 11, 2021, GBL entered into a Sale and Purchase of Assets Agreement (the “SPA Agreement”) to purchase a factory site from a Malaysia company Segama Ventures Sdn Bhd (“Segaman Ventures”), an unrelated third party, in order to expand the Company’s biofraction plant in Malaysia. Under the terms of the SPA Agreement, the acquisition is satisfied by cash payment of $
NOTE 7 - ACCOUNTS PAYABLE AND ADVANCED FROM RELATED PARTIES
Accounts Payable
Accounts payable at June 30, 2021 and June 30, 2020 consist of the following items:
|
| June 30, 2021 |
|
| June 30, 2020 |
| ||
Due to Beijing Changxin Wanlin Technology Co., Ltd. (*) |
| $ |
|
| $ |
| ||
Other accounts payable |
|
|
|
|
|
| ||
|
| $ |
|
| $ |
| ||
______________
(*) Due to Beijing Changxin Wanlin Technology Co., Ltd. are accounts payable derived from ordinary business transactions. One of the directors of Beijing Changxin Wanlin Technology Co., Ltd., Mr. Wu Ming Ding, has resigned as director of VRDR (on February 20, 2016), GBL (as of February 11, 2016) and CSB (on February 17, 2016). This accounts payable bears no interest or collateral, repayable and renewable under normal business accounts payable terms.
On June 9, 2021, the Company entered into a Settlement of Debt Agreement (the “Debt Settlement Agreement”) with Beijing Changxin Wanlin Technology Co., Ltd. to convert a total of USD
| F-13 |
| Table of Contents |
Advanced from related parties
Advanced from related parties at June 30, 2021 and June 30, 2020 consist of the following items:
|
| June 30, 2021 |
|
| June 30, 2020 |
| ||
Advanced from BOG (#1) |
| $ |
|
| $ |
| ||
Advanced from Federal Mining Resources Limited(#2) |
| $ |
|
| $ |
| ||
Advanced from Federal Capital Investment Limited (#3) |
| $ |
|
| $ |
| ||
Advanced from Yorkshire Capital Limited (#4) |
| $ |
|
| $ |
| ||
|
| $ | 585,783 |
|
| $ | 655,920 |
|
______________
(#1) Borneo Oil and Gas Corporation SDN (“BOG”) is a wholly owned subsidiary of Borneo Oil Berhad (“BOB”) (holding 20.0% and 23.0% of the Company’s issued and outstanding common stock as of June 30, 2021 and November 10, 2021, respectively). BOG is one of the shareholders of the Company and did not own any shares of the Company since April 28, 2017. The advances are related to ordinary business transactions and bear no interest or collateral, repayable and renewable under normal business advancement terms.
(#2) One of the directors of Federal Mining Resources Limited, Mr. Chen Ching, has been appointed as director of the Company effective on February 20, 2016. Another director of Federal Mining Resources Limited, Mr. Wu Ming Ding, has resigned as director of the Company effective on February 20, 2016. The advances are related to ordinary business transactions and bear no interest or collateral, repayable and renewable under normal business advancement terms.
On June 9, 2021, the Company entered into a Settlement of Debt Agreement (the “Debt Settlement Agreement”) with Federal Mining Resources Limited, to convert a total of USD
(#3) One of the directors of Federal Capital Investment Limited, Mr. Wu Ming Ding, has resigned as director of the Company effective on February 20, 2016. The advances are related to ordinary business transactions and bear no interest or collateral, repayable and renewable under normal business advancement terms.
On June 9, 2021, the Company entered into a Settlement of Debt Agreement (the “Debt Settlement Agreement”) with Federal Capital Investment Limited, to convert a total of USD
(#4) One of the directors of Yorkshire Capital Limited, Mr. Lai Kui Shing, Andy, has resigned as director of CSB effective on February 17, 2016. The advances are related to ordinary business transactions and bear no interest or collateral, repayable and renewable under normal business advancement terms.
On June 9, 2021, the Company entered into a Settlement of Debt Agreement (the “Debt Settlement Agreement”) with its creditor Yorkshire Capital Limited, to convert a total of USD
NOTE 8 - PROPERTY, PLANT AND EQUIPMENT
Property and equipment at June 30, 2021 and June 30, 2020, are summarized as follows:
|
| June 30, 2021 |
|
| June 30, 2020 |
| ||
Land and Building |
| $ |
|
| $ |
| ||
Plant and Machinery |
|
|
|
|
|
| ||
Office equipment |
|
|
|
|
|
| ||
Project equipment |
|
|
|
|
|
| ||
Computer |
|
|
|
|
|
| ||
Motor Vehicle |
|
|
|
|
|
| ||
Accumulated depreciation |
|
| ( | ) |
|
| ( | ) |
|
| $ |
|
| $ |
| ||
The depreciation expenses charged for the year ended June 30, 2021 and 2020 were $
| F-14 |
| Table of Contents |
NOTE 9 - PROMISSORY NOTES
On May 10, 2021, the Company announced the Share Sale Agreement on May 12, 2021 for the acquisition of the entire issued and paid-up share capital of Bio Resources Limited from Taipan International Limited, an unrelated third party, The Wision Project Limited (formerly known as “Borneo Resources Limited”), an un-related third party, and other individuals unrelated third parties, in consideration of issuance of
The fair value of the outstanding promissory notes was calculated with the following assumptions:
Risk free rate |
|
| % | |
Credit spread |
|
| % | |
Liquidity risk premium |
|
| % |
The following is a reconciliation of the beginning and ending balances of promissory notes payable using Level 3 inputs:
|
| June 30 | June 30 |
| ||||
|
| 2021 |
|
| 2020 |
| ||
Balance at the beginning of period |
| $ |
|
| $ |
| ||
Promissory notes issued to unrelated third parties at fair value |
|
|
|
|
|
| ||
