Verde Resources, Inc 10-Q for FY2022 Q2
Verde Resources, Inc. (VRDR)
About this 10-Q
Verde Resources, Inc filed this 10-Q on February 22, 2022, covering the quarter ended December 31, 2021 (FY2022 Q2).
Headline figures
Quarter ended December 31, 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
- $843.25K
- compared with a net loss of $34.51K a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended December 31, 2021
or
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) |
| (I.R.S. Employer Identification No.) |
(Address of principal executive offices) |
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(Registrant’s telephone number, including area code) |
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 past 90 days.
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one).
Large accelerated filer | ☐ | Accelerated filer | ☐ |
☐ | Smaller reporting company | ||
(Do not check if a smaller reporting company) |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of February 22, 2022 there were
VERDE RESOURCES, INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2021
TABLE OF CONTENTS
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Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
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Unregistered Sales of Equity Securities and Use of Proceeds. |
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Item Regulation S-X, Rule 10-01(c) Interim Financial Statements, and, therefore, do not include all information and footnotes necessary for a complete presentation of financial position, results of operations, cash flows, and stockholders’ equity in conformity with generally accepted accounting principles. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature. Operating results for the six months ended December 31, 2021 are not necessarily indicative of the results that can be expected for the year ended June 30, 2022.
VERDE RESOURCES, INC.
INDEX TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD OF ENDED DECEMBER 31, 2021
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Condensed Consolidated Balance Sheets as at December 31, 2021 (Unaudited) and June 30, 2021 |
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Notes to Condensed Consolidated Financial Statements (Unaudited) |
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| Table of Contents |
Verde Resources, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In US$ except for number of shares)
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| As at December 31, |
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| As at June 30, |
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| 2021 |
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| 2021 |
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ASSETS |
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Current Assets |
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Cash and cash equivalents |
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Other receivables |
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Advanced to related party |
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Other deposit & prepayment |
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Total Current Assets |
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Long Term Assets |
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Property, plant and equipment |
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Right of use assets |
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Deposit paid for acquisition of subsidiaries |
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Deposit paid for acquisition of property, plant and equipment |
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Total Long Term Assets |
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TOTAL ASSETS |
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LIABILITIES AND STOCKHOLDERS’ DEFICIT |
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Current Liabilities |
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Accounts payable |
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Advanced from related parties |
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Hire purchase creditor |
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Accrual and other payables |
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Total Current Liabilities |
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Long term Liabilities |
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Hire purchase creditors |
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Promissory notes |
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Total Long Term Liabilities |
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TOTAL LIABILITIES |
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STOCKHOLDERS’ DEFICIT |
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Preferred stock, par value $ |
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Common stock, par value $ |
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Additional paid-in capital |
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Accumulated deficit |
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Accumulated other comprehensive income (loss) |
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Non-controlled interest |
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Total Stockholders’ Deficit |
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TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
| F-1 |
| Table of Contents |
Verde Resources, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
(In US$ except for number of shares)
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| Three Months Ended December 31, |
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REVENUES |
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Revenue |
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Cost of revenue |
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Gross profit |
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OPERATING EXPENSES: |
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Selling, general & administrative expenses |
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LOSS FROM OPERATIONS |
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INTEREST EXPENSES |
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| $ |
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OTHER INCOME(EXPENSES) |
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NET LOSS BEFORE INCOME TAX |
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Provision of Income Tax |
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NET LOSS |
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Non-controlled interest |
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Net loss contributed to the group |
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Other comprehensive income(loss) |
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Foreign currency translation income(loss) |
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Comprehensive income(loss) |
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| $ | ( | ) |
| $ | ( | ) |
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Less: Other comprehensive (gain) loss attributable to non-controlling interest |
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Other comprehensive income (loss) attributable to Verde Resources, Inc. |
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| $ | ( | ) |
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Basic and Diluted Profit (Loss) per Common Share |
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Weighted Average Number of Common Shares Outstanding |
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*Less than $0.01 per share
The accompanying notes are an integral part of these condensed consolidated financial statements.
| F-2 |
| Table of Contents |
Verde Resources, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In US$ except for number of shares)
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| December 31, 2021 |
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| December 31, 2020 |
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Cash flows from operating activities: |
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Net profit (loss) |
| $ | ( | ) |
| $ | ( | ) |
Adjustments to reconcile loss to net cash used in operation |
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Amortization |
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Depreciation |
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Interest expenses |
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Stock-based compensation |
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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 deposits and prepayment |
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Increase (decrease) in: |
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Accounts payable |
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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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Advanced to related party |
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Payments of deposit paid for property, plant and equipment |
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Purchase 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 to hire purchase creditor |
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Net cash used in financing activities |
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Net increase (decrease) in cash and cash equivalent |
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Effect of exchange rate changes on cash |
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Net increase (decrease) 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/ period |
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Supplementary cash flow information |
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Income taxes paid |
| $ |
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Interest paid |
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Supplementary non-cash information |
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Deposit paid for acquisition of property, plant and equipment (note 7) |
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Purchase of property, plant and equipment under finance lease |
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Increase in finance lease liabilities |
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The accompanying notes are an integral part of these condensed financial statements.
| F-3 |
| Table of Contents |
Verde Resources, Inc.
Statement of Changes in Stockholders’ Equity (Deficit)
Six months ended December 31, 2021 and 2020 (Unaudited)
(In US$ except for number of shares)
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| Additional Paid-In |
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| Accumulated |
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| Amount |
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| Deficit |
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| Interest |
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Balance - Ju ne 30, 2020 |
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Net loss for the period |
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Foreign currency translation gain |
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Balance - December 31, 2020 |
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Balance - June 30, 2021 |
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Shares issued for acquisition |
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Stock-based compensation |
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Net loss for the period |
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Foreign currency translation loss |
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Balance – December 31, 2021 |
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| $ |
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| $ |
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F-4 |
| Table of Contents |
Verde Resources, Inc.
