Verde Resources, Inc 10-Q for FY2022 Q3
Verde Resources, Inc. (VRDR)
About this 10-Q
Verde Resources, Inc filed this 10-Q on June 30, 2022, covering the quarter ended March 31, 2022 (FY2022 Q3).
Headline figures
Quarter ended March 31, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $16.71K
- up 16.7% from $14.33K a year earlier
- Net loss
- $1.06M
- compared with a net loss of $67.28K a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One) | |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the quarterly period ended
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ____________ to ________________
Commission file number:
(Exact name of registrant as specified in its charter) |
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(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
(Address of principal executive offices)
(
(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 June 10, 2022 there were
VERDE RESOURCES, INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2022
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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| Table of Contents |
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 March 31, 2022 are not necessarily indicative of the results that can be expected for the year endingJune 30, 2022.
VERDE RESOURCES, INC.
INDEX TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD OF ENDED MARCH 31, 2022
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Condensed Consolidated Balance Sheets as at March 31, 2022 (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 March 31, |
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| As at June 30, |
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| 2022 |
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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 deposits & prepayments |
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Inventories |
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Trade receivables |
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Total Current Assets |
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Non-current Assets |
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Property, plant and equipment |
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Right of use assets |
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Mining rights |
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Security deposit |
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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 Non-current 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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Lease liabilities |
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Accrued liabilities and other payables |
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Total Current Liabilities |
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Long term Liabilities |
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Lease liabilities |
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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’ EQUITY |
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Preferred stock, par value $ |
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Common stock, par value $ |
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Common stock, par value $0.001, |
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Additional paid-in capital |
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Accumulated deficit |
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Accumulated other comprehensive income (loss) |
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Stockholders’ equity to Verde Resources, Inc shareholders |
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Non-controlling interest |
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Total Stockholders’ Equity |
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TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
| F-1 |
| Table of Contents |
Verde Resources, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
(In US$ except for number of shares)
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| Three Months Ended March 31, |
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| Nine Months Ended March 31, |
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Revenues, net |
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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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OTHER INCOME (EXPENSE) |
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Interest expenses |
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Other income |
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Total other income (expense), net |
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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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Less: Net loss attributable to non-controlling interest |
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Net loss attributable to Verde Resources Inc., shareholders |
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Other comprehensive income (loss) |
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Foreign currency translation income (loss) |
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Less: Other comprehensive loss attributable to non-controlling interest |
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Other comprehensive income (loss) attributable to Verde Resources, Inc. |
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Comprehensive (loss) income |
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Net loss per share |
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- Basic |
| $ | ( | )* |
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- Diluted |
| $ | ( | ))* |
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Weighted average number of shares outstanding |
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- Basic |
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- Diluted |
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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)
|
| Nine Months Ended |
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| March 31, 2022 |
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| March 31, 2021 |
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Cash flows from operating activities: |
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Net loss |
| $ | ( | ) |
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Adjustments to reconcile net loss to net cash used in operating activities |
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Amortization |
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Depreciation |
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Stock-based compensation |
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Finance cost interest element of promissory notes |
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Changes in operating assets and liabilities: |
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Accounts receivables |
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Other deposits and prepayment |
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Right of use assets |
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Inventory |
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Accounts payable |
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Accrued liabilities and other payables |
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Net cash used in operating activities |
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Cash flows from investing activities: |
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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 lease liabilities |
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Advanced from related parties |
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Advanced to related party |
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Proceeds from common shares and additional paid in capital |
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Net cash provided by financing activities |
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Net decrease in cash and cash equivalent |
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Effect of exchange rate changes on cash |
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Net (decrease) increase in cash and cash equivalents |
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Cash and cash equivalents at beginning of year/ period |
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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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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)
Nine months ended March 31, 2022 and 2021 (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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| Capital |
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| Deficit |
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| Interest |
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| Total |
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Balance - June 30, 2020 |
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Net loss for the period |
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Foreign currency translation gain |
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Balance – March 31, 2021 |
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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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Shares to be issued |
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Net loss for the period |
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Foreign currency translation loss |
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Accretion of interest |
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Balance – March 31, 2022 |
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| F-4 |
| Table of Contents |
Verde Resources, Inc.
Statement of Changes in Stockholders’ Equity (Deficit)
Three months ended March 31, 2022 and 2021
(Unaudited)
(In US$ except for number of shares)
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| Additional Paid-In |
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Balance - December 31, 2020 |
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Net loss for the period |
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| - |
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Foreign currency translation loss |
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| - |
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Balance – March 31, 2021 |
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| $ |
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| $ |
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Balance – December 31, 2021 |
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Shares issued for share-based compensation |
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| - |
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Shares to be issued |
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Net loss for the period |
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| - |
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Foreign currency translation loss |
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| - |
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Accretion of interest |
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Balance – March 31, 2022 |
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| $ |
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| $ |
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| F-5 |
| Table of Contents |
Verde Resources, Inc.
Notes to Condensed Consolidated Financial Statements
For the three and nine months ended March 31, 2021 and 2022
(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..