Interest expense |
|
|
|
|
|
| ||
Balance at the end of period |
| $ |
|
| $ |
| ||
The Company recorded $
| F-15 |
| Table of Contents |
NOTE 10 - INCOME TAX
The Company and its subsidiaries are subject to income taxes on an entity basis on income arising in, or derived from, the tax jurisdiction in which they operate. The Company is a Nevada incorporated company and subject to United State Federal Income Tax. The Tax Cuts and Jobs Act of (“TCJ Act”) was signed into law in December 2017, and among its many provisions, it imposed a mandatory one-time transition tax on undistributed international earnings and reduced the U.S. corporate income tax rate to
A reconciliation between the income tax computed at the relevant statutory rate and the Company’s provision for income tax is as follows:
|
| For the year ended |
|
| For the year ended |
| ||
|
| June 30, 2021 |
|
| June 30, 2020 |
| ||
|
| % |
|
| % |
| ||
Loss before income taxes |
|
|
|
|
|
| ||
Non-deductible items/non-taxable income |
|
| ( | ) |
|
| ( | ) |
Tax effect of tax exempt entity |
|
| ( | ) |
|
|
| |
Share based payments |
|
| ( | ) |
|
|
| |
Changes in valuation allowances |
|
| ( | ) |
|
| ( | ) |
Effect of different tax rate of subsidiaries operating in other jurisdictions |
|
|
|
|
|
| ||
Effective tax rate |
|
|
|
|
|
| ||
Summary of the Company’s net deferred tax liabilities and assets are as follows:
|
| June 30, 2021 |
|
| June 30, 2020 |
| ||
Deferred tax assets: |
|
|
|
|
|
| ||
Tax attribute carry forwards |
| $ |
|
| $ |
| ||
Valuation allowances |
|
| ( | ) |
|
| ( | ) |
Total |
| $ |
|
| $ |
| ||
The Company has recorded valuation allowances for certain tax attribute carry forwards and other deferred tax assets due to uncertainty that exists regarding future realizability. If in the future the Company believes that it is more likely than not that these deferred tax benefits will be realized, the majority of the valuation allowances will be recognized in the consolidated statement of operations. The Company did not have any interest and penalty provided or recognized in the income statements for years ended June 30, 2021 and June 30, 2020 or balance sheet as of June 30, 2021 and June 30, 2020. The Company did not have uncertainty tax positions or events leading to uncertainty tax position within the next 12 months.
| F-16 |
| Table of Contents |
NOTE 11 - COMMITMENTS AND CONTINGENCIES
As of June 30, 2021, the Group had the following contracted capital commitments:
|
| June 30, 2021 |
|
| June 30, 2020 |
| ||
|
|
|
|
|
|
| ||
For purchase of property, plant and equipment |
| $ |
|
| $ |
| ||
For acquisition of subsidiary |
|
|
|
|
|
|
| |
Total |
| $ |
|
| $ |
| ||
NOTE 12 - LOSS PER SHARE
The Company has adopted ASC Topic No. 260, “Earnings Per Share,” (“EPS”) which requires presentation of basic and diluted EPS on the face of the income statement for all entities with complex capital structures, and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. In the accompanying financial statements, basic earnings (loss) per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the year.
The following table sets forth the computation of basic and diluted earnings per share:
|
| Year Ended June 30, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
|
|
|
|
|
|
| ||
Net loss |
| $ | ( | ) |
| $ | ( | ) |
Less: Net loss attributable to non-controlling interests |
|
|
|
|
|
| ||
Net loss attributable to shareholders of Verde Resources, Inc. |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
Weighted average shares used in basic and diluted computation |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Net loss per share (Basic and Diluted) |
| $ | ( | )* |
| $ | ( | )* |
*Less than $0.01 per share
The Company has no potentially dilutive securities, such as options or warrants, currently issued and outstanding.
NOTE 13 - CAPITAL STOCK
Authorized Stock
The Company has authorized
Effective February 2, 2018, the Company’s Articles of Incorporation were amended to increase the authorized shares of the Company from
| F-17 |
| Table of Contents |
Share Issuance
On May 10, 2021, the Company announced the Sale and Purchase Agreement to acquire the assets of biofraction plant and the right to use intellectual property license in Sabah, Malaysia from Borneo Energy Sdn Bhd, in consideration of issuance of
On May 12, 2021, the Company, through its wholly-owned subsidiary GBL, entered into a Share Sale Agreement in relation to acquisition of the entire issued and paid-up share capital of Bio Resources Limited with Taipan International Limited, an unrelated third party, The Wision Project Limited (formerly known as “Borneo Resources Limited”), an unrelated third party and other individuals unrelated third parties, in consideration of issuance of
On June 4, 2021, the Company issued a total of
On June 9, 2021, the Company entered into a Settlement of Debt Agreement (the “Debt Settlement Agreement”) with the Company's creditors Beijing Changxin Wanlin Technology Co., Ltd, Federal Mining Resources Ltd, Federal Capital Investment Limited and Yorkshire Capital Limited (collectively the “Creditors”) to convert a total of USD
On June 10, 2021, the Company issued a total of
On June 10, 2021, the Company issued a total of
On June 18, 2021, the Company issued a total of
There were
There are no preferred shares outstanding. The Company has issued no authorized preferred shares. The Company has no stock option plan, warrants, or other dilutive securities.