Statement of Changes in Stockholders’ Equity (Deficit)
Three months ended December 31, 2021 and 2020
(Unaudited)
(In US$ except for number of shares)
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| Common Shares |
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| Additional Paid-In |
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| Accumulated |
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| Accumulated Other Comprehensive |
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| Non-Controlling |
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| Shares |
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| Amount |
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| Capital |
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| Deficit |
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| Income (Loss) |
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| Interest |
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| Total |
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Balance - September 30, 2020 |
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| $ |
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| $ |
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| $ | ( | ) |
| $ |
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| $ | ( | ) |
| $ | ( | ) | ||||
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Net loss for the period |
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Foreign currency translation loss |
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Balance - December 31, 2020 |
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Balance - September 30, 2021 |
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Shares issued for share-based compensation |
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Net loss for the period |
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Foreign currency translation loss |
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Balance – December 31, 2021 |
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F-5 |
| Table of Contents |
Verde Resources, Inc.
Notes to Condensed Consolidated Financial Statements
For the three and six months ended December 31, 2020 and 2021
(Unaudited)
(In US$ except for number of shares)
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 was setup by the Board of Directors 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
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 15% non-controlling interest of Champmark SDN BHD (“CSB”) after the acquisition. This transaction was accounted for as a recapitalization effected by a share exchange, wherein GBL with its
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
On April 1, 2014, GBL purchased
Effective February 2, 2018, the Company’s Articles of Incorporation were amended to increase the authorized shares of the Company from
Effective February 20, 2021, 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, 2021 and February 22, 2021 respectively.
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.
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 propertylicense in Sabah, Malaysia from Borneo Energy SdnBhd, in consideration of issuance of
| F-6 |
| Table of Contents |
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
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 SdnBhd (“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 HermalisBintiMohmad 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 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.
Verde Renewables, Inc. (“VRI”) was incorporated on August 10, 2021, in the State of Missouri, U.S.A. The major operation of VRI will include management of a processing and packaging facility to process organic bio-waste into sources of renewable commodities using its biofraction technology, and distribution of biochar, wood vinegar and bio-gas. VRI is wholly owned by the Company.
Verde Estates LLC (“VEL”) was incorporated on August 10, 2021, in the State of Missouri, U.S.A. VEL is formed for the purpose of holding property in Missouri. VEL is wholly owned by VRI.
Verde Life Inc. (“VLI”) was incorporated on November 15, 2021, in the State of Oregon, U.S.A. The major operation of VLI will include conducting business in the distribution of THC-free cannabinoid (CBD) products. VLI is wholly owned by the Company.
On January 17, 2022, the Company formed a wholly owned subsidiary, Verde Resources (Malaysia) Sdn Bhd, a company incorporated under the laws of the Malaysia, for the purpose of conducting consultation services and distribution of renewable agricultural commodities.
On January 20, 2022, the Company has reached a mutual agreement to enter into a Supplement to Promissory Note with each of the 17 lenders (“Lenders”) of the promissory notes that were issued on May 12, 2021, to convert the total principal loan amount of $
| F-7 |
| Table of Contents |
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Condensed Consolidated Financial Statements
Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. The results of operations for the periods ended December 31, 2021 are not necessarily indicative of the operating results for the full years.
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 condensed 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 condensed consolidated financial statements include the financial statements of Verde Resources, Inc., its wholly owned subsidiary Gold Billion Global Limited (“GBL”) and the 85% of the deemed subsidiary variable interest of Champmark SDN BHD (“CSB”). All inter-company balances and transactions between the Company and its subsidiary and variable interest entity (VIE) 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
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 US Dollars One Hundred Nine Thousand Eight Hundred One And Cents Seventy-Two Only (US$ 109,801.72), 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.
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
| F-8 |
| 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.
The COVID-19 pandemic has created and may continue to create significant uncertainty in macroeconomic conditions, which may cause further business slowdowns or shutdowns, depress demand for the Company’s business, and adversely impact its results of operations. The Company expects uncertainties around its key accounting estimates to continue to evolve depending on the duration and degree of impact associated with the COVID-19 pandemic. Its estimates may change as new events occur and additional information emerges, and such changes are recognized or disclosed in its consolidated financial statements.
Identified below are the accounting policies that reflect the Company’s most significant estimates and judgments, and those that the Company believes are the most critical to fully understanding and evaluating its unaudited condensed consolidated financial statements.
Cash and Cash Equivalents
Cash and cash equivalents include cash in banks, money market funds, and certificates of term deposits with maturities of less than three months, 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, plant and equipment
Property, plant 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:
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| Useful Lives |
Long Term Assets |
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Machinery |
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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 December 31, 2021 and June 30, 2021, the Company has no allowance for doubtful accounts, as per management’s judgment based on their best knowledge. As of December 31, 2021 and June 30, 2021, 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. As of December 31, 2021 and June 30, 2021 there was no allowance for doubtful accounts.
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.
| F-9 |
| Table of Contents |
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.
Leases
The Company determines if an arrangement is a lease or contains a lease at inception. Operating lease liabilities are recognized based on the present value of the remaining lease payments, discounted using the discount rate for the lease at the commencement date. As the rate implicit in the lease is not readily determinable for the operating lease, the Company generally uses an incremental borrowing rate based on information available at the commencement date to determine the present value of future lease payments. Operating lease right-of-use (“ROU assets”) assets represent the Company’s right to control the use of an identified asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets are generally recognized based on the amount of the initial measurement of the lease liability. Lease expense is recognized on a straight-line basis over the lease term.