Pursuant to an Assignment Agreement For The Assignment of Management Right in Merapoh Gold Mines in Malaysia (“Assignment Agreement”) dated October 25, 2013, and a Supplementary Agreement dated February 17, 2014 on further clarifications to the Assignment Agreement signed by Verde Resources, Inc. (“VRDR”) with Federal Mining Resources Limited (“FMR”), a company incorporated under the laws of the British Virgin Islands, the 100% interest of FMR in Gold Billion Global Limited (“GBL”) was transferred to VRDR at a consideration of $1. This transaction was recorded as 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 CSB after the acquisition. This transaction was accounted for as a recapitalization effected by a share exchange, wherein GBL with its 85% deemed subsidiary CSB was considered the acquirer for accounting and financial reporting purposes. The assets and liabilities of the acquired entity have been brought forward at their book value and no goodwill has been recognized.
Prior to the acquisition of GBL, on July 1, 2013, FMR had assigned its rights and obligations pursuant to its
Furthermore, under the terms of the Assignment Agreement, FMR will assign its management rights of CSB’s mining operation in the Mining Lease to GBL in exchange for
With the above transactions, GBL became a wholly-owned subsidiary of the Company and CSB, its 85% deemed indirect subsidiary.
On March 17, 2014, the Company through GBL and its 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, the Board of Directors of GBL notified FMR of GBL's decision to exercise its option to purchase an
Effective February 20, 2016 Mr. Chen Ching was appointed Director of the Company and the entire Board of Directors consisted of Mr. Balakrishnan B S Muthu and Mr. Chen Ching. The SC 14F1 and Form 8-K announcing the change in officers and directors were filed with SEC on February 10, 2016 and February 22, 2016 respectively.
Effective February 2, 2018, the Company’s Articles of Incorporation were amended to increase the authorized shares of the Company from
Effective March 31, 2021, Mr. Carl M. Craven was appointed as a Director of the Company and the entire Board of Directors consisted 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 property license in Sabah, Malaysia from Borneo Energy Sdn Bhd, in consideration of issuance of
| F-6 |
| Table of Contents |
On June 11, 2021, GBL entered into a Sale and Purchase of Assets Agreement (the “SPA Agreement”) to purchase a factory site from a Malaysia company Segama Ventures Sdn Bhd (“Segama 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 $
Simultaneously, on March 2, 2022, the Company, through GBL, entered into a Commercial Lease Agreement and Option to Purchase (“Lease Agreement”) for renting the factory site from Segama Ventures for a lease term of seven (7) years (“Lease Term”) at a monthly rental of MYR 36,000 ($8,571). The rental for the entire Lease Term amounts to the sum of MYR 3,024,000 ($720,000) (the “Lease Payment”) which shall be paid in advance upon commencement of the Lease Agreement together with a payment of security deposit for the sum of MYR 336,000 ($80,000) (the “Security Payment”). The refundable advance of $
On June 17, 2021, the Company through its prospective indirect subsidiary Bio Resources Limited (“BRL”), a company incorporated under the laws of Labuan, entered into a Shares Sale Agreement with Hermalis Binti Mohmad Tahir (“Hermalis”), a company incorporated under the laws of Malaysia, to acquire the entire issued and paid-up share capital of Global Renewables Sdn Bhd. Under the terms of the Shares Sale Agreement, the consideration for the acquisition shall be satisfied in full by the payment of MYR 25,000 ($6,000) upon the execution of the Shares Sale Agreement. The acquisition of Global Renewables Sdn Bhd however, was cancelled on April 18, 2022.
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
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 was formed for the purpose of holding real 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 (“Verde Malaysia”), a company incorporated under the laws of Malaysia, for the purpose of conducting consultation services and distribution of renewable agricultural commodities.
On February 10, 2022, the Company, through VEL, entered into a Commercial Lease Agreement and Option to Purchase (the “Lease Agreement”) to rent a 24-acre property in La Belle Missouri from Jon Neal Simmons and Betty Jo Simmon (the “Landlord”) to support carbon farming with biochar in Missouri. Under the Lease Agreement, the term of the lease will be for a period of two (
On March 23, 2022, the Company, through Verde Malaysia, entered into a Sale of Shares Agreement (“SSA”) with The Wision Project Sdn Bhd (“Wision”), a company incorporated under the laws of Malaysia, and its sole shareholder Jack Wong, to acquire the one hundred percent (
| F-7 |
| Table of Contents |
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared by management in accordance with both accounting principles generally accepted in the United States (“GAAP”), and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Certain information and note disclosures normally included in audited financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading.
In the opinion of management, the consolidated balance sheet as of June 30, 2021 which has been derived from audited financial statements and these unaudited condensed consolidated financial statements reflect all normal and recurring adjustments considered necessary to state fairly the results for the periods presented. The results for the period ended March 31, 2022 are not necessarily indicative of the results to be expected for the entire fiscal year ending June 30, 2022 or for any future period.
These unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with the Management’s Discussion and the audited financial statements and notes thereto included in the Annual Report on Form 10-K for the year ended June 30, 2021, filed with the SEC on November 12, 2021.
Basis of Consolidation
The condensed consolidated financial statements include the financial statements of Verde Resources, Inc. and subsidiaries. All inter-company balances and transactions between the Company and its subsidiaries have been eliminated upon consolidation.
| 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 $1,722,583 and $2,117,622 in cash and cash equivalents at March 31, 2022 and June 30, 2021, respectively.
At March 31, 2022 and June 30, 2021 cash and cash equivalents consisted of bank deposits in a Malaysian bank and petty cash on hands.