NOTE 14 - RELATED PARTY TRANSACTIONS
Related party transaction |
| For the Year ended |
| |||||
|
| June 30, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
|
|
|
|
|
|
| ||
Other income - Sales of wash sand to: |
|
|
|
|
|
| ||
Jusra Mining Merapoh Sdn Bhd (#1) |
| $ |
|
| $ |
| ||
Professional services provided by: |
|
|
|
|
|
|
|
|
Federal Capital Investment Limited (#2) |
|
|
|
|
|
| ||
Related party balances |
|
|
| |||||
|
| June 30, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
|
|
|
|
|
|
| ||
Deposits paid for acquisition of property, plant and equipment |
|
|
|
|
|
| ||
- Intellectual property license of Borneo Energy Sdn Bhd (#3) (note 6) |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Other receivable |
|
|
|
|
|
|
|
|
Jusra Mining Merapoh Sdn Bhd (#1) |
| $ |
|
| $ |
| ||
(#1) Lamax Gold Limited (“LGL”) holding 15% equity interests of GBL was the major shareholder of Jusra Minging Merapoh Sdn Bhd , .
(#2) One of the directors of Federal Capital Investment Limited, Mr. Wu Ming Ding, has resigned as director of the Company effective February 20, 2016.
(#3) Borneo Oil Berhad (“BOB”) is ultimate holding company of Borneo Energy Sdn Bhd and holding 20.0% and 23.0% of the Company’s issued and outstanding common stock as of June 30, 2021 and November 10, 2021, respectively.
| F-18 |
| Table of Contents |
NOTE 15 - GOING CONCERN AND LIQUIDITY CONSIDERATIONS
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. As of June 30, 2021, the Company has suffered recurring net losses and records an accumulated deficit of $5,913,255. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The Company intends to fund operations through debt and equity financing arrangements.
The ability of the Company to survive is dependent upon, among other things, obtaining additional financing to continue operations, and development of its business plan.
In response to these problems, management intends to raise additional funds through public or private placement offerings, and related party loans.
No assurance can be given that any future financing, if needed, will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, if needed, it may contain undue restrictions on its operations, in the case of debt financing, or cause substantial dilution for its stock holders, in the case of equity financing.
In March 2020, the World Health Organization declared the outbreak of COVID-19 as a global pandemic, which continues to spread around the world. There is significant uncertainty around the breadth and duration of business disruptions related to COVID-19, as well as its impact on the Malaysia’s and global economy. While it is difficult to estimate the financial impact of COVID-19 on the Company’s operations, management believes that COVID-19 could have a material impact on its financial results at this time.
These consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets and liabilities that may result in the Company not being able to continue as a going concern.
NOTE 16 - SUBSEQUENT EVENTS
On May 10, 2021, the Company announced the Sale and Purchase Agreement to acquire the assets of biofraction plant and the right to use intellectual property license in Sabah, Malaysia from Borneo Energy Sdn Bhd (“BESB”) in consideration of issuance of
The Company also announced the Share Sale Agreement on May 12, 2021 for the acquisition of the entire issued and paid-up share capital of Bio Resources Limited in consideration of issuance of
On June 11, 2021, GBL entered into a Sale and Purchase of Assets Agreement (the “SPA Agreement”) to purchase a factory site from a Malaysia company Segama Ventures Sdn Bhd (“Segaman Ventures”) in order to expand the Company’s biofraction plant in Malaysia. Under the terms of the SPA Agreement, the acquisition is satisfied by cash payment of $
On June 17, 2021, the Company through its indirect subsidiary Bio Resources Limited (“BRL”), a company incorporated under the laws of the Labuan, entered into a Shares Sale Agreement with Hermalis Binti Mohamad Tahir (“Hermaliss”), a company incorporated under the laws of the Malaysia, to acquire the entire issued and paid-up share capital of Global Renewables. Under the terms of the Shares Sale Agreement, the consideration for the acquisition shall be satisfied in full by the payment of Malaysia Ringgit MYR
On June 18, 2021, GBL entered into a Shares Sale Agreement with Lamax Gold Limited (“LGL”), a company incorporated under the laws of the British Virgin Islands, in relation to acquisition of the remaining
On July 7, 2021, the Company issued a Press Release announcing a partnership with MRX Technologies, a market leader in commercial extraction systems for cannabis and hemp. The partnership includes an agreement for Verde Resources to white-label THC-free CBD products from MRX Technologies. The Company will distribute non-psychoactive, THC-free CBD products in Europe, Hong Kong and the United States.
On August 10, 2021, the Company formed a wholly owned subsidiary, Verde Renewables, Inc., for the purpose of conducting business in Missouri (using palm waste to create biochar and related products). Another entity, Verde Estates, LLC, was also formed on August 10, 2021 to own property in Missouri. Verde Estates, LLC is a wholly owned subsidiary of Verde Renewables, Inc.
The Company has evaluated subsequent events from the balance sheet date through the date the financial statements were issued and determined that there are no additional significant or material items to be required to disclose except the above mentioned matters.
| F-19 |
| Table of Contents |
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
Independent Accountants:
There were no changes to our certifying accountants for the year ended June 30, 2021.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our senior management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of the design and operation 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 (the “Exchange Act”), as of the end of the period covered by this Annual Report on Form 10-K (the “Evaluation Date”). During the 2021, the Company has been undertaking tremendous changes and expansion which rendered the management to re-consider the available of more management talents and professional staff to meet the enlargement in operation under the coming acquisition and expansion move. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded as of the Evaluation Date that 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.
As of June 30, 2021, management assessed the effectiveness of our internal control over financial reporting based on the criteria for effective internal control over financial reporting established in Internal Control--Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and SEC guidance on conducting such assessments. During the 2021, the Company has been undertaking tremendous enlargement and expansion which rendered the management to re-consider the available of more management talents and professional staff to meet the enlargement in operation during and after the coming acquisition and expansion move. Based on this consideration and that evaluation, the current management concluded that, during the period covered by this report, such internal controls and procedures were not effective to detect the inappropriate application of US GAAP rules as more fully described below. This was due to deficiencies that existed in the design or operation of our internal controls over financial reporting that adversely affected our internal controls and that may be considered to be material weaknesses.
