VRDR 10-Q
Verde Resources, Inc. (VRDR)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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) |
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(Registrant’s telephone number, including area code) |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one).
Large accelerated filer | ☐ | Accelerated filer | ☐ |
☐ | Smaller reporting company | ||
(Do not check if a smaller reporting company) |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of May 3, 2024 there were
VERDE RESOURCES, INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2024
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 |
CAUTIONARY NOTE CONCERNING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical facts, included in this Form 10-Q including, without limitation, statements in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, events or developments which the Company expects or anticipates will or may occur in the future, including such things as future capital expenditures (including the amount and nature thereof); expansion and growth of the Company’s business and operations; and other such matters are forward-looking statements. These statements are based on certain assumptions and analyses made by the Company in light of its experience and its perception of historical trends, current conditions and expected future developments, as well as other factors it believes are appropriate under the circumstances. However, whether actual results or developments will conform with the Company’s expectations and predictions is subject to a number of risks and uncertainties, including general economic, market and business conditions; the business opportunities (or lack thereof) that may be presented to and pursued by the Company; changes in laws or regulation; and other factors, most of which are beyond the control of the Company.
These forward-looking statements can be identified by the use of predictive, future-tense or forward-looking terminology, such as “believes,” “anticipates,” “expects,” “estimates,” “plans,” “may,” “will,” or similar terms. These statements appear in a number of places in this filing and include statements regarding the intent, belief or current expectations of the Company, and its directors or its officers with respect to, among other things: (i) trends affecting the Company’s financial condition or results of operations for its limited history; (ii) the Company’s business and growth strategies; and, (iii) the Company’s financing plans. Investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve significant risks and uncertainties, and that actual results may differ materially from those projected in the forward-looking statements as a result of various factors. Such factors that could adversely affect actual results and performance include, but are not limited to, the Company’s limited operating history, potential fluctuations in quarterly operating results and expenses, government regulation, technological change and competition. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to our filings with the SEC under the Exchange Act and the Securities Act of 1933, as amended, including our Current Report on Form 10-K and Form 10-K/A filed with the Securities and Exchange Commission on October 16, 2023 and February 15, 2024 respectively.
Consequently, all of the forward-looking statements made in this Form 10-Q are qualified by these cautionary statements and there can be no assurance that the actual results or developments anticipated by the Company will be realized or, even if substantially realized, that they will have the expected consequence to or effects on the Company or its business or operations. The Company assumes no obligations to update any such forward-looking statements.
| 3 |
| Table of Contents |
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
The accompanying unaudited condensed 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 nine months ended March 31, 2024 are not necessarily indicative of the results that can be expected for the year ended June 30, 2024.
VERDE RESOURCES, INC.
INDEX TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED MARCH 31, 2024
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Unaudited Condensed Consolidated Balance Sheets as at March 31, 2024 and June 30, 2023 (audited) |
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Notes to Unaudited Condensed Consolidated Financial Statements |
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| Table of Contents |
VERDE RESOURCES, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(Currency expressed in United States Dollars (“US$”), except for number of shares)
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| March 31, 2024 |
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| June 30, 2023 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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Accounts receivable |
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Inventories |
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Amount due from related party |
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Advance to supplier |
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Prepayments |
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Other receivables and deposits |
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Total current assets |
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Non-current assets: |
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Property, plant and equipment, net |
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Right of use assets, net |
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Intangible assets |
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Security deposit |
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Deposit paid for acquisition of subsidiaries |
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Total non-current assets |
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TOTAL ASSETS |
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LIABILTIES AND STOCKHOLDERS’ EQUITY |
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Current liabilities: |
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Accounts payable |
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Accrued liabilities and other payables |
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Finance lease liabilities |
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Operating lease liability |
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Bank loan |
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Amount due to director |
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Amounts due to related parties |
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Total current liabilities |
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Non-current liabilities: |
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Finance lease liabilities |
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Operating lease liability |
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Promissory notes |
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Total non-current liabilities |
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TOTAL LIABILITIES |
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Commitments and contingencies |
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STOCKHOLDERS’ EQUITY |
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Preferred stock, $ |
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Common stock, $ |
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Common stock, $ |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated other comprehensive income |
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Accumulated deficit |
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Stockholders’ equity |
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TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
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See accompanying notes to unaudited condensed consolidated financial statements.