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 |
Land and buildings |
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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 March 31, 2022 and June 30, 2021, the Company has no allowance for doubtful accounts, as per management’s judgment based on their best knowledge. As of March 31, 2022 and June 30, 2021, the longest credit term for certain customers are 60 days.
Inventories
Inventories are stated at the lower of cost or market value (net realizable value), cost being determined on a first-in-first-out method. Costs include material, labor and overhead costs. The Company provides inventory allowances based on excess and obsolete inventories determined principally by customer demand.
As of March 31, 2022 and June 30, 2021, the Company did not record an allowance for obsolete inventories, nor have there been any write-offs
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 March 31, 2022 and June 30, 2021.
The operating lease is included in operating lease right-of-use assets and operating lease liabilities as current and non-current liabilities in the consolidated balance sheets at March 31, 2022 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.
Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the consolidated statement of operations.
For reporting purposes, 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 gains and losses resulting from translation of financial statements subsidiaries to the reporting currency are recorded as a separate component of accumulated other comprehensive income within the statements of changes in stockholder’s equity.
Translation of 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 |
March 31, 2022 |
| RM |
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Statement of operations and cash flow items |
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For the nine months ended March 31, 2021 |
| RM |
For the nine months ended March 31, 2022 |
| 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
The Company follows the ASC 850-10, “Related Party Disclosures” for the identification of related parties and disclosure of related party transactions.
Pursuant to section 850-10-20 the related parties include a) affiliates of the Company; b) entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of section 825–10–15, to be accounted for by the equity method by the investing entity; c) trusts for the benefit of employees, such as pension and Income-sharing trusts that are managed by or under the trusteeship of management; d) principal owners of the Company; e) management of the Company; f) other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.
The consolidated financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a) the nature of the relationship(s) involved; b) a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c) the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d) amount due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.
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.
Mineral Acquisition and Exploration Costs
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 |
Commitments and contingencies
The Company follows the ASC 450-20, “Contingencies” to report accounting for contingencies. Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or un-asserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or un-asserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available at this time that these matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.
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.
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.
Gold mining
Revenue from the sales of gold mineral or other minerals to registered gold trading companies or other customers in Malaysia is recognized as revenue 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.
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 March 31, 2022 and June 30, 2021, the Company did not have any significant unrecognized uncertain tax positions.
Recent Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standard Board (“FASB”) or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption.
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), (“ASU 2021-04”). This ASU reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. This ASU provides guidance for a modification or an exchange of a freestanding equity-classified written call option that is not within the scope of another Topic. It specifically addresses: (1) how an entity should treat a modification of the terms or conditions or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange; (2) how an entity should measure the effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange; and (3) how an entity should recognize the effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange. This ASU became effective for all entities for fiscal years beginning after December 15, 2021. An entity should apply the amendments prospectively to modifications or exchanges occurring on or after the effective date of the amendments. The adoption of ASU 2021-04 on July 1, 2022 is not expected to have a material impact on the Company’s financial statements or disclosures.
The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and believes that the future adoption of any such pronouncements may not be expected to cause a material impact on its financial condition or the results of its operations.
| F-12 |
| Table of Contents |
NOTE 3 - 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 March 31, 2022, the Company had suffered from recurring operating losses and recorded 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 stockholders, 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 condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets and liabilities that may result in the Company not being able to continue as a going concern.
NOTE 4 – MINING RIGHT
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 March 31, 2022 |
| |
Balance as at the 1 July 2021 |
| $ |
| |
Amortization charge for the period |
|
| ( | ) |
Foreign exchange adjustment |
|
| ( | ) |
Balance as of March 31, 2022 |
| $ |
| |
Amortization charge of rights of use lease assets was $
Amortization charge of rights of use lease assets was $
| F-13 |
| Table of Contents |
NOTE 5 – RIGHT OF USE ASSET AND LEASE LIABILITIES
a) Lease liabilities
The lease liabilities for motor vehicle, include long term and short term liabilities and are summarized as follow:
|
| March 31, 2022 |
|
| June 30, 2021 |
| ||
Current finance lease liabilities |
| $ |
|
| $ |
| ||
Non-current finance lease liabilities |
|
|
|
|
|
| ||
Total |
| $ |
|
| $ |
| ||
The lease facilities do not impose any interest charge and the payables are summarized as follows:
|
| Interest Rate |
|
| Monthly Due |
|
| March 31, 2022 |
|
| June 30, 2021 |
| ||||
Finance lease liabilities in the hire purchase loan |
|
| % |
|
|
|
|
|
|
|
|
| ||||
Finance lease liabilities to a hire purchase creditor |
|
| - |
|
|
| - |
|
| $ |
|
| $ |
| ||
The imputed interest element within the contract has been assessed as not significant.