The matters involving internal controls and procedures that our management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board were: (1) lack of a functioning audit committee, (2) lack of a majority of outside directors on our board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; (3) inadequate segregation of duties consistent with control objectives; and (4) management is dominated by three individuals without adequate compensating controls. The aforementioned material weaknesses were identified by our Chief Executive and Financial Officers in connection with the review of our financial statements as of June 30, 2021.
Management believes that the material weaknesses set forth above may have an immediate negative effect on our financial results because of our enlargement of operation. However, management believes that the lack of a functioning audit committee and the lack of a majority of outside directors on our board of directors results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements if the Company were growing substantially after the expansion move was materialized.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives. With the participation of our Chief Executive and Financial Officer, our management conducted an evaluation of the effectiveness of our internal control over financial reporting as of June 30, 2021 based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control - Integrated Framework. Based upon such evaluation, our management concluded that we did not maintain effective internal control over financial reporting as of June 30, 2021 based on the COSO framework criteria because of the enlargement in operation. The management acknowledged that there is room for further improvement in maintaining effective internal control and shall take steps to implement management’s remediation initiatives during and after that expansion, This includes recruiting more management talents and professional staff, committing the entire organization to allocate necessary organizational resources, and cross-functional collaboration focused on strengthening the company’s quality systems and operating culture.
This Annual Report on Form 10-K does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to an exemption for non-accelerated filers from the internal control audit requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002.
In order to cure the foregoing material weakness, we have taken or are taking the following remediation measures:
| – | We have been working on recruitment of more management talents and professional staff to fill in the gap of shortage of personnel under enlargement of operation during and after this expansion move. With the enlargement of operation, the management needs to re-consider and re-evalaute the entire internal control reporting system and related risk and changes. |
| – | We have regularly offered our financial personnel trainings on internal control and risk management. Also, we have regularly provided trainings to our financial personnel on U.S. GAAP accounting guidelines. We plan to continue to provide trainings to our financial team and our other relevant personnel on the U.S. GAAP accounting guidelines applicable to our financial reporting requirements. |
We intend to complete the remediation of the material weaknesses discussed above as soon as practicable but we can give no assurance that we will be able to do so. Designing and implementing an effective disclosure controls and procedures is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to devote significant resources to maintain a financial reporting system that adequately satisfies our reporting obligations. The remedial measures that we have taken and intend to take may not fully address the material weakness that we have identified, and material weaknesses in our disclosure controls and procedures may be identified in the future. Should we discover such conditions, we intend to remediate them as soon as practicable. We are committed to taking appropriate steps for remediation, as needed.
Officers’ Certifications
Appearing as exhibits to this Annual Report are “Certifications” of our Chief Executive Officer and Chief Financial Officer. The Certifications are required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (the “Section 302 Certifications”). This section of the Annual Report contains information concerning the Controls Evaluation referred to in the Section 302 Certification. This information should be read in conjunction with the Section 302 Certifications for a more complete understanding of the topics presented.
Changes in Internal Control Over Financial Reporting
The Company initiated its remediation of material weaknesses identified above, which steps were being implemented during the period covered by this Annual Report.
Item 9B. Other Information.
Not applicable.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspetions.
Not applicable.
| 21 |
| Table of Contents |
PART III
Item 10. Directors, Executive Officers and Corporate Governance
All directors of the Company hold office until the next annual meeting of the security holders or until their successors have been elected and qualified. The officers of the Company are appointed by the board of directors and hold office until their death, resignation or removal from office. The directors and executive officers, their ages, positions held, and duration as such, are as follows:
Name |
| Position Held with the Company |
| Age |
|
| Date First Elected or Appointed |
| |
|
|
|
|
|
|
|
|
| |
Balakrishnan B S Muthu |
| President |
|
| 59 |
|
| February 20, 2016 |
|
Balakrishnan B S Muthu |
| Treasurer, Chief Financial Officer, General Manager and Director |
|
| 59 |
|
| October 17, 2013 |
|
Chen Ching |
| Director |
|
| 61 |
|
| February 20, 2016 |
|
Carl M. Craven |
| Director |
|
| 60 |
|
| March 31, 2021 |
|
Liang Wai Keen |
| Secretary |
|
| 50 |
|
| October 17, 2013 |
|
Business Experience
The following is a brief account of the education and business experience during at least the past five years of each director, executive officer and key employee of the Company, indicating the person’s principal occupation during that period, and the name and principal business of the organization in which such occupation and employment were carried out.
Mr. Balakrishnan B S Muthu
Apr 1987 - Dec 1989: |
| Graduated with Diploma in Business Administration, The Association of Business Executives ABE, UK. |
|
|
|
Dec 2007 - Present: |
| General Manager, Champmark Sdn. Bhd |
Mr. Muthu has more than 20 years of experience in financial auditing and business strategic planning. He has been involved in preliminary alluvial mine planning and initial development of Merapoh Project since 2008. His previous experience includes working for Petroliam Nasional Berhad (Petronas) in various departments including the roles in compilation of seismic data, kiosk coordination and upstream financial auditing. He has also worked as a consultant providing financial and technical services for several oil and gas projects. He is also a Chartered Financial Planner (CFP).
Mr. Chen Ching
1979 - 1982: |
| Graduated with BA in Business Administration, University of Santa Clara |
|
|
|
1990 - Present: |
| Managing Director, C&K Holdings Pte Ltd. |
Mr. Chen is an entrepreneur with many successes through his investment holding company C&K Holdings Pte Ltd, with which he currently serves as the Managing Director. C&K Holdings. Pte Ltd was founded in Singapore in 1990 with diverse interests in Singapore, Malaysia, Taiwan, China, UK, Thailand and Vietnam; its portfolio spans property development and management, furniture manufacturing, fuel product technology, public transportation, software development, commodity electronic trading platform, and gold mining. Mr. Chen is also a director of Dynamic Offshore Pte Ltd, Premier International Holdings Pte Ltd and Dynamics Holding (Thailand) Co., Ltd.