| F-2 |
| Table of Contents |
VERDE RESOURCES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME
(Currency expressed in United States Dollars (“US$”), except for number of shares)
|
| Three Months ended March 31, |
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| Nine Months ended March 31, |
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Revenue |
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Cost of revenue |
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Gross (loss)/profit |
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Operating expenses: |
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Selling, general and administrative |
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Total operating expenses |
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LOSS FROM OPERATION |
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Other (expense) income: |
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Interest expense |
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Rental income |
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Other (expense) income |
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Total other (expense) income, net |
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LOSS BEFORE INCOME TAXES |
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Income tax expense |
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Loss from continuing operation |
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Loss from discontinued operation |
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NET LOSS |
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Other comprehensive income (loss) : |
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– Foreign currency adjustment income |
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COMPREHENSIVE LOSS |
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Net loss per share |
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– Basic |
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– Diluted |
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Weighted average Common Shares outstanding |
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– Basic |
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– Diluted |
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See accompanying notes to unaudited condensed consolidated financial statements.
| F-3 |
| Table of Contents |
VERDE RESOURCES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Currency expressed in United States Dollars (“US$”))
|
| Nine Months ended March 31, |
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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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Depreciation of property, plant and equipment |
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Amortization |
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Stock-based compensation |
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Finance cost interest element of promissory notes (non-cash) |
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Lease interest expense |
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Fair value adjustment on convertible promissory note |
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Deposit paid for acquisition of subsidiary written off |
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Impairment on trade receivables |
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Impairment on other receivables |
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Gain on disposal of property, plant and equipment |
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Changes in operating assets and liabilities: |
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Accounts receivable |
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Other receivables, deposits and prepayments |
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Inventories |
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Accounts payables |
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Accrued liabilities and other payables |
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Advanced to director |
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Advanced from related parties |
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Net cash used in operating activities |
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Cash flows from investing activities: |
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Proceeds from disposal of property, plant and equipment |
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Proceed from disposal of discontinued operation, net |
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Payments of deposit for acquisition of subsidiary company |
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Net cash flows on acquisition of subsidiary company |
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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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Drawdown of bank loan |
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Repayment of bank loan |
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Lease interest paid |
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Advanced from related parties |
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Advanced from other payables |
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Proceeds from issuance of common stock and common stock to be issued |
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Net cash provided by financing activities |
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Net change in cash and cash equivalent |
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Foreign currency translation adjustment |
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Net change in cash and cash equivalents |
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BEGINNING OF PERIOD |
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END OF PERIOD |
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |
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Cash paid for income taxes |
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Cash paid for interest |
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See accompanying notes to unaudited condensed consolidated financial statements.
| F-4 |
| Table of Contents |
VERDE RESOURCES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE NINE MONTHS ENDED MARCH 31, 2024 AND 2023
(Currency expressed in United States Dollars (“US$”), except for number of shares)
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No. of Shares |
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| Common shares Stock |
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| Shares to be issued Amount |
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| Shares to be cancelled Amount |
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| Additional paid-in capital |
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| Accumulated other comprehensive (loss) income |
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| Accumulated losses |
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| Total stockholders’ equity |
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Balance as of July 1, 2023 |