ROU assets are reviewed for impairment when indicators of impairment are present. ROU assets from operating and finance leases are subject to the impairment guidance in ASC 360, Property, Plant, and Equipment, as ROU assets are long-lived nonfinancial assets.
ROU assets are tested for impairment individually or as part of an asset group if the cash flows related to the ROU asset are not independent from the cash flows of other assets and liabilities. An asset group is the unit of accounting for long-lived assets to be held and used, which represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities.
The Company recognized no impairment of ROU assets as of December 31, 2021 and June 30, 2021.
The operating lease is included in operating lease right-of-use assets, operating lease liabilities-current and operating lease liabilities-non-current in the
consolidated balance sheets at December 31, 2021 and June 30, 2021.
Leases that transfer substantially all the rewards and risks of ownership to the lessee, other than legal title, are accounted for as finance leases. Substantially all of the risks or benefits of ownership are deemed to have been transferred if any one of the four criteria is met: (i) transfer of ownership to the lessee at the end of the lease term, (ii) the lease containing a bargain purchase option, (iii) the lease term exceeding 75% of the estimated economic life of the leased asset, (iv) the present value of the minimum lease payments exceeding 90% of the fair value. At the inception of a finance lease, we as the lessee records an asset and an obligation at an amount equal to the present value of the minimum lease payments. The leased asset is amortized over the shorter of the lease term or its estimated useful life if title does not transfer to us, while the leased asset is depreciated in accordance with our depreciation policy if the title is to eventually transfer to us. The periodic rent payments made during the lease term are allocated between a reduction in the obligation and interest element using the effective interest method in accordance with the provisions of ASC 842.
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.
Translation of amounts from RM into U.S. dollars has been made at the following exchange rates:
Balance sheet items, except for equity accounts |
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June 30, 2021 |
| RM |
September 30, 2021 |
| RM |
December 31, 2021 |
| RM |
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Statement of operations and cash flow items |
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For the six months ended December 31, 2020 |
| RM |
For the six months ended December 31, 2021 |
| RM |
| F-10 |
| Table of Contents |
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
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.
| F-11 |
| Table of Contents |
Revenue Recognition
The Company recognizes revenues when its customers obtain control of promised goods or services, in an amount that reflects the consideration which it expects to receive in exchange for those goods. The Company recognizes revenues following the five-step model prescribed under ASU No. 2014-09: (i) identifies contract(s) with a customer; (ii) identifies the performance obligations in the contract; (iii) determines the transaction price; (iv) allocates the transaction price to the performance obligations in the contract; and (v) recognizes revenues when (or as) it satisfies the performance obligation.
Revenues are recognized when control of the promised goods or services is transferred to the customers, which may occur at a point in time or over time depending on the terms and conditions of the agreement, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services.
Gold mining
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.
Product sales
Revenues from product sales are recognized when the customer obtains control of the Company’s product, which occurs at a point in time, typically upon delivery to the customer. The Company expenses incremental costs of obtaining a contract as and when incurred if the expected amortization period of the asset that it would have recognized is one year or less or the amount is immaterial.
Revenues from product sales are recorded net of reserves established for applicable discounts and allowances that are offered within contracts with the Company’s customers.
Product revenue reserves, which are classified as a reduction in product revenues, are generally characterized in the following categories: discounts, returns and rebates. These reserves are based on estimates of the amounts earned or to be claimed on the related sales and are classified as reductions of accounts receivable as the amount is payable to the Company’s customer.
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 December 31, 2021 and June 30, 2021, the Company did not have any significant unrecognized uncertain tax positions.
Recent Accounting Pronouncements
Recently Adopted Accounting Standards
In December 2019, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”). ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions and enhances and simplifies various aspects of the income tax accounting guidance in ASC 740. ASU 2019-12 was effective July 1, 2021. The adoption of ASU 2019-12 did not have any impact on the Company’s consolidated financial statement presentation or disclosures.
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”). ASU 2020-06 simplifies the accounting for convertible debt by eliminating the beneficial conversion and cash conversion accounting models. Upon adoption of ASU 2020-06, convertible debt proceeds, unless issued with a substantial premium or an embedded conversion feature that is not clearly and closely related to the host contract, will no longer be allocated between debt and equity components. This modification will reduce the issue discount and result in less non-cash interest expense in financial statements. ASU 2020-06 also updates the earnings per share calculation and requires entities to assume share settlement when the convertible debt can be settled in cash or shares. For contracts in an entity’s own equity, the type of contracts primarily affected by ASU 2020-06 are freestanding and embedded features that are accounted for as derivatives under the current guidance due to a failure to meet the settlement assessment by removing the requirements to (i) consider whether the contract would be settled in registered shares, (ii) consider whether collateral is required to be posted, and (iii) assess shareholder rights. ASU 2020-06 is effective for fiscal years beginning after December 15, 2023. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, and only if adopted as of the beginning of such fiscal year. The Company adopted ASU 2020-06 effective July 1, 2021. The adoption of ASU 2020-06 did not have any impact on the Company’s consolidated financial statement presentation or disclosures.
| F-12 |
| Table of Contents |
Recently Issued But Not Yet Adopted Accounting Pronouncements
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326) (“ASU 2016-13”), 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. ASU 2016-13 replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost. ASU 2016-13 is to be adopted on a modified retrospective basis. As a smaller reporting company, ASU 2016-13 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 adoption of ASU 2016-13 will have on its consolidated financial statement presentations and disclosures.