The scheduled maturities of the finance lease liabilities installment loans are as follows:
March 31, |
|
|
| |
2023 |
|
|
| |
2024 |
|
|
| |
2025 |
|
|
| |
2026 |
|
|
| |
Thereafter |
|
|
| |
Total minimum finance lease liabilities installment payment |
| $ |
| |
Less: Imputed interest |
|
|
| |
Present value of net minimum lease payments (#) |
| $ |
| |
(#) Minimum payment are reflected in the balance sheet as current and non-current obligations under finance lease liabilities as at March 31, 2022.
b) Right to use asset – Leasing of Segama Factory and La-Belle
|
| Ended March 31, 2022 |
| |
Balance as at the 1 July 2021 |
| $ |
| |
Addition |
|
| ||
Amortization charge for the period |
|
| ( | ) |
Balance as of March 31, 2022 |
| $ |
| |
This leasing arrangement for the lease of the
On February 10, 2022, the Company, through VEL, a limited liability company incorporated in the State of Missouri, which is an indirect wholly-owned subsidiary of the Company via 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 monthly base rent is $
There are no corresponding lease liabilities recorded as the lease payments for the entire lease period has been paid upfront upon inception of the agreement.
| F-14 |
| Table of Contents |
NOTE 6 – OTHER DEPOSITS & PREPAYMENT
Other deposits & prepayment as of March 31, 2022 and June 30, 2021 consisted of the following:
|
| March 31, |
|
| June 30, |
| ||
|
| 2022 |
|
| 2021 |
| ||
|
|
|
|
|
|
| ||
Prepayment to suppliers |
| $ |
|
| $ |
| ||
Prepaid operating expenses |
|
|
|
|
|
| ||
|
| $ |
|
| $ |
| ||
NOTE 7 – INVENTORIES
Inventories as of March 31, 2022 and June 30, 2021 consisted of the following:
|
| March 31, |
|
| June 30, |
| ||
|
| 2022 |
|
| 2021 |
| ||
|
|
|
|
|
|
| ||
Bio produce |
|
|
|
|
|
| ||
|
| $ |
|
| $ |
| ||
NOTE 8 – SECURITY DEPOSIT, AND DEPOSITS PAID FOR ACQUISITION OF SUBSIDIARIES AND PROPERTY, PLANT AND EQUIPMENT
At March 31, 2022 and June 30, 2021, the deposits consist of the following:
|
| March 31, |
|
| June 30, |
| ||
|
| 2022 |
|
| 2021 |
| ||
|
|
|
|
|
|
| ||
Deposits paid for acquisition of subsidiaries |
|
|
|
|
|
| ||
- Bio Resources Limited (#1) |
| $ |
|
| $ |
| ||
- Champmark Sdn Bhd (#2) |
|
|
|
| $ |
| ||
|
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Deposits paid for acquisition of Intellectual Property |
|
|
|
|
|
|
|
|
- Intellectual property license (#3) |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Other deposits |
|
|
|
|
|
| ||
- Factory site (#4) |
| $ |
|
| $ |
| ||
(#1) The Company announced the Share Sale Agreement on May 12, 2021 for the acquisition of the entire issued and paid-up share capital of Bio Resources Limited from Taipan International Limited, an unrelated third party, The Wision Project Limited (formerly known as “Borneo Resources Limited”), a unrelated third party, and other unrelated third party individuals, in consideration of the issuance of
On January 20, 2022, however, the Company 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 $
(#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 a biofraction plant and the right to use intellectual property license in Sabah, Malaysia from Borneo Energy Sdn Bhd, for a consideration 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 Malaysian company Segama Ventures Sdn Bhd (“Segama 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 $
Simultaneously, on March 2, 2022, the Company, through GBL, entered into a Commercial Lease Agreement and Option to Purchase (“Lease Agreement”) for renting the factory site from Segama Ventures for a lease term of seven (
| F-15 |
| Table of Contents |
NOTE 9 –ADVANCED FROM RELATED PARITES
Advanced from related parties at March 31, 2022 and June 30, 2021, consist of the following items:
|
| March 31, 2022 |
|
| June 30, 2021 |
| ||
|
|
|
|
|
|
| ||
Advanced from BOG (#1) |
| $ |
|
| $ |
| ||
Advanced from Federal Capital Investment Limited (#2) |
|
|
|
|
|
| ||
|
| $ |
|
| $ |
| ||
______________
(#1) Borneo Oil and Gas Corporation SDN BHD (“BOG”) is a wholly owned subsidiary of Borneo Oil Berhad Group (“BOB”) (holding 19.23% and 19.96% of the Company’s issued and outstanding common stock as of March 31, 2022 and June 30, 2021, respectively). The advances are related to ordinary business transactions and bear no interest or collateral, repayable and renewable under normal business advancement terms.