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Shares to be issued to service provider |
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Shares issued for private placement |
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|
|
|
|
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Common stock subject to forfeiture |
|
| ( | ) |
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) |
|
| - |
|
|
|
|
|
| ( | ) | |||
Shares to be issued for private placement |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| - |
|
|
|
| |||||||
Net loss for the period |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) | |||||
Foreign currency translation adjustment |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
| ( | ) | |||||
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31,2023 |
|
|
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
|
| $ | ( | ) |
| $ | ( | ) |
| $ |
| |||||
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for previously committed private placement |
|
| - |
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Shares previously committed issued to service provider |
|
| - |
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Shares to be issued for private placement |
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Shares cancelled |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) | |||||
Shares to be issued to service provider |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net loss for the period |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) | |||||
Foreign currency translation adjustment |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
|
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|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2024 |
|
|
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
|
| $ | ( | ) |
| $ | ( | ) |
| $ |
| |||||
| F-5 |
| Table of Contents |
VERDE RESOURCES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE NINE MONTHS ENDED MARCH 31, 2024 AND 2023
(Currency expressed in United States Dollars (“US$”), except for number of shares)
|
| Common Stock shares |
|
| Common Stock Amount |
|
| Shares to be issued Amount |
|
| Additional paid-in capital |
|
| Accumulated other comprehensive income |
|
| Accumulated losses |
|
| Accumulated other comprehensive income of disposal group held for sale |
|
| Total stockholders’ equity |
| ||||||||
|
|
|
|
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| ||||||||
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Balance as of July 1, 2022 |
|
|
|
| $ |
|
| $ | - |
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
|
| $ |
| ||||||
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share issued to service provider |
|
|
|
|
|
|
|
|
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
| |||||||
Shares issued for private placement |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| - |
|
|
|
|
|
|
| |||||||
Shares issued for conversion of promissory note (“PN”) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| - |
|
|
|
| |||||||
Fair value adjustment on conversion of PN |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Net loss for the period |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
| ( | ) | |||||
Foreign currency translation adjustment |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
| ( | ) | |||||
|
|
|
|
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|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31,2022 |
|
|
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
|
| $ |
| |||||||
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued to service provider |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Shares to be issued for private placement |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Net loss for the period |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
| ( | ) | |||||
Foreign currency translation adjustment |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Reclassification arising from disposal group held for sale |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
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| ||||||
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2023 |
|
|
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
|
| $ |
| |||||||
See accompanying notes to unaudited condensed consolidated financial statements.
| F-6 |
| Table of Contents |
VERDE RESOURCES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2024 AND 2023
(Currency expressed in United States Dollars (“US$”), except for number of shares)
NOTE 1 - ORGANIZATION AND BUSINESS BACKGROUND
Verde Resources, Inc. (the “We” or “Company” or “VRDR”) was incorporated on April 22, 2010, in the State of Nevada, U.S.A..
We currently operate in the distribution of THC-free cannabinoid (CBD) products, production and distribution of renewable commodities and real property holding. However, the Company has been undergoing a restructuring exercise to shift its focus towards renewable energy and sustainability development with the world faced with challenges of climate change and environmental dehydration.
As of March 31, 2024, the Company has the following subsidiaries:-
Company name |
|
Place of incorporation |
| Principal activities and place of operation |
| Effective interest held |
|
|
|
|
|
|
|
Verde Resources Asia Pacific Limited (“VRAP”) |
|
|
| |||
|
|
|
|
|
|
|
Verde Resources (Malaysia) Sdn Bhd (“Verde Malaysia”) |
|
|
| |||
|
|
|
|
|
|
|
Verde Renewables, Inc. (“VRI”) |
|
|
| |||
|
|
|
|
|
|
|
Verde Life Inc. (“VLI”) |
|
|
| |||
|
|
|
|
|
|
|
The Wision Project Sdn Bhd (“Wision”) |
|
|
| |||
|
|
|
|
|
|
|
Verde Estates LLC (“VEL”) |
|
|
| |||
|
|
|
|
|
|
|
Bio Resources Limited (“BRL”) |
|
|
|
The Company and its subsidiaries are hereinafter referred to as (the “Company”).
| F-7 |
| Table of Contents |
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited condensed consolidated financial statements reflect the application of certain significant accounting policies as described in this note and elsewhere in the accompanying unaudited condensed consolidated financial statements and notes.
· | 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 condensed consolidated balance sheet as of June 30, 2023 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, 2024 are not necessarily indicative of the results to be expected for the entire fiscal year ending June 30, 2024 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, 2023, filed with the SEC on October 16, 2023.
· | Use of Estimates and Assumptions |
The preparation of unaudited condensed consolidated 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.
In preparing these unaudited condensed consolidated financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheet and revenues and expenses during the periods reported. Actual results may differ from these estimates.
· | Basis of Consolidation |
The unaudited condensed consolidated financial statements include the financial statements of Verde Resources, Inc. and its subsidiaries. All significant inter-company balances and transactions within the Company and its subsidiaries have been eliminated upon consolidation. The Company accounts for acquisitions in accordance with guidance found in ASC 805, Business Combinations. The guidance requires consideration given, including contingent consideration, assets acquired, and liabilities assumed to be valued at their fair market values at the acquisition date.