In January 2017, the FASB issued ASU No. 2017-04, Intangibles – Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment (“ASU 2017-04”). ASU 2017-04 eliminates Step 2 of the two-step goodwill impairment test, under which a goodwill impairment loss was measured by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. ASU 2017-04 requires only a one-step quantitative impairment test, whereby a goodwill impairment loss is measured as the excess of a reporting unit’s carrying amount over its fair value (not to exceed the total goodwill allocated to that reporting unit). 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 adoption of ASU 2017-04 will have on its consolidated financial statement presentation or disclosures.
In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt — Modifications and Extinguishments (Subtopic 470-50), Compensation —Stock Compensation (Topic 718), and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (“ASU 2021-04”). ASU 2021-04 provides guidance as to how an issuer should account for a modification of the terms or conditions or an exchange of a freestanding equity-classified written call option (i.e., a warrant) that remains classified after modification or exchange as an exchange of the original instrument for a new instrument. An issuer should measure the effect of a modification or exchange as the difference between the fair value of the modified or exchanged warrant and the fair value of that warrant immediately before modification or exchange and then apply a recognition model that comprises four categories of transactions and the corresponding accounting treatment for each category (equity issuance, debt origination, debt modification, and modifications unrelated to equity issuance and debt origination or modification). ASU 2021-04 is effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. An entity should apply the guidance provided in ASU 2021-04 prospectively to modifications or exchanges occurring on or after the effective date. Early adoption is permitted for all entities, including adoption in an interim period. If an entity elects to early adopt ASU 2021-04 in an interim period, the guidance should be applied as of the beginning of the fiscal year that includes that interim period. The adoption of ASU 2021-04 is not expected to have any impact on the Company’s consolidated financial statement presentation or disclosures.
The Company’s management does not believe that any other recently issued, but not yet effective, authoritative guidance, if currently adopted, would have a material impact on the Company’s financial statement presentation or disclosures.
| F-13 |
| Table of Contents |
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. At December 31, 2021 and June 30, 2021 cash and cash equivalents consisted of bank deposits in Malaysia bank and petty cash on hands.
NOTE 4 –OTHER RECEIVABLE, AND ADVANCED TO RELATED PARTIES –
Other receivables
Other receivables at December 31, 2021 and June 30, 2021 consist of the following items:
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| December 31 |
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| June 30 |
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| 2021 |
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| 2021 |
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Other receivable (#1) |
| $ |
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| $ |
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Less: allowance for doubtful debts |
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| $ |
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| $ |
| ||
(#1) Other receivables were amounts due from Jusra Mining Merapoh Sdn Bhd, whose major shareholder Lamax Gold Limited holds
Advanced to related party
Advanced from related party at December 31, 2021 and June 30, 2021 consist of the following items:
|
| December 31, 2021 |
|
| June 30, 2021 |
| ||
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.
| F-14 |
| Table of Contents |
NOTE 5 - OPERATING LEASE
As of December 31, 2021, the Company leases minings space under a non-cancelable operating lease, with terms of
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.
|
| Ended December 31, |
| |
Balance as at the beginning of period |
| $ |
| |
Addition |
|
|
| |
Amortization charge for the year |
|
| ( | ) |
Foreign exchange adjustment |
|
| ( | ) |
Balance as of December 31, 2021 |
| $ |
| |
Amortization charge of rights of use lease assets was $15,585 and $nil for the six ended December 31, 2021 and 2020, respectively. Amortization charge of rights of use lease assets was $7,809 and $nil for the three month ended December 31, 2021 and 2020, respectively.
Lease term and discount rate |
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|
| December 31, 2021 |
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Weighted-average remaining lease term - years |
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| F-15 |
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NOTE 6 – OTHER DEPOSIT & PREPAYMENT
Other deposit & prepayment as of December 31, 2021 and June 30, 2021 consisted of the following:
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| December 31, |
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| June 30, |
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| 2021 |
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| 2021 |
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Prepayments to suppliers |
| $ |
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| $ |
| ||
Prepaid operating expenses |
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| $ |
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| $ |
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NOTE 7 – DEPOSIT PAID FOR ACQUISITION OF SUBSIDIARIES AND PROPERTY, PLANT AND EQUIPMENT
At December 31, 2021 and June 30, 2021 deposit and prepayment consists of the following:
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| December 31, |
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| June 30, |
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| 2021 |
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| 2021 |
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Deposits paid for acquisition of subsidiaries |
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- Bio Resources Limited (#1) |
| $ |
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| $ |
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- Champmark Sdn Bhd (#2) |
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| $ |
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| $ |
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| $ |
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Deposits paid for acquisition of property, plant and equipment |
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- Intellectual property license (#3) |
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- Factory site (#4) |
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- Security deposit of property (#5) |
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| $ |
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| $ |
| ||
___________
(#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
(#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 $
(#5) On February 10, 2022, the Company, through VEL, a limited liability company incorporated in the State of Missouri, which is a wholly-owned subsidiary of the Company’s wholly-owned subsidiary, Verde Renewables, Inc., entered into a Commercial Lease Agreement and Option to Purchase (the “Lease Agreement”) to rent a 24-acre property in La Belle from Jon Neal Simmons and Betty Jo Simmon (the “Landlord”) in order to kickstart carbon farming with biochar in Missouri.