Mr. Carl M. Craven
1992 - 1998: President and Part Owner, Fuego Flame Fireplace Manufacturing, Quincy, IL
1998 - 2005: President, Hide-A-Rake, Scottsdale, Arizona
2006 - Present: Partner, Turks & Caicos Island Project (Joe Grants Cay)
2007 - Present: Partner, Dominican Republic Project (Coconut Grove)
Mr. Craven is currently a partner in Turks & Caicos Island Project (Joe Grants Cay) and Dominican Republic Project (Coconut Grove). He has worked as President of Hide-A-Rake, Scottsdale, Arizona and was responsible for the research and development of new golf course product that received two United States Patents. Mr. Craven was also the President and part owner of Fuego Flame Fireplace Manufacturing, Quincy, IL.
Employment Agreements
Other than as set out below, we have no formal employment agreements with any of our employees, directors or officers.
| 22 |
| Table of Contents |
Family Relationships
There are no family relationships between any of our directors, executive officers and proposed directors or executive officers.
Involvement in Certain Legal Proceedings
None.
Compliance with Section 16(a) of the Exchange Act
As of August 27, 2014, the Company’s common stock is registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Accordingly, officers, directors and principal shareholders are subject to the beneficial ownership reporting requirements of Section 16(a) of the Exchange Act. As of the date of this Annual Report, no officer or director has filed beneficial ownership reports as required by Section 16(a).
Code of Ethics
We have adopted a corporate code of ethics. We believe our code of ethics is reasonably designed to deter wrongdoing and promote honest and ethical conduct; provide full, fair, accurate, timely and understandable disclosure in public reports; comply with applicable laws; ensure prompt internal reporting of code violations; and provide accountability for adherence to the code. The Company will provide to any person, without charge and upon request, a copy of the code of ethics. Any such request must be made in writing to the Company at, Block B-5, 20/F, Great Smart Tower, 230 Wanchai Rd, Wanchai, Hong Kong.
Board and Committee Meetings
Our board of directors currently consists of three members, Balakrishnan B S Muthu, Chen Ching and Carl M. Craven. The Board held no formal meetings during the year ended June 30, 2021. Until the Company develops a more comprehensive Board of Directors, all proceedings will be conducted by resolutions consented to in writing by all the directors and filed with the minutes of the proceedings of the directors. Such resolutions consented to in writing by the directors entitled to vote on that resolution at a meeting of the directors are, according to the Nevada General Corporate Law and our Bylaws, as valid and effective as if they had been passed at a meeting of the directors duly called and held.
Nomination Process
As of June 30, 2021, we did not effect any material changes to the procedures by which our shareholders may recommend nominees to our board of directors. Our board of directors does not have a policy with regards to the consideration of any director candidates recommended by our shareholders. Our board of directors has determined that it is in the best position to evaluate our company’s requirements as well as the qualifications of each candidate when the board considers a nominee for a position on our board of directors. If shareholders wish to recommend candidates directly to our board, they may do so by sending communications to the president of our company at the address on the cover of this annual report.
Audit Committee
Currently, the Company is developing a comprehensive Board of Directors and does not have an Audit Committee. The Company intends to appoint audit, compensation and other applicable committee members as it appoints individuals with pertinent expertise.
Audit Committee Financial Expert
Our board of directors does not have a member that qualifies as an “audit committee financial expert” as defined in Item 407(d)(5)(ii) of Regulation S-K.
| 23 |
| Table of Contents |
Item 11. Executive Compensation.
The particulars of the compensation paid to the following persons:
| (a) | our principal executive officer; and |
|
|
|
| (b) | each of our three executive officers who were serving as executive officers at the end of the year ended June 30, 2021. |
SUMMARY COMPENSATION TABLE | ||||||||||||||||||||||||||||||||||
Name and Principal Position |
| Year |
| Salary ($) |
|
| Bonus ($) |
|
| Stock Awards ($) |
|
| Option Awards ($) |
|
| Non-Equity Incentive Plan Compensation ($) |
|
| Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) |
|
| All Other Compensation ($) |
|
| Total ($) |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Balakrishnan B S Muthu (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
President, Treasurer, Chief Financial |
| 2021 |
|
| 66,338 |
|
|
| 0 |
|
|
| 62,857 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 129,195 |
|
Officer, General Manager, and Director |
| 2020 |
|
| 50,644 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 50,644 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chen Ching (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Director |
| 2021 |
|
| 0 |
|
|
| 0 |
|
|
| 77,858 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 77,858 |
|
Director |
| 2020 |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carl M. Craven (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Director |
| 2021 |
|
| 6,000 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 6,000 |
|
Director |
| 2020 |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
______________
(1) | Mr. Muthu was appointed Treasurer, Chief Financial Officer, General Manager and a director of the Company on October 17, 2013. He was also appointed President of the Company on February 20, 2016. Mr. Muthu was paid a total salary of $129,195 for the year ended June 30, 2021. |
(2) | Mr. Chen was paid a total salary of $77,858 for the year ended June 30, 2021. |
(3) | Mr. Craven was paid a total salary of $6,000 for the year ended June 30, 2021. |
Other than set out below, there are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers. Our directors and executive officers may receive share options at the discretion of our board of directors in the future. We do not have any material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that share options may be granted at the discretion of our board of directors.
Grants of Plan-Based Awards
There were no grants of plan based awards during the year ended June 30, 2021.
Outstanding Equity Awards at Fiscal Year End
There were no outstanding equity awards at the year ended June 30, 2021.