· | Segment Reporting |
Accounting Standard Codification (“ASC”) Topic 280, Segment Reporting establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organization structure as well as information about geographical areas, business segments and major customers in consolidated financial statements. Currently, the Company operates in four reportable operating segments.
· | 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, accounts receivable and related party receivables, advance to suppliers and other receivables and deposits. 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 also assesses the financial strength and credit worthiness of any parties to which it extends funds or trades with, and as such, it believes that any associated credit risk exposures are limited.
· | Risks and Uncertainties |
The Company is venturing into the production and distribution of renewable commodities that are subject to significant risks and uncertainties, including financial, operational, technological, and other risks associated with a production operation for renewable commodities, including the potential risk of business failure.
· | Cash and Cash Equivalents |
Cash and cash equivalents are carried at cost and represent 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 $
At March 31, 2024 and June 30, 2023, cash and cash equivalents consisted of bank deposits and petty cash on hands.
| F-8 |
| Table of Contents |
· | 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. As of March 31, 2024 and June 30, 2023, the longest credit term for certain customers are
For the three and nine months ended March 31, 2024, the allowance for doubtful debts for accounts receivables amounted to $
· | Expected Credit Loss |
ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments requires entities to use a current lifetime expected credit loss methodology to measure impairments of certain financial assets. Using this methodology will result in earlier recognition of losses than under the previous incurred loss approach, which requires waiting to recognize a loss until it is probable of having been incurred. There are other provisions within the standard that affect how impairments of other financial assets may be recorded and presented, and that expand disclosures. The Company adopted the new standard effective July 1, 2023, the first day of the Company’s fiscal year and applied to accounts receivable and other financial instruments. The adoption of this guidance did not materially impact the net earning and financial position and has no impact on the cash flows.
· | 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. Cost of raw materials include cost of materials and incidental costs in bringing the inventory to its current location. Costs of finished goods, on the other hand 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, 2024 and June 30, 2023, the Company did not record an allowance for obsolete inventories, nor have there been any write-offs.
· | Property, Plant and Equipment |
Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Depreciation is calculated on the straight-line basis over the following expected useful lives from the date on which they become fully operational and after taking into account their estimated residual values:
|
| Expected useful life |
|
Land and buildings |
|
| |
Plant and machinery |
|
| |
Office equipment |
|
| |
Computer |
|
| |
Motor vehicles |
|
| |
Furniture and fittings |
|
| |
Renovation |
|
|
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 unaudited condensed consolidated statements of income and other comprehensive income in other income or expenses.
Depreciation expense for the three months ended March 31, 2024 and 2023 totaled $
Depreciation expense for the nine months ended March 31, 2024 and 2023 were $
· | Intangible assets |
Intangible assets acquired from third parties are measured initially at fair value , and where they have an infinite live, are not amortized. The Company annually evaluates the recoverability of the infinite-lived intangible assets for possible impairment whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable. The recoverability of these assets is measured by a comparison of the carrying amounts to the future discounted cash flows the assets are expected to generate. If such a review indicates that the carrying amount of intangible assets is not recoverable, the carrying amount of such assets is reduced to fair value.
As of March 31, 2024 and June 30, 2023, the Company did not record an impairment on the intangible assets.
· | Impairment of Long-lived Assets |
In accordance with the provisions of ASC Topic 360, Impairment or Disposal of Long-Lived Assets, all long-lived assets such as property and equipment and intangible assets owned and held by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is evaluated by a comparison of the carrying amount of an asset to its estimated future undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceed the fair value of the assets.
There has been no impairment charge for the three and nine months ended March 31, 2024 and 2023.
| F-9 |
| Table of Contents |
· | Advance to Supplier |
Advance to supplier is provided for the provision of goods and services and they are secured either by a security deposit or a legally enforceable right to recover.
· | Revenue Recognition |
ASC Topic 606, Revenue from Contracts with Customers (“ASC Topic 606”), establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts to provide goods or services to customers.