(#2) Pursuant to a Settlement of Debt Agreement (the “Debt Settlement Agreement”) entered into by the Company on June 9, 2021 with Federal Capital Investment Limited (“FCIL”), payables of $
| F-16 |
| Table of Contents |
NOTE 10 – PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at March 31, 2022 and June 30, 2021 are summarized as follows:
|
| March 31, 2022 |
|
| June 30, 2021 |
| ||
|
| (Unaudited) |
|
|
| |||
Land and building |
| $ |
|
| $ |
| ||
Plant and machinery |
|
|
|
|
|
| ||
Office equipment |
|
|
|
|
|
| ||
Project equipment |
|
|
|
|
|
| ||
Computer |
|
|
|
|
|
| ||
Motor vehicle |
|
|
|
|
|
| ||
Sub-total |
|
|
|
|
|
| ||
Less: accumulated depreciation |
|
| ( | ) |
|
| ( | ) |
|
| $ |
|
| $ |
| ||
The depreciation expenses charged for the three months ended March 31, 2022 and 2021 was $
The depreciation expenses charged for the nine months ended March 31, 2022 and 2021 was $
Included in property, plant and equipment, is a motor vehicle purchased under finance lease arrangement with a carrying amount of $
| F-17 |
| 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”) and other unrelated third party individuals, for a consideration to be satisfied by way of the 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:
|
| March 31 |
|
| June 30 |
| ||
|
| 2022 |
|
| 2021 |
| ||
Balance at the beginning of period |
| $ |
|
| $ |
| ||
Promissory notes issued to unrelated third parties at fair value |
|
|
|
|
|
| ||
Interest expense |
|
|
|
|
|
| ||
Balance at the end of period |
| $ |
|
| $ |
| ||
The Company recorded $
The Company recorded $
| F-18 |
| 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:
|
| Nine months period ended |
| |||||
|
| March 31, 2022 |
|
| March 31, 2021 |
| ||
|
|
|
|
|
|
| ||
Loss before income taxes |
|
|
|
|
|
| ||
Non-deductible items/non-taxable income |
|
| ( | ) |
|
| ( | ) |
Tax effect of tax exempt entity |
|
| ( | ) |
|
| ( | ) |
Share based payments |
|
| ( | ) |
|
| - |
|
Changes in valuation allowances |
|
| ( | ) |
|
| ( | ) |
Effect of different tax rate of subsidiaries operating in other jurisdictions |
|
| - |
|
|
|
| |
Effective tax rate |
|
| - |
|
|
| - |
|
Summary of the Company’s net deferred tax assets are as follows:
|
| March 31, 2022 |
|
| June 30, 2021 |
| ||
Deferred tax assets: |
|
|
|
|
|
| ||
Net operating loss |
| $ |
|
| $ |
| ||
Less: 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 nine month periods ended March 31, 2022 and March 31, 2021, or balance sheet as of March 31, 2022 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-19 |
| Table of Contents |
NOTE 13 – COMMITMENTS AND CONTINGENCIES
As of March 31, 2022, the Group had the following contracted capital commitments:
|
| March 31, 2022 |
|
| June 30, 2021 |
| ||
|
|
|
|
|
|
| ||
For purchase of property, plant and equipment |
| $ |
|
| $ |
| ||
For acquisition of subsidiary |
|
|
|
|
|
| ||
Total |
| $ |
|
| $ |
| ||
The agreement for the purchase of property, plant and equipment for the purchase of factory site from Segama Ventures was cancelled on March 2, 2022 and is replaced with commercial lease agreement and option to purchase. The deposit paid was utilized as deposit and advance lease payment for the lease.
NOTE 14 – NET LOSS PER SHARE
The Company 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:
|
| Three Months Ended March 31, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
|
| (Unaudited) |
|
| (Unaudited) |
| ||
Net income applicable to common shares |
| $ | ( | ) |
| $ |
| |
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding (Basic) |
|
|
|
|
|
| ||
Shares to be issued under promissory notes |
|
|
|
|
| - |
| |
Options |
|
| - |
|
|
| - |
|
Warrants |
|
| - |
|
|
| - |
|
Weighted average common shares outstanding (Diluted) |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Net loss per share (Basic and Diluted) |
| $ | ( | )* |
| $ | ( | )* |
|
| Nine Months Ended March 31, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
|
| (Unaudited) |
|
| (Unaudited) |
| ||
Net income (loss) applicable to common shares |
| $ | ( | ) |
| $ | ( | ) |
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding (Basic) |
|
|
|
|
|
| ||
Shares to be issued under promissory notes |
|
|
|
|
| - |
| |
Options |
|
| - |
|
|
| - |
|
Warrants |
|
| - |
|
|
| - |
|
Weighted average common shares outstanding (Diluted) |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Net loss per share (Basic and Diluted) |
| $ | ( | )* |
| $ | ( | )* |
*Less than $0.01 per share
The Company has no other potentially dilutive securities, such as options or warrants, currently issued and outstanding.
The promissory notes issued for the acquisition of BRL for $
For the nine months ended March 31, 2022 and 2021, diluted weighted-average common shares outstanding is equal to basic weighted-average common shares, due to the Company’s net loss position. Hence no common stocks equivalents were included in the computations of diluted net loss per share since such inclusion would have been antidilutive.
| F-20 |
| Table of Contents |
NOTE 15 - STOCKHOLDERS’ EQUITY
Authorized Stock
Effective February 2, 2018, the Company’s Articles of Incorporation were amended to increase the authorized shares of the Company from
As of March 31, 2022 and June 30, 2021, the Company has authorized
Common stock
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 unrelated third party individuals, in consideration of issuance of
On January 20, 2022, the Company 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 $
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 $
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 not issued any preferred shares. The Company also has no stock option plan, warrants, or other dilutive securities other than
| F-21 |
| Table of Contents |
NOTE 16 - RELATED PARTY TRANSACTIONS
Related party balances |
|
| ||||||
|
| March 31, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
|
|
|
|
|
|
| ||
Deposits paid for acquisition of Intellectual Property |
|
|
|
|
|
| ||
- Intellectual property license of Borneo Energy Sdn Bhd (#1) (note 8) |
| $ |
|
| $ |
| ||
(#1) Borneo Oil Berhad (“BOB”) is ultimate holding company of Borneo Energy Sdn Bhd and holding 19.23% of the Company’s issued and outstanding common stock as of March 31, 2022.