Under the Lease Agreement, the term of the lease will be for a period of two (2) years and the Company will have the right to renew the lease with a total of three renewal periods with each term being two years. The base rent is ten thousand dollars ($
| F-16 |
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NOTE 8 – ACCOUNTS PAYABLE AND ADVANCED FROM RELATED PARITES
Accounts Payable
Accounts payable at December 31, 2021 and June 30, 2021 consist of the following items:
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| December 31, 2021 |
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| June 30, 2021 |
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Other accounts payable |
| $ |
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| $ |
| ||
Advanced from related parties
Advanced from related parties at December 31, 2021 and June 30, 2021, consist of the following items:
|
| December 31, 2021 |
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| June 30, 2021 |
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Advanced from BOG (#1) |
| $ |
|
| $ |
| ||
Advanced from Federal Capital Investment Limited (#2) |
| $ |
|
| $ |
| ||
Amounts due from directors (#3) |
| $ |
|
| $ |
| ||
|
| $ |
|
| $ |
| ||
______________
(#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 Capital Investment Limited, Mr. Wu Ming Ding, has resigned as director of the Company effective on February 20, 2021. 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
(#3) Carl Craven, a director of the Company, advanced $
| F-17 |
| Table of Contents |
NOTE 9 – PROPERTY, PLANT AND EQUIPMENT
Property and equipment at December 31, 2021 and June 30, 2021 are summarized as follows:
|
| December 31, 2021 |
|
| June 30, 2021 |
| ||
|
| (Unaudited) |
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Land and Building |
| $ |
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| $ |
| ||
Plant and Machinery |
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Office equipment |
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Project equipment |
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Computer |
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Motor Vehicle |
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Accumulated depreciation |
|
| ( | ) |
|
| ( | ) |
|
| $ |
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| $ |
| ||
The depreciation expenses charged for the six months ended December 31, 2021 and 2020 was $
Included in property, plant and equipment, a motor vehicle was under finance leases with a carrying amount of $
NOTE 10 – FINANCE LEASE LIABILITIES
The loans from a hire purchase creditor include long term and short term and are summarized as follow:
|
| December 31, 2021 |
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| June 30, 2021 |
| ||
Current finance lease liabilities |
| $ |
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| $ |
| ||
Non-current finance lease liabilities |
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Total |
| $ |
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| $ |
| ||
A hire purchase installment loan with total amount $
|
| Interest Rate |
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| Monthly Due |
|
| December 31, 2021 |
|
| June 30, 2021 |
| ||||
Finance lease liabilities in the hire purchase loan |
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| % |
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| ||||
Finance lease liabilities to a hire purchase creditor |
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| $ |
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| $ |
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The scheduled maturities of the finance lease liabilities installment loans are as follows:
December 31, |
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2022 |
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2023 |
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2024 |
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2025 |
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Thereafter |
|
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Total minimum finance lease liabilities installment payment |
| $ |
| |
Less: Imputed interest |
|
|
| |
Present value of net minimum lease payments (#) |
| $ |
| |
(#) Minimum payment reflected in the balance sheet as current and noncurrent obligations under finance lease liabilities as at December 31, 2021.
| F-18 |
| Table of Contents |
NOTE 11 - 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:
|
| December 31 |
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| June 30 |
| ||
|
| 2021 |
|
| 2021 |
| ||
Balance at the beginning of period |
| $ |
|
| $ |
| ||
Promissory notes issued to unrelated third parties at fair value |
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Interest expense |
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Balance at the end of period |
| $ |
|
| $ |
| ||
The Company recorded $
| F-19 |
| Table of Contents |
NOTE 12 – 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:
|
| Three months period ended |
| |||||
|
| December 31, 2021 |
|
| December 31, 2020 |
| ||
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Loss before income taxes |
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Non-deductible items/non-taxable income |
|
| ( | ) |
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| |
Tax effect of tax exempt entity |
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| ( | ) | |
Share based payments |
|
| ( | ) |
|
| - |
|
Changes in valuation allowances |
|
| ( | ) |
|
| ( | ) |
Effect of different tax rate of subsidiaries operating in other jurisdictions |
| ( | ) |
|
| |||
Effective tax rate |
|
| - |
|
|
| - |
|
|
| Six months period ended |
| |||||
|
| December 31, 2021 |
|
| December 31, 2020 |
| ||
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Loss before income taxes |
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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:
|
| December 31, 2021 |
|
| June 30, 2021 |
| ||
Deferred tax assets: |
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Tax attribute carryforwards |
| $ |
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| $ |
| ||
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 period December 31, 2021 and June 30, 2021 or balance sheet as of December 31, 2021 and June 30, 2021. The Company did not have uncertainty tax positions or events leading to uncertainty tax position within the next 12 months.
| F-20 |
| Table of Contents |
NOTE 13 – COMMITMENTS AND CONTINGENCIES
As of December 31, 2021, the Group had the following contracted capital commitments:
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| December 31, 2021 |
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| June 30, 2021 |
| ||
|
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For purchase of property, plant and equipment |
| $ |
|
| $ |
| ||
For acquisition of subsidiary |
|
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Total |
| $ |
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| $ |
| ||
NOTE 14 – 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 income (loss) by the weighted average number of shares of common stock outstanding during the period.
The following table sets forth the computation of basic and diluted earnings per share:
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| Three Months Ended December 31, |
| |||||
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| 2021 |
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| 2020 |
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| (Unaudited) |
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| (Unaudited) |
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Net income(loss) applicable to common shares |
| $ | ( | ) |
| $ | ( | ) |
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Weighted average common shares outstanding (Basic) |
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Options |
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| - |
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| - |
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Warrants |
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| - |
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| - |
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Weighted average common shares outstanding (Diluted) |
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Net income(loss) per share (Basic and Diluted) |
| $ | ( | )* |
| $ | ( | )* |
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| Six Months Ended December 31, |
| |||||
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| 2021 |
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| 2020 |
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| (Unaudited) |
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| (Unaudited) |
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Net income(loss) applicable to common shares |
| $ | ( | ) |
| $ | ( | ) |
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Weighted average common shares outstanding (Basic) |
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Options |
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| - |
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| - |
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Warrants |
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| - |
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| - |
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Weighted average common shares outstanding (Diluted) |
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Net income(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.