The Company applies the following five steps in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements:
· | identify the contract with a customer; |
· | identify the performance obligations in the contract; |
· | determine the transaction price; |
· | allocate the transaction price to performance obligations in the contract; and |
· | recognize revenue as the performance obligation is satisfied. |
Revenue is recognized when the Company satisfies its performance obligation under the contract by transferring the promised product to its customer that obtains control of the product which typically occurs at delivery date at a point in time, and collection is reasonably assured. A performance obligation is a promise in a contract to transfer a distinct product or service to a customer. Most of the Company’s contracts have a single performance obligation, as the promise to transfer products or services is not separately identifiable from other promises in the contract and, therefore, not distinct.
The Company considers customer order confirmations, whether formal or otherwise, to be a contract with the customer. In determining the transaction price, the Company evaluates whether the price is subject to refund or adjustment to determine the net consideration to which the Company expects to be entitled.
The Company also follows the guidance provided in ASC 606, Revenue from Contracts with Customers, for determining whether the Company is the principal or an agent in arrangements with customers that involve another party that contributes to the provision of goods to a customer. In these instances, the Company determines whether it has promised to provide the goods itself (as principal) or to arrange for the specified goods to be provided by another party (as an agent). This determination is a matter of judgment that depends on the facts and circumstances of each arrangement.
The Company derives its revenue from the sale of products and services in its role as a principal.
Rental income
Rental income is recognized on a straight line basis over the term of the respective lease agreement.
· | Cost of revenue |
Cost of revenue consists primarily of the cost of goods sold, which are directly attributable to the sales of products.
· | 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 Topic 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, 2024 and June 30, 2023.
The operating lease is included in operating lease right-of-use assets and operating lease liabilities as current and non-current liabilities in the unaudited condensed consolidated balance sheets at March 31, 2024 and June 30, 2023.
| F-10 |
| Table of Contents |
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 Topic 842.
· | Income Taxes |
The Company adopted the ASC Topic 740, Income tax provisions of paragraph 740-10-25-13, which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the unaudited condensed consolidated financial statements. Under paragraph 740-10-25-13, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the unaudited condensed consolidated financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Paragraph 740-10-25-13 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. The Company had no material adjustments to its liabilities for unrecognized income tax benefits according to the provisions of paragraph 740-10-25-13.
The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying balance sheets, as well as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its balance sheets and provides valuation allowances as management deems necessary.
Uncertain Tax Positions
The Company did not take any uncertain tax positions and had no adjustments to its income tax liabilities or benefits pursuant to the ASC Topic 740 provisions of Section 740-10-25 for the three and nine months ended March 31, 2024 and 2023.
· | Foreign Currencies Translation |
The Company’s functional and reporting currency is the United States dollar (“US$”) and the accompanying unaudited condensed consolidated financial statements have been expressed in United States dollars. The Company’s subsidiaries in Malaysia have functional currency of Malaysian Ringgit (“MYR”), being the primary currency of the economic environment in which their operations are conducted.
Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the unaudited condensed consolidated statement of operations.
For reporting purposes, in accordance with ASC Topic 830 ”Translation of Financial Statements”, capital accounts of the unaudited condensed consolidated financial statements are translated into United States dollars from MYR at their historical exchange rates when the capital transactions occurred. Assets and liabilities are translated at the exchange rates as of balance sheet date. Income and expenditures are translated at the average exchange rate of the respective period. The gains and losses resulting from translation of financial statements subsidiaries to the reporting currency are recorded as a separate component of accumulated other comprehensive income within the statements of changes in stockholder’s equity.
Translation of MYR into U.S. dollars has been made at the following exchange rates for the following periods:-
|
| March 31, 2024 |
|
| March 31, 2023 |
| ||
Period-end MYR:US$ exchange rate |
|
|
|
|
|
| ||
Average period MYR:US$ exchange rate |
|
|
|
|
|
| ||
· | Comprehensive Income |
ASC Topic 220, Comprehensive Income, establishes standards for reporting and display of comprehensive income, its components and accumulated balances. Comprehensive income as defined includes all changes in equity during a period from non-owner sources. Accumulated other comprehensive income, as presented in the accompanying unaudited condensed consolidated statements of changes in stockholders’ equity, consists of changes in unrealized gains and losses on foreign currency translation. This comprehensive income is not included in the computation of income tax expense or benefit.