Option Exercises and Stock Vested
During our Fiscal year ended June 30, 2021, there were no options exercised by any officer or director.
| 24 |
| Table of Contents |
Compensation of Directors
We do not have any agreements for compensating our directors for their services in their capacity as directors.
Pension, Retirement or Similar Benefit Plans
There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers. We have no material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options may be granted at the discretion of the board of directors or a committee thereof.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table sets forth, as of November 10, 2021, certain information with respect to the beneficial ownership of our common shares by each shareholder known by us to be the beneficial owner of more than 5% of our common shares, as well as by each of our current directors and executive officers as a group. Each person has sole voting and investment power with respect to the shares of common stock, except as otherwise indicated. Beneficial ownership consists of a direct interest in the shares of common stock, except as otherwise indicated.
Name and Address of Beneficial Owner |
| Amount and Nature of Beneficial Ownership |
| Percentage of Class (1) |
| |
|
|
|
|
|
| |
Balakrishnan B.S. Muthu (2) Block B-5, 20/F., Great Smart Tower, 230 Wanchai Road, |
| 7,095,233 common shares Direct ownership |
|
| 0.9 | % |
Wanchai, Hong Kong |
|
|
|
|
|
|
|
| 500,000 common shares Indirect ownership through Banavees Resources |
|
| 0.06 | % |
|
|
|
|
|
|
|
Chen Ching Block B-5, 20/F., Great Smart Tower, 230 Wanchai Road, |
| 7,595,267 common shares Direct ownership |
|
| 0.9 | % |
Wanchai, Hong Kong |
|
|
|
|
|
|
|
| 4,746,341 common shares Indirect ownership through Goldlynn Invest Limited |
|
| 0.6 | % |
|
|
|
|
|
|
|
Directors and Executive Officers as a Group (1) |
| 19,936,841 common shares |
|
| 2.4 | % |
|
|
|
|
|
|
|
Taipan International Limited LEVEL 1, LOT 7, BLOCK F , SAGUKING COMMERCIAL BUILDING , JALAN PATAU-PATAU LABUAN F.T. 87000 MALAYSIA |
| 192,900,000 common shares Direct ownership |
|
| 23.8 | % |
|
|
|
|
|
|
|
Borneo Oil Berhad 1ST & 2ND FLOOR , VICTORIA POINT JALAN OKK AWANG BESAR W.P. LABUAN 87007, MALAYSIA |
| 186,666,667 common shares Direct ownership |
|
| 23.0 | % |
|
|
|
|
|
|
|
Internet.com Ltd SUITE 4703, CENTRAL PLAZA, 18 HARBOUR ROAD, WANCHAI, HONG KONG |
| 70,343,443 common shares Direct ownership |
|
| 8.7 | % |
|
|
|
|
|
|
|
The Wision Project Limited (formerly known as “Borneo Resources Limited”) LEVEL 1, LOT 7 , BLOCK F , SAGUKING COMMERCIAL BUILDING , JALAN PATAU-PATAU LABUAN F.T. 87000, MALAYSIA |
| 64,300,000 common shares Direct ownership |
|
| 7.9 | % |
_____________
(1) | Under Rule 13d-3, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of these acquisition rights. As a result, the percentage of outstanding shares of any person as shown in this table does not necessarily reflect the person’s actual ownership or voting power with respect to the number of shares of common stock actually outstanding on November 12, 2021. As of November 12, there were 810,742,109 shares of our company’s common stock issued and outstanding. |
|
|
(2) | Balakrishnan Muthu, our President, CFO and a director, and Chen Ching, our director have not filed their respective Forms 3. These shareholders expect to file the forms in the near future. |
Changes in Control
The Company, through its wholly-owned subsidiary GBL, entered into a Share Sale Agreement in relation to acquisition of the entire issued and paid-up share capital of Bio Resources Limited (“BRL”) with Taipan International Limited, a company incorporated under the laws of the Labuan, and The Wision Project Limited (formerly known as “Borneo Resources Limited”), a company incorporated under the laws of the Labuan, and other individuals. Under the terms of the Share Sale Agreement, the acquisition of the entire issued and paid-up share capital of BRL, through the Company’s wholly-owned subsidiary GBL, shall be satisfied by the issuance of 321,500,000 shares of the Company’s restricted common stock, par value $0.001 per share (the “Common Stock”) at a price per share of $0.03, and the issuance of promissory notes with a two-year term period for the amount of $20,355,000. This acquisition is currently in progress and the completion of the Share Sale Agreement, which is subject to all such acts necessary, including but not limited to auditing and due diligence exercise to ascertain the valuation of BRL, may result in a change in control of our company.
| 25 |
| Table of Contents |
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Messrs. Muthu, one of our three directors, is not an independent director as he also serves as our executive officer. Messrs Chen, one of our three directors, is an independent directors as he does not hold any position as an executive officer. Mr. Craven, one of our three directors, is not an independent director as he also serves as the executive officer of the Company’s wholly owned subsidiary Verde Renewables, Inc as of August 10, 2021.