| F-22 |
| Table of Contents |
NOTE 17 – 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 March 31, 2022:
|
| 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 loss |
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
| ( | ) | ||||
Selling, general & administrative expenses |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
Loss from operations |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
Interest expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) | ||||
Other income |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Loss before income tax |
|
| ( | ) |
|
| ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) | |
Income tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net loss |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
For the nine months ended March 31, 2022:
|
| 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 loss |
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
| ( | ) | ||||
Selling, general & administrative expenses |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
Loss from operations |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
Interest expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) | ||||
Other income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Loss before income tax |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
Income tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net loss |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
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 is incorporated in 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 Verde Resources (Malaysia) Sdn. Bhd. which is incorporated in 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-23 |
| Table of Contents |
NOTE 18 - SUBSEQUENT EVENTS
On June 17, 2021, Verde Resources, Inc. (the “Company”), through its prospective indirect subsidiary Bio Resources Limited (“BRL”), a company incorporated under the laws of Labuan, entered into a Shares Sale Agreement (“SSA Agreement”) with Global Renewables Sdn Bhd (“Global Renewables”), a company incorporated under the laws of 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 MYR
On April 18, 2022, the Company, through its prospective indirect subsidiary BRL, entered into a Cancellation Agreement for the cancellation of the SSA Agreement to acquire the entire issued and paid-up share capital of Global Renewables. The SSA Agreement is rendered null and void upon terms and conditions provided in the Cancellation Agreement.
On April 19, 2022, the Company, through its wholly-owned subsidiary Verde Resources (Malaysia) Sdn Bhd (“Verde Malaysia”), a company incorporated in Malaysia, entered into an Agreement for Regenerative Carbon Negative Agriculture Initiative (the “Agreement”) with The Borneo Food Group Sdn Bhd (“SB”), a company incorporated in Malaysia, to supply proprietary blend of various carbon negative agricultural products such as plant natural enzyme, FAA bio enzyme and enriched biochar to SB. SB is a wholly-owned subsidiary of Borneo Oil Berhad (BORNOIL), a company listed on the Main Board Stock Exchange of Malaysia and an affiliate of the Company by virtue of owning more than 10% shares of the Company’s Common Stock. Under the Agreement, Verde Malaysia has the expertise, technical know-how supply of proprietary blend of various carbon negative agricultural products to assist SB in achieving a long term and consistent supply of various agriculture produce for its business while ensuring that all ingredients utilized by SB is farmed in a sustainable and environmentally friendly manner which is not just carbon neutral but carbon negative to create a long term carbon negative footprint. Verde Malaysia will provide the services and supply the proprietary blend of various carbon negative agricultural products to SB at the agreed fixed rates which may be subject to price increase in the event of any drastic fluctuations in the cost of fuel and/or related production costs with a minimum notice of two weeks in writing to SB.
On April 25, 2022, the Company issued a total of
On April 27, 2022, the Company, entered into a Professional Engineering Services Contract (the “PES Agreement”) with BioDiverse Energies, LLC (“BDE”). Under the PES Agreement, BDE will provide professional services on the feasibility assessment, preliminary engineering and preliminary market analysis related to the biochar enhanced compost project. The Company will pay BDE a total of $
On April 29, 2022, Verde Renewables, Inc.(“VRI”) a wholly owned subsidiary of the Company, closed on the purchase of residential real property located in Chesterfield, Missouri (the “Property”). The purchase price for the Property was $
On May 18, 2022, GBL, a company incorporated under the laws of the British Virgin Islands and a wholly-owned subsidiary of the Company, has changed its name to Verde Resources Asia Pacific Limited.
On June 8, 2022, the Company through its wholly-owned subsidiary VRI, entered into a Services Agreement (the “Agreement”) with Gary F. Zimmer to engage him as its corporate consultant to develop and formulate a designer compost and the Company's integrated regenerative farming programs as designated in the Agreement. Under the Agreement, the Company will pay Gary F. Zimmer by the issuance of
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 further significant subsequent items which are required to be disclosed.
| F-24 |
| 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 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 has taken 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 degree Celsius to 500 degree Celsius 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.
| 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.
On April 1, 2014, the Board of Directors of GBL notified Federal Mining Resources Limited (“FMR”) of the decision to exercise its option to purchase an 85% equity interest of Champmark Sdn Bhd (“CSB”) pursuant to Section 3.2.4 of the Management Agreement dated July 1, 2013, between GBL and FMR. This acquisition was completed on April 1, 2014, with consideration of $1, and GBL then became an 85% shareholder of CSB.
Effective February 20, 2016, Mr. Wu Ming Ding resigned from all of his positions as President and Director of the Company, with Mr. Balakrishnan B S Muthu being appointed President to fill the vacancy created. Effective February 20, 2016, Mr. Chen Ching was appointed Director of the Company and the entire Board of Directors then consisted 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:
Pursuant to an Assignment Agreement For The Assignment of Management Right in Merapoh Gold Mines in Malaysia (“Assignment Agreement”) dated October 25, 2013, and a Supplementary Agreement dated February 17, 2014 on further clarifications to the Assignment Agreement signed by the Company with FMR, a company incorporated under the laws of the British Virgin Islands, the 100% interest of FMR in GBL was transferred to VRDR at a consideration of $1. This transaction was recorded as 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 CSB after the acquisition. This transaction was accounted for as a recapitalization effected by a share exchange, wherein GBL with its 85% deemed subsidiary CSB was considered the acquirer for accounting and financial reporting purposes. The assets and liabilities of the acquired entity have been brought forward at their book value and no goodwill has been recognized.