| F-21 |
| Table of Contents |
NOTE 15 - 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
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.
| F-22 |
| Table of Contents |
NOTE 16 - RELATED PARTY TRANSACTIONS
Related party transaction |
| Six months ended |
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| December 31, |
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| 2021 |
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| 2020 |
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Other income - Sales of wash sand to: |
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Jusra Mining Merapoh Sdn Bhd (#1) |
| $ |
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| $ |
| ||
Professional services provided by: |
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Federal Capital Investment Limited (#2) |
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Related party transaction |
| Three months ended |
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| December 31, |
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| 2021 |
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| 2020 |
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Other income - Sales of wash sand to: |
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Jusra Mining Merapoh Sdn Bhd (#1) |
| $ |
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| $ |
| ||
Professional services provided by: |
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Federal Capital Investment Limited (#2) |
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Related party balances |
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| December 31, |
| |||||
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| 2021 |
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| 2020 |
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Deposits paid for acquisition of property, plant and equipment |
|
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| ||
- Intellectual property license of Borneo Energy Sdn Bhd (#3) (note 7) |
| $ |
|
| $ |
| ||
(#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, 2021.
(#3) Borneo Oil Berhad (“BOB”) is ultimate holding company of Borneo Energy Sdn Bhd and holding 23.0% and 23.0% of the Company’s issued and outstanding common stock as of December 31, 2021 and February 14, 2022, respectively.
NOTE 17 - GOING CONCERN AND LIQUIDITY CONSIDERATIONS
The accompanying condescend 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 December 31, 2021, the Company had suffered recurring net losses and records an accumulated deficit of $
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.
| F-23 |
| Table of Contents |
NOTE 18 – SEGMENT INFORMATION
The Company’s segments are business units that offer different products and services and are reviewed separately by the chief operating decision maker (the “CODM”), or the decision-making group, in deciding how to allocate resources and in assessing performance. The Company’s CODM is the Company’s Chief Executive Officer.
For the three months ended December 31, 2021:
|
| Gold mineral mining |
|
| Distribution of THC-free cannabinoid (CBD) products |
|
| Production and distribution of renewable commodities |
|
| Holding property |
|
| Corporate unallocated |
|
| Consolidated |
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| ||||||
Revenue |
| $ |
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| $ |
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| $ |
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| $ |
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| $ |
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| $ |
| ||||||
Cost of revenue |
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| ||||||
Gross profit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Selling, general & administrative expenses |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
Loss from operations |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
Interest expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) | ||||
Other income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Loss before income tax |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
Income tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net loss |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
For the six months ended December 31, 2021:
|
| Gold mineral mining |
|
| Distribution of THC-free cannabinoid (CBD) products |
|
| Production and distribution of renewable commodities |
|
| Holding property |
|
| Corporate unallocated |
|
| Consolidated |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Revenue |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||||
Cost of revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Gross profit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Selling, general & administrative expenses |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
Loss from operations |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
Interest expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) | ||||
Other income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Loss before income tax |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
Income tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net loss |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2021 |
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
As of June 30, 2021 |
| $ | |
|
|
| |
|
| $ | |
|
| $ | |
|
|
| |
|
|
| |
|
The Company conducts its Gold Mineral Mining operation through CSB. The expenses incurred were consisting principally of management services and its major operation is located in Malaysia.
The Company conducts business in the distribution of THC-free cannabinoid (CBD) products through Verde Life Inc. which incorporated on the State of Oregon, U.S.A. Its major operation is located in U.S.A.
The Company conducts business in production and distribution of renewable commodities through Global Renewables Sdn. Bhd. which incorporated on Malaysia. Its major operation is located in Malaysia.
The Company formed VEL on August 10, 2021, for the purpose of holding property in Missouri. Its major operation is located in U.S.A.
| F-24 |
| Table of Contents |
NOTE 19 - SUBSEQUENT EVENTS
On January 17, 2022, the Company formed a wholly owned subsidiary, Verde Resources (Malaysia) Sdn Bhd, a company incorporated under the laws of the Malaysia, for the purpose of conducting consultation services and distribution of renewable agricultural commodities.
Under the terms of the Share Sale Agreement on May 12, 2021 for the acquisition of the entire issued and paid-up share capital of Bio Resources Limited (“BRL”), the acquisition shall be satisfied by the issuance of
On January 20, 2022, the Company has reached a mutual agreement with the Lenders of the Notes to enter into a Supplement to Promissory Note, with each Lender, to convert the total principal loan amount of $
On February 10, 2022, the Company, through Verde Estates LLC, a limited liability company incorporated in the State of Missouri, which is a wholly-owned subsidiary of the Company’s wholly-owned subsidiary, Verde Renewables, Inc., entered into a Commercial Lease Agreement and Option to Purchase (the “Lease Agreement”) to rent a 24-acre property in La Belle from Jon Neal Simmons and Betty Jo Simmon (the “Landlord”) in order to kickstart carbon farming with biochar in Missouri. Under the Lease Agreement, the term of the lease will be for a period of two (2) years and the Company will have the right to renew the lease with a total of three renewal periods with each term being two years. The base rent is ten thousand dollars ($
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 significant material subsequent items which are required to be disclosed.
| F-25 |
| Table of Contents |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
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 herein as well as in the “Description of Business – Risk Factors” section in our Annual Report on Form 10-K, as filed on November 12, 2021. You should carefully review the risks described in our Annual Report 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-Q to the “Company,” “Verde Resources,” “we,” “us,” or “our” are to Verde Resources, Inc.
Business Overview
The Company is a Nevada corporation that 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 GBL.
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 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.
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.
| 4 |
| Table of Contents |
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 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. 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.