· | Net Loss per Share |
The Company calculates net loss per share in accordance with ASC Topic 260, Earnings per Share. Basic income per share is computed by dividing the net income by the weighted-average number of Common Shares outstanding during the period. Diluted income per share is computed similar to basic income per share except that the denominator is increased to include the number of additional Common Shares that would have been outstanding if the potential Common Stock equivalents had been issued and if the additional Common Shares were dilutive.
| F-11 |
| Table of Contents |
· | Stock Based Compensation |
The Company accounts for stock-based compensation in accordance with ASC Topic 718-10, Compensation-Stock Compensation, which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees, directors and non-employee 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.
· | Retirement Plan Costs |
Contributions to retirement plans (which are defined contribution plans) are charged to general and administrative expenses in the accompanying statements of operation as the related employee service are provided.
· | 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.
· | Related Parties |
The Company follows the ASC 850-10, Related Party 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 unaudited condensed 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.
· | Commitments and Contingencies |
The Company follows the ASC 450-20, Commitments 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 unaudited condensed 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.
| F-12 |
| Table of Contents |
· | Fair Value of Financial Instruments |
The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and has adopted paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 of the FASB Accounting Standards Codification establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, paragraph 820-10-35-37 of the FASB Accounting Standards Codification establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by paragraph 820-10-35-37 of the FASB Accounting Standards Codification are described below:
Level 1 | Quoted market prices available in active markets for identical assets or liabilities as of the reporting date. |
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Level 2 | Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. |
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Level 3 | Pricing inputs that are generally observable inputs and not corroborated by market data. |
Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.
The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.
The carrying amounts of the Company’s financial assets and liabilities, such as cash and cash equivalents, accounts receivable, prepayments and other receivables, accounts payable, accrued liabilities and other payables, loans payable, and amounts due to related parties approximate their fair values because of the short maturity of these instruments.
· | Recent Accounting Pronouncements |
During the period ended March 31, 2024, there have been no new, or existing, recently issued accounting pronouncements that are of significance, or potential significance, that impact the Company’s unaudited condensed consolidated financial statements.
In June 2016, the Financial Accounting Standards Board (“FASB”) issued new accounting guidance ASU 2016-13 for recognition of credit losses on financial instruments, which is effective January 1, 2020, with early adoption permitted on January 1, 2019. The guidance introduces a new credit reserving model known as the Current Expected Credit Loss (“CECL”) model, which is based on expected losses, and differs significantly from the incurred loss approach used today. The CECL model requires measurement of expected credit losses not only based on historical experience and current conditions, but also by including reasonable and supportable forecasts incorporating forward-looking information and will likely result in earlier recognition of credit reserves. In November 2019, the FASB issued ASU No. 2019-10, which is to update the effective date of ASU No. 2016-13 for private companies, not-for-profit organizations and certain smaller reporting companies applying for credit losses standard. The new effective date for these preparers is for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company has adopted this update on July 1, 2023, and the adoption does not have material impact on Company’s consolidated financial statements and related disclosures.
CECL adoption will have broad impact on the financial statements of financial services firms, which will affect key profitability and solvency measures. Some of the more notable expected changes include:
– | Higher allowance on financial guarantee reserve and finance lease receivable levels and related deferred tax assets. While different asset types will be impacted differently, the expectation is that reserve levels will generally increase across the board for all financial firms. |
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– | Increased reserve levels may lead to a reduction in capital levels. |
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– | As a result of higher reserving levels, the expectation is that CECL will reduce cyclicality in financial firms’ results, as higher reserving in “good times” will mean that less dramatic reserve increases will be loan related income (which will continue to be recognized on a periodic basis based on the effective interest method) and the related credit losses (which will be recognized up front at origination). This will make periods of loan expansion seem less profitable due to the immediate recognition of expected credit losses. Periods of stable or declining loan levels will look comparatively profitable as the income trickles in for loans, where losses had been previously recognized. |
In March 2023, the FASB issued new accounting guidance, ASU 2023-01, for leasehold improvements associated with common control leases, which is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted for both interim and annual financial statements that have not yet been made available for issuance. The new guidance introduced two issues: terms and conditions to be considered with leases between related parties under common control and accounting for leasehold improvements. The goals for the new issues are to reduce the cost associated with implementing and applying Topic 842 and to promote diversity in practice by entities within the scope when applying lease accounting requirements.