Prior to the acquisition of GBL, on July 1, 2013, FMR had assigned its rights and obligations pursuant to its 85% interest in Champmark Sdn Bhd (“CSB”) to GBL. According to ASC 810-05-08 A, CSB is a deemed subsidiary of GBL because due to the assignment, GBL had gained control of the Board of Directors of CSB, GBL’s rights to receive future benefits and residual value, and GBL’s obligation to absorb losses and provide financing for CSB. GBL had the power to direct the activities of CSB that most significantly impact CSB’s economic performance, and the obligation to absorb losses or receive benefits of CSB that could potentially be significant to CSB. Accordingly, GBL was the primary beneficiary of CSB. Under 810-23-42, 43, it was determined that CSB was de-facto agent and GBL, the principal, and consequently, CSB was considered as a deemed subsidiary of GBL beginning July 1, 2013.
With the above transactions, GBL became a wholly-owned subsidiary of the Company and CSB, its 85% deemed indirect subsidiary.
On April 1, 2014, the Board of Directors of GBL notified FMR of the decision to exercise its option to purchase an 85% equity interest of CSB pursuant to Section 3.2.4 of the Management Agreement dated July 1, 2013, between GBL and FMR. This acquisition was completed on April 1, 2014, with consideration of $1, and GBL then became an 85% shareholder of CSB.
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 for a consideration of MYR 150,000 ($35,669). Prior to this acquisition, GBL owned 85% equity in CSB. Upon completion of the acquisition on October 20,2021, CSB became a wholly owned subsidiary of GBL, and indirectly, of the Company.
On August 10, 2021, the Company formed a wholly owned subsidiary, VRI. 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 Malaysia, for the purpose of conducting consultation services and distribution of renewable agricultural commodities.
On March 23, 2022, the Company, through Verde Resources (Malaysia) Sdn Bhd, entered into a Sale of Shares Agreement (“SSA”) with The Wision Project Sdn Bhd (“Wision”), a company incorporated under the laws of Malaysia, to acquire the one hundred percent (100%) of the issued and paid up ordinary shares in Wision.
| 6 |
| Table of Contents |
Stage of Operation
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 has taken 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 degree Celsius to 500 degree Celsius 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.
| 7 |
| Table of Contents |
Results of Operations
For the three months ended March 31, 2022 and 2021:
We have generated $16,712 and $14,326 revenues for the three months ended March 31, 2022 and 2021, and have recorded a gross (loss)/ profit of ($69,989) and $0 for the three months ended March 31, 2022 and 2021. We have incurred $498,773 and $81,606 in operating expenses through March 31, 2022 and 2021. We have interest expense of $486,977 and $0 for the three months ended March 31, 2022 and 2021. We have other income $99 and $0 for the three months ended March 31, 2022 and 2021.
The following table provides selected financial data about our company for the three months ended March 31, 2022 and March 31, 2021.
|
| 03/31/2022 |
|
| 03/31/2021 |
|
| Change |
| |||
Statement of Operation |
| Amount |
|
| Amount |
|
| % |
| |||
|
| (Unaudited) |
|
| (Unaudited) |
|
|
| ||||
Revenue |
| $ | 16,712 |
|
| $ | 14,326 |
|
|
| 17 | % |
Cost of revenue |
| $ | 86,701 |
|
| $ | - |
|
|
| 100 | % |
Gross (loss) profit |
| $ | (69,989 | ) |
| $ | 14,326 |
|
|
| -589 | % |
Operating expenses |
| $ | 498,774 |
|
| $ | 81,606 |
|
|
| 511 | % |
Interest expense |
| $ | 486,977 |
|
| $ | - |
|
|
| 100 | % |
Other income, net |
| $ | 99 |
|
| $ | - |
|
|
| 100 | % |
The revenue is normally derived from the sales of gold mineral to customers in Malaysia. There was no revenue for the three months ended March 31, 2022 and 2021 because of the depletion of mineral reserves in the mine. The revenue instead was derived from sales of wood vinegar and bio char for these periods. 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 segment development during the period.
For the nine months ended March 31, 2022 and 2021:
We have generated $16,712 and $14,326 revenues for the nine months ended March 31, 2022 and 2021, and have recorded a gross (loss) / income of ($69,989) and $14,326 for the nine months ended March 31, 2022 and 2021. We have incurred $1,221,874 and $180,398 in operating expenses through March 31, 2022 and 2021. We have interest expense of $1,441,911 and $0 for the nine months ended March 31, 2022 and 2021. We have other income $12,214 and $0 for the nine months ended March 31, 2022 and 2021.
The following table provides selected financial data about our company for the nine months ended March 31, 2022 and March 31, 2021.
|
| 03/31/2022 |
|
| 03/31/2021 |
|
| Change |
| |||
Statement of Operation |
| Amount |
|
| Amount |
|
| % |
| |||
|
| (Unaudited) |
|
| (Unaudited) |
|
|
| ||||
Revenue |
| $ | 16,712 |
|
| $ | 14,326 |
|
|
| 17 | % |
Cost of revenue |
| $ | 86,701 |
|
| $ | - |
|
|
| 100 | % |
Gross (loss) profit |
| $ | (69,989 | ) |
| $ | 14,326 |
|
|
| -589 | % |
Operating expenses |
| $ | 1,221,875 |
|
| $ | 180,398 |
|
|
| 577 | % |
Interest expense |
| $ | 1,441,911 |
|
| $ | - |
|
|
| 100 | % |
Other income, net |
| $ | 12,214 |
|
| $ | - |
|
|
| 100 | % |
The revenue is normally derived from the sales of gold mineral to customers in Malaysia. There was no revenue for the nine months ended March 31, 2022 and 2021 because of the depletion of mineral reserves in the mine. The revenue instead was derived from sales of wood vinegar and bio char for the periods mentioned 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 in the number of staff for new segment development during the period.
| 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.