Verde Renewables, Inc. (“VRI”) was incorporated on August 10, 2021, in the State of Missouri, U.S.A. The major operation of VRI will include management of a processing and packaging facility to process organic bio-waste into sources of renewable commodities using its biofraction technology, and distribution of biochar, wood vinegar and bio-gas. VRI is wholly owned by the Company.
Verde Estates LLC (“VEL”) was incorporated on August 10, 2021, in the State of Missouri, U.S.A. VEL is formed for the purpose of holding property in Missouri. VEL is wholly owned by VRI.
Verde Life Inc. (“VLI”) was incorporated on November 15, 2021, in the State of Oregon, U.S.A. The major operation of VLI will include conducting business in the distribution of THC-free cannabinoid (CBD) products. VLI is wholly owned by the Company.
On January 17, 2022, the Company formed a wholly owned subsidiary, Verde Resources (Malaysia) Sdn Bhd, a company incorporated under the laws of the Malaysia, for the purpose of conducting consultation services and distribution of renewable agricultural commodities.
On January 20, 2022, the Company has reached a mutual agreement to enter into a Supplement to Promissory Note with each of the 17 lenders (“Lenders”) of the promissory notes that were issued on May 12, 2021, to convert the total principal loan amount of $20,355,000 into shares of the Company’s restricted common stock priced at $0.0611 per share, which represents the last ninety (90) days’ volume weighted average price (VWAP) as of the market closing of January 19, 2022. The Company and the Lenders further agreed that the actual date for the allotment and issue of new shares of the Company’s restricted common stock shall be confirmed in a subsequent written agreement.
5 |
| Table of Contents |
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”) upon 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, 2021, 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, 2021, 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.
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 branch of Verde Renewables, Inc.
On November 15, 2021, the Company formed a wholly owned subsidiary, Verde Life Inc., an Oregon corporation for the purpose of conducting business in the distribution of THC-free cannabinoid products.
On January 17, 2022, the Company formed a wholly owned subsidiary, Verde Resources (Malaysia) Sdn Bhd, a company incorporated under the laws of the Malaysia, for the purpose of conducting consultation services and distribution of renewable agricultural commodities.
| 6 |
| Table of Contents |
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: | |
|
|
|
|
|
| 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) | to act as principal of CSB; | |
| iv) | an obligation to provide financial support to CSB; | |
| v) | an option to purchase an equity interest in CSB; | |
| vi) | an entitlement to future benefits and residual value of CSB; | |
| vii) | a 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 Three Hundred Nine Thousand Three Hundred Thirty One 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 controls CSB as the primary beneficiary and the operating results of the VIE was included in the condensed consolidated financial statements.
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 has negotiated 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 and is currently awaiting clearance approval from Malaysia Forest Department. For the period between January 2021 to December 2021, 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.
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 mine site and is about 400 kilometers away from Kuala Lumpur.
Current State of Exploration:
As of the date of this report, the Merapoh Gold Mine property is without significant 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 period between January 1, 2021 and December 31, 2021.
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 that there will be production in the coming future. Management continues to search for mining opportunities to generate revenues for the Company in the future. Management continues to search for mining opportunities to generate revenues in the future.
| 7 |
| Table of Contents |
Results of Operations
For the three months ended December 31, 2021 and 2020:
We have generated $0 and $0 revenues for the three months ended December 31, 2021 and 2020, and have recorded a gross profit of $0 and $0 for the three months ended December 31, 2021 and 2020. We have incurred $359,105 and $34,512 in operating expenses through December 31, 2021 and 2020. We have interest expense of $484,168 and $0 for the three months ended December 31, 2021 and 2020. We have other income $25 and $0 for the three months ended December 31, 2021 and 2020.
The following table provides selected financial data about our company for the three months ended December 31, 2021 and December 31, 2020.
|
| 12/31/2021 |
|
| 12/31/2020 |
|
| Change |
| |||
Statement of Operation |
| Amount |
|
| Amount |
|
| % |
| |||
|
| (Unaudited) |
|
| (Unaudited) |
|
|
|
| |||
Revenue |
| $ | - |
|
| $ | - |
|
|
| - | % |
Cost of revenue |
| $ | - |
|
| $ | - |
|
|
| - | % |
Gross profit |
| $ | - |
|
| $ | - |
|
|
| - | % |
Operating Expenses |
| $ | 359,105 |
|
| $ | 34,512 |
|
|
| 941 | % |
Interest expense |
| $ | 484,168 |
|
| $ | - |
|
| N/A | % | |
Other Income, net |
| $ | 25 |
|
| $ | - |
|
| N/A | % | |
The revenue is normally derived from the sales of gold mineral to customers in Malaysia. There was no revenue for the three months ended December 31, 2021 and 2020 because of the depletion of mineral reserves in the mine. Operating expenses comprised mainly of salaries, office costs, legal and professional fees. The increase in operating expenses for the period was mainly due to the increase of consultancy, salary, legal and professional fees during the period. The increase in salary expenses for the period was mainly due to the increase number of staff for new segment development during the period.
For the six months ended December 31, 2021 and 2020:
We have generated $0 and $0 revenues for the six months ended December 31, 2021 and 2020, and have recorded a gross profit of $0 and $0 for the six months ended December 31, 2021 and 2020. We have incurred $723,101 and $98,792 in operating expenses through December 31, 2021 and 2020. We have interest expense of $954,934 and $0 for the six months ended December 31, 2021 and 2020. We have other income $12,115 and $0 for the six months ended December 31, 2021 and 2020.