Related party transaction |
| For the Year ended |
| |||||
|
| June 30, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
|
|
|
|
|
|
| ||
Other income - Sales of wash sand to: |
|
|
|
|
|
| ||
Jusra Mining Merapoh Sdn Bhd (#1) |
| $ | 26,559 |
|
| $ | - |
|
Professional services provided by: |
|
|
|
|
|
|
|
|
Federal Capital Investment Limited (#2) |
|
| 24,000 |
|
|
| - |
|
Related party balances |
|
| ||||||
|
| June 30, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
Deposits paid for acquisition of property, plant and equipment |
|
|
|
|
|
| ||
Borneo Energy Sdn Bhd (#3) |
| $ | 4,070,000 |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
Other receivable |
|
|
|
|
|
|
|
|
Jusra Mining Merapoh Sdn Bhd (#1) |
| $ | 26,338 |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
Advanced to related parties |
|
|
|
|
|
|
|
|
Advanced to Global Renewable Sdn Bhd (#4) |
| $ | 6,691 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advanced from related parties |
|
|
|
|
|
|
|
|
Advanced from BOG (#5) |
| $ | 579,783 |
|
| $ | 319,455 |
|
Advanced from Federal Mining Resources Limited (#6) |
| $ | - |
|
| $ | 173,465 |
|
Advanced from Federal Capital Investment Limited (#7) |
| $ | 6,000 |
|
| $ | 136,000 |
|
Advanced from Yorkshire Capital Limited (#8) |
| $ | - |
|
| $ | 27,000 |
|
(#1) Lamax Gold Limited (“LGL”) holding 15% equity interests of GBL was the major shareholder of Jusra Minging Merapoh Sdn Bhd , .
(#2) One of the directors of Federal Capital Investment Limited, Mr. Wu Ming Ding, has resigned as director of the Company effective February 20, 2016.
(#3) On May 10, 2021, the Company announced the Sale and Purchase Agreement to acquire the assets of biofraction plant and the right to use intellectual property license in Sabah, Malaysia from Borneo Energy Sdn Bhd, in consideration of issuance of 166,666,667 share of the Company’s stock at $0.03 per share, valued at $5,000,000. 135,666,667 shares and 31,000,000 shares were issued on May 10, 2021 and July 1, 2021, respectively. The completion of the S&P Agreement is subject to all such acts necessary, including but not limited to due diligence exercise to ascertain the valuation of the assets of the biofraction plant and the right to use the licensed intellectual property in Sabah, Malaysia. Borneo Oil Berhad (“BOB”) is ultimate holding company of Borneo Energy Sdn Bhd and holding 20.0% and 23.0% of the Company’s issued and outstanding common stock as of June 30, 2021 and November 10, 2021, respectively.
(#4) Balakrishnan B.S. Muthu is the common director of Global Renewable Sdn Bhd and the Company.
(#5) Borneo Oil and Gas Corporation SDN (“BOG”) is a wholly owned subsidiary of Borneo Oil Berhad (“BOB”) (holding 20.0% and 23.0% of the Company’s issued and outstanding common stock as of June 30, 2021 and November 10, 2021, respectively). BOG is one of the shareholders of the Company and did not own any shares of the Company since April 28, 2017. The advances are related to ordinary business transactions and bear no interest or collateral, repayable and renewable under normal business advancement terms.
(#6) One of the directors of Federal Mining Resources Limited, Mr. Chen Ching, has been appointed as director of the Company effective on February 20, 2016. Another director of Federal Mining Resources Limited, Mr. Wu Ming Ding, has resigned as director of the Company effective on February 20, 2016. The advances are related to ordinary business transactions and bear no interest or collateral, repayable and renewable under normal business advancement terms.
On June 9, 2021, the Company entered into a Settlement of Debt Agreement (the “Debt Settlement Agreement”) with Federal Mining Resources Limited, to convert a total of USD 173,465 of the Company’s accounts payable to the creditor as of December 31, 2020 into equity by means of a subscription for 5,782,167 new restricted shares of the Company’s common stock at a subscription price of $0.03 per share.
(#7) One of the directors of Federal Capital Investment Limited, Mr. Wu Ming Ding, has resigned as director of the Company effective on February 20, 2016. The advances are related to ordinary business transactions and bear no interest or collateral, repayable and renewable under normal business advancement terms.
On June 9, 2021, the Company entered into a Settlement of Debt Agreement (the “Debt Settlement Agreement”) with Federal Capital Investment Limited, to convert a total of USD 142,000 of the Company’s accounts payable to the creditor as of December 31, 2020 into equity by means of a subscription for 4,733,333 new restricted shares of the Company’s common stock at a subscription price of $0.03 per share.
(#8) One of the directors of Yorkshire Capital Limited, Mr. Lai Kui Shing, Andy, has resigned as director of CSB effective on February 17, 2016. The advances are related to ordinary business transactions and bear no interest or collateral, repayable and renewable under normal business advancement terms.
On June 9, 2021, the Company entered into a Settlement of Debt Agreement (the “Debt Settlement Agreement”) with its creditor Yorkshire Capital Limited, to convert a total of USD 27,000 of the Company’s accounts payable to the creditor as of December 31, 2020 into equity by means of a subscription for 900,000 new restricted shares of the Company’s common stock at a subscription price of $0.03 per share.
Item 14. Principal Accounting Fees and Services.
The aggregate fees billed for the most recently completed fiscal year ended June 30, 2021 and 2020 for professional services rendered by the principal accountant for the audit of our annual financial statements on Form 10-K, and review of the financial statements included in our quarterly reports on Form 10-Q and services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for these fiscal periods were as follows:
|
| Year Ended June 30, 2021 |
|
| Year Ended June 30, 2020 |
| ||
Audit Fees (1) |
| $ | 48,200 |
|
| $ | 48,800 |
|
Audit Related Fees (2) |
| $ | - |
|
| $ | - |
|
Tax Fees (3) |
| $ | 2,000 |
|
| $ | 2,000 |
|
All Other Fees (4) |
| $ | - |
|
| $ | - |
|
Total |
| $ | 50,200 |
|
| $ | 50,800 |
|
_____________
(1) | Audit fees consist of fees incurred for professional services rendered for the audit of our financial statements, for reviews of our interim financial statements included in our quarterly reports on Form 10-Q and for services that are normally provided in connection with statutory or regulatory filings or engagements. |
(2) | Audit-related fees consist of fees billed for professional services that are reasonably related to the performance of the audit or review of our financial statements, but are not reported under “Audit fees.” |
(3) | Tax fees consist of fees billed for professional services relating to tax compliance only. |
(4) | All other fees consist of fees billed for all other services. |
Our board of directors pre-approves all services provided by our independent auditors. All of the above services and fees were reviewed and approved by the board of directors either before or after the respective services were rendered.