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.
| 9 |
| Table of Contents |
Liquidity and Capital Resources
The following table provides selected cash flow data about our company for the nine months ended March 31, 2022 and March 31, 2021.
Cash Flow Date |
| 03/31/2022 |
|
| 03/31/2021 |
| ||
Net Loss from operation |
| $ | (2,721,561 | ) |
| $ | (166,072 | ) |
Net Cash Used in operating activities |
|
| (1,097,381 | ) |
|
| (189,317 | ) |
Net Cash Used in investing activities |
|
| (310,332 | ) |
|
| - |
|
Net Cash Generated from/(Used in) financing activities |
|
| 1,004,887 |
|
|
| (72,389 | ) |
Effect of exchange rate changes on cash and cash equivalents |
|
| 7,787 |
|
|
| 120,530 |
|
Net (decrease) increase in cash and cash equivalents |
|
| (395,039 | ) |
|
| 3,602 |
|
Cash and cash equivalents at beginning of year |
|
| 2,117,622 |
|
|
| 24,027 |
|
Cash and cash equivalents at end of year |
| $ | 1,722,583 |
|
| $ | 27,629 |
|
For the nine months ended March 31, 2022, the Company had incurred net loss from operation of $2,721,561 which posted a negative impact to the company’s cash flow.
In the operation analysis, the net cash used in operating activities increased from $189,317 to $1,097,381. The operation loss of $2,721,561 was partially offset by the noncash expenses such as $9,831 in depreciation, $29,434 in amortization, $284,249 in share based compensation and $1,441,911 in interest expenses on promissory notes. In the operating assets and liabilities, the net decrease in current assets resulted from an increase of trade receivables at $14,818, increase of other deposits and prepayments of $85,132, an increase in inventories of $81,492 and decrease in right of use assets of $16,142 whereas the net increase in current liabilities resulted from an increase of accrued liabilities and other payables at $24,774 and $719 decrease of accounts payable.
The net cash used by investing activities of $310,332 resulted from security deposit paid at $240,000 and acquisition of plant and equipment at $70,332 for the nine months ended March 31, 2022.
The net cash provided by financing activities of $1,004,887 resulted from proceeds from shares to be issued of $1,000,000, net of repayment of lease liabilities for the nine months ended March 31, 2022 of $5,220 and advances from/(to) related parties of $10,107
The net decrease in exchange rate effect of $7,787 provided a positive cash flow effect and the overall cash and cash equivalents at the end of March 31, 2022, was decreased by $396,039 with $1,722,583 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.
| 10 |
| Table of Contents |
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 past one year, 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 March 31, 2022 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 past one year, 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 March 31, 2022.
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 nine months ended March 31, 2022 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 March 31, 2022.
Item 5. Other Information.
None.
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Item 6. Exhibits.
The following exhibits are included as part of this report:
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101*
* The following financial information from Verde Resources, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Balance Sheets as of March 31, 2022, and June 30, 2021, (ii) Condensed Statements of Operations for the three and nine months ended March 31, 2022 and 2021, (iii) Condensed Statements of Cash Flows for the nine months ended March 31, 2022 and 2021, 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: June 30, 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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EXHIBIT 31.1
CERTIFICATION
I, Balakrishnan B S Muthu, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Verde Resources, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
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| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and |
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| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: June 30, 2022
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| By: | /s/ Balakrishnan B S Muthu |
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| Balakrishnan B S Muthu |
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| Chief Executive Officer |
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EXHIBIT 31.2
CERTIFICATION
I, Balakrishnan B S Muthu, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Verde Resources, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
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| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and |
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| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: June 30, 2022
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| By: | /s/ Balakrishnan B S Muthu |
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| Balakrishnan B S Muthu |
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| Chief Financial Officer |
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EXHIBIT 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Balakrishnan B S Muthu, certify, as of the dates hereof, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Verde Resources, Inc. on Form 10-Q for the period ended March 31, 2022 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Form 10-Q fairly presents in all material respects the financial condition and results of operations of Verde Resources, Inc. at the dates and for the periods indicated.
Date: June 30, 2022
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| By: | /s/ Balakrishnan B S Muthu |
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| Balakrishnan B S Muthu |
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| Chief Executive Officer |
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I, Balakrishnan B S Muthu, certify, as of the dates hereof, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Verde Resources, Inc. on Form 10-Q for the period ended March 31, 2022 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Form 10-Q fairly presents in all material respects the financial condition and results of operations of Verde Resources, Inc. at the dates and for the periods indicated.
Date: June 30, 2022
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| By: | /s/ Balakrishnan B S Muthu |
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| Balakrishnan B S Muthu |
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| Chief Financial Officer |
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A signed original of this written statement required by Section 906 has been provided to Verde Resources, Inc. and will be retained by Verde Resources, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.