The following table provides selected financial data about our company for the six months ended December 31, 2021 and December 31, 2020.
|
| 12/31/2021 |
|
| 12/31/2020 |
|
| Change |
| |||
Statement of Operation |
| Amount |
|
| Amount |
|
| % |
| |||
|
| (Unaudited) |
|
| (Unaudited) |
|
|
|
| |||
Revenue |
| $ | - |
|
| $ | - |
|
| - | % | |
Cost of revenue |
| $ | - |
|
| $ | - |
|
| - | % | |
Gross profit |
| $ | - |
|
| $ | - |
|
| - | % | |
Operating Expenses |
| $ | 723,101 |
|
| $ | 98,792 |
|
|
| 632 | % |
Interest expense |
| $ | 954,934 |
|
| $ | - |
|
| N/A | % | |
Other Income, net |
| $ | 12,115 |
|
| $ | - |
|
| N/A | % | |
The revenue is normally derived from the sales of gold mineral to customers in Malaysia. There was no revenue for the six months ended December 31, 2021 and 2020 because of the depletion of mineral reserves in the mine. Operating expenses comprised mainly of salaries, office costs, legal and professional fees. The increase in operating expenses for the period was mainly due to the increase of consultancy, salary, legal and professional fees during the period. The increase in salary expenses for the period was mainly due to the increase number of staff for new segment development during the period.
The average rate of MYR : USD for six months ended December 31, 2021 and December 31, 2020 was 1 to 0.2393 and 1 to 0.2419 respectively.
| 8 |
| Table of Contents |
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 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 will provide necessary disclosure when any significant agreements have been made with sub-contractors 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 has negotiated 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 mid 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.
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 no 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.
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Liquidity and Capital Resources
The following table provides selected cash flow data about our company for the six months ended December 31, 2021 and December 31, 2020.
Cash Flow Date |
| 12/31/2021 |
|
| 12/31/2020 |
| ||
Net Loss from operation |
| $ | (1,665,920 | ) |
| $ | (98,792 | ) |
Net Cash Generated/(Used) from operating activities |
| $ | (543,559 | ) |
| $ | (54,029 | ) |
Net Cash Generated/(Used) from investing activities |
| $ | (390,836 | ) |
| $ | - |
|
Net Cash Generated/(Used) from financing activities |
| $ | (2,610 | ) |
| $ | - |
|
Effect of exchange rate changes on cash and cash equivalents |
| $ | (3,888 | ) |
| $ | 63,244 |
|
Net increase (decrease) in cash and cash equivalents |
| $ | (940,893 | ) |
| $ | 9,215 |
|
Cash and cash equivalents at beginning of year |
| $ | 2,117,622 |
|
| $ | 24,027 |
|
Cash and cash equivalents at end of year |
| $ | 1,176,729 |
|
| $ | 33,242 |
|
For the six months ended December 31, 2021, the Company had incurred net loss from operation of $1,665,920 which posted a negative impact to the company’s cash flow. The reconciliation on non-cash items such as interest expenses, depreciation and amortization provides positive impact on cash.
In the operation analysis, the net cash used in operating activities increased from $54,029 to $543,559. The operation loss of $1,665,920 was partially offset by the noncash expenses such as $5,220 in depreciation, $15,585 in amortization, 191,222 in share based compensation and $954,934 in interest expenses on promissory notes. In the operating assets and liabilities, the net decrease in current assets resulted from a decrease of other receivables at $26,169 and an increase of other deposits and prepayments of $111,102 whereas the net increase in current liabilities resulted from increase of accrued liabilities and other payables at 28,433, advance from sub-contractor & related parties at $12,623 and $723 decrease of accounts payable. The final result of the cash flow used in operating activities was $543,559 negative cash flow effect.
The net cash used by investing activities of $390,836 resulted from advances to related party at $118,848, security deposit paid at $240,000 and acquisition of plant and equipment at $31,988 for the six months ended December 31, 2021.
The net cash used by financing activities of $2,610 resulted from repayment of hire purchase creditor for the six months ended December 31, 2021.
The net increase in exchange rate effect of $3,888 provided a negative cash flow effect and the overall cash and cash equivalents at the end of December 31, 2021, was decreased by $940,893 with $1,176,729 as the closing 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.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk.
As a “smaller reporting company”, we are not required to provide the information required by this Item.
Item 4. Controls and Procedures.
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 Quarterly Report on Form 10-Q (the “Evaluation Date”). During the 2021, the Company has been undertaking tremendous changes and expansion which rendered the management to re-consider the availability 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 December 31, 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 availability 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 December 31, 2021.
Management believes that the material weaknesses set forth above did not have an immediate negative effect on our financial results because of our small size 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.
Changes in Internal Controls
There have been no changes in our internal controls over financial reporting identified in connection with the evaluation required by paragraph (d) of Securities Exchange Act Rule 13a-15 or Rule 15d-15 that occurred in the six months ended December 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
We know of no material, existing or pending legal proceedings against our Company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered beneficial shareholder, is an adverse party or has a material interest adverse to our interest.
Item 1A. Risk Factors.
As a “smaller reporting company”, we are not required to provide the information required by this Item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
N/A.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosure.
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 period ended December 31, 2021.
Item 5. Other Information.
None.
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Item 6. Exhibits.
The following exhibits are included as part of this report:
______________
101*
* The following financial information from Verde Resources, Inc.’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2021, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Balance Sheets as of December 31, 2021, and June 30, 2021, (ii) Condensed Statements of Operations for the three and six months ended December 31, 2021 and 2020, (iii) Condensed Statements of Cash Flows for the six months ended December 31, 2021 and 2020, and (iv) Notes to Condensed Financial Statements.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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| VERDE RESOURCES, INC. |
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| (Registrant) |
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Dated: February 22, 2022 |
| /s/ Balakrishnan B S Muthu |
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| Balakrishnan B S Muthu |
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| President |
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| (Principal Executive Officer) |
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