Our board of directors has considered the nature and amount of fees billed by our independent auditors and believes that the provision of services for activities unrelated to the audit is compatible with maintaining our independent auditors’ independence.
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PART IV
Item 15. Exhibits, Financial Statement Schedules
Exhibits
In reviewing the agreements included as exhibits to this Form 10-K, please remember that they are included to provide you with information regarding their terms and are not intended to provide any other factual or disclosure information about the Company or the other parties to the agreements. The agreements may contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the parties to the applicable agreement and:
| • | should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate; |
| • | have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement; |
| • | may apply standards of materiality in a way that is different from what may be viewed as material to you or other investors; and |
| • | were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments. |
Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. Additional information about the Company may be found elsewhere in this Form 10-K and the Company’s other public filings, which are available without charge through the SEC’s website at http://www.sec.gov.
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The following exhibits are included as part of this report:
Exhibit No. |
| SEC Report Reference No. |
| Description |
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| Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer | ||
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| Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer | ||
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101.INS (4) |
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| XBRL Instance |
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101.SCH (4) |
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| XBRL Taxonomy Extension Schema |
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101.CAL (4) |
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| XBRL Taxonomy Extension Calculations |
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101.DEF (4) |
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| XBRL Taxonomy Extension Definitions |
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101.LAB (4) |
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| XBRL Taxonomy Extension Labels |
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101.PRE (4) |
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| XBRL Taxonomy Extension Presentation |
_____________
(1) | Filed with the Securities and Exchange Commission on December 2, 2010 as an exhibit, numbered as indicated above, to the Registrant’s registration statement on Form S-1 (file no. 333-17093 5), which exhibit is incorporated herein by reference. |
(2) | Filed with the Securities and Exchange Commission on July 19, 2011 as an exhibit, numbered as indicated above, to the Registrant’s Form 8-K (file no. 333-170935), which exhibit is incorporated herein by reference. |
(3) | Filed with the Securities and Exchange Commission on September 28, 2011 as an exhibit, numbered as indicated above, to the Registrant’s Form 10-K (file no. 333-170935), which exhibit is incorporated herein by reference. |
(4) | XBRL Information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections. |
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* | Filed herewith. |
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized.
| VERDE RESOURCES, INC. |
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| (Registrant) |
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Dated: November 12, 2021 | By: | /s/ Balakrishnan B S Muthu |
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| Balakrishnan B S Muthu |
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| President and Director |
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| (Principal Executive Officer) |
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Dated: November 12, 2021 | By: | /s/ Chen Ching |
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| Chen Ching |
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| Director |
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Dated: November 12, 2021 | By: | /s/ Carl M. Craven |
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| Carl M. Craven |
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| Director |
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Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Dated: November 12, 2021 | By: | /s/ Balakrishnan B S Muthu |
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| Balakrishnan B S Muthu |
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| President and Director |
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| (Principal Executive Officer) |
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Dated: November 12, 2021 | By: | /s/ Balakrishnan B S Muthu |
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| Balakrishnan B S Muthu |
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| Chief Financial Officer, Treasurer, General Manager and Director |
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| (Principal Financial Officer) |
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| 29 |
EXHIBIT 10.1
EXHIBIT 10.2
EXHIBIT 10.3
EXHIBIT 10.4
EXHIBIT 10.5
EXHIBIT 31.1
CERTIFICATIONS OF PRINCIPAL EXECUTIVE OFFICER
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Balakrishnan B S Muthu, certify that:
| 1. | I have reviewed this Annual Report on Form 10-K of Verde Resources, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared; |
|
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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| (c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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| (d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the period covered by this quarterly report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
| 5. | I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
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| (a) | All significant deficiencies and material weakness in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
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| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
| Date: November 12, 2021 |
| /s/ “Balakrishnan B S Muthu" |
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| Balakrishnan B S Muthu |
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| President |
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EXHIBIT 31.2
CERTIFICATIONS OF PRINCIPAL FINANCIAL OFFICER
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Balakrishnan B S Muthu, certify that:
| 1. | I have reviewed this Annual Report on Form 10-K of Verde Resources, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared; |
|
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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| (c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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| (d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the period covered by this quarterly report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
| 5. | I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
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| (a) | All significant deficiencies and material weakness in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
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| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
| Date: November 12, 2021 |
| /s/ "Balakrishnan B S Muthu" |
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| Balakrishnan B S Muthu |
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| Chief Financial Officer |
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EXHIBIT 32.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Verde Resources, Inc. (the "Company") on Form 10-K for the year ended June 30, 2021 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Balakrishnan B S Muthu, President of the Company, certify, pursuant to 18 U.S.C. Sect. 1350, as adopted pursuant to Sect. 906 of the Sarbanes-Oxley Act of 2002, that:
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| (1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
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| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
IN WITNESS WHEREOF, the undersigned has executed this certification as of the 12th day of November 2021
| /s/ Balakrishnan B S Muthu |
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| Balakrishnan B S Muthu, |
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| President |
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EXHIBIT 32.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Verde Resources, Inc. (the "Company") on Form 10-K for the year ended June 30, 2021 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Balakrishnan B S Muthu, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Sect. 1350, as adopted pursuant to Sect. 906 of the Sarbanes-Oxley Act of 2002, that:
|
| (1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
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| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
IN WITNESS WHEREOF, the undersigned has executed this certification as of the 12th day of November 2021
| /s/ Balakrishnan B S Muthu |
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| Balakrishnan B S Muthu, Chief Financial Officer |
|