The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and believe 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-13 |
| Table of Contents |
NOTE 3 - GOING CONCERN UNCERTAINTIES
The accompanying unaudited condensed consolidated financial statements have been prepared using the going concern basis of accounting, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.
The Company has generated recurring losses and suffered from 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, 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.
These and other factors raise substantial doubt about the Company’s ability to continue as a going concern. These unaudited 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.
| F-14 |
| Table of Contents |
NOTE 4 – BUSINESS SEGMENT INFORMATION
Currently, the Company currently has four reportable business segments, mainly operating in:
(i) | Distribution of THC-free cannabinoid (CBD) products; |
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(ii) | Production and distribution of renewable commodities; |
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(iii) | Holding of real property; and |
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(iv) | Licensor of proprietary pyrolysis technology. |
In the period ended March 31, 2023, the business segment included the following, which has since been disposed:
(i) | Gold mineral mining. |
In the following table, revenue is disaggregated by primary major product line, and timing of revenue recognition. The table also includes a reconciliation of the disaggregated revenue with the reportable segments for the three and nine months ended March 31, 2024 and 2023:
|
| Three Months ended March 31, 2024 |
| |||||||||||||||||||||
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| Distribution of THC-free cannabinoid (CBD) products |
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| Production and distribution of renewable commodities |
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| Holding property |
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| Licensor of proprietary pyrolysis technology |
|
| Corporate unallocated |
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| Consolidated |
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|
|
|
|
|
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|
|
|
|
|
|
|
|
| ||||||
Revenue |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
| |||||
Cost of revenue |
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) | |||
Gross profit/(loss) |
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) | |||||
Selling, general & administrative expenses |
|
|
|
|
| ( | ) |
|
| ( | ) |
|
|
|
|
| ( | ) |
|
| ( | ) | ||
Loss from operations |
|
|
|
|
| ( | ) |
|
| ( | ) |
|
|
|
|
| ( | ) |
|
| ( | ) | ||
Interest expense |
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) | |||
Rental income |
|
| |
|
|
| |
|
|
| |
|
|
| - |
|
|
| |
|
|
| |
|
Other income |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) | ||||
Loss before income tax |
|
|
|
|
| ( | ) |
|
| ( | ) |
|
|
|
|
| ( | ) |
|
| ( | ) | ||
Income tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net loss |
| $ |
|
| $ | ( | ) |
| $ | ( | ) |
| $ |
|
| $ | ( | ) |
|
| ( | ) | ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Total assets at March 31, 2024 |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||||
|
| Three Months ended March 31, 2023 |
| |||||||||||||||||||||||||
|
| Gold mineral mining |
|
| Distribution of THC-free cannabinoid (CBD) products |
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| Production and distribution of renewable commodities |
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| Holding property |
|
| Licensor of proprietary pyrolysis technology |
|
| Corporate unallocated |
|
| Consolidated |
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|
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|
| |||||||
Revenue |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| |||||||
Cost of revenue |
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) | ||||
Gross (loss) profit |
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
|
|
|
| ( | ) | |||||
Selling, general & administrative expenses |
|
|
|
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) | |
Loss from operations |
|
|
|
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) | |
Interest expenses |
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
|
|
|
| ( | ) | |||||
Rental income |
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
Other income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Loss before income tax |
|
|
|
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) | |
Income tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Loss from continuing operation |
|
|
|
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) | |
Loss from discontinued operation |
|
| ( | ) |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) | ||||
Net loss |
| $ | ( | ) |
| $ | (300 | ) |
| $ | ( | ) |
| $ | ( | ) |
|
| ( | ) |
| $ | ( | ) |
| $ | ( | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets as March 31, 2023 |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
|
|
|
| $ |
| |||||||
| F-15 |
| Table of Contents |
|
| Nine Months ended March 31, 2024 |
| |||||||||||||||||||||
|
| Distribution of THC-free cannabinoid (CBD) products |
|
| Production and distribution of renewable commodities |
|
| Holding property |
|
| Licensor of proprietary pyrolysis technology |
|
| Corporate unallocated |
|
| Consolidated |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Revenue |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||||
Cost of revenue |
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) | |||
Gross profit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Selling, general & administrative expenses |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
Loss from operations |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
Interest expense |
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) | |||
Rental income |
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
Other income |
|
|
|
|
|
|
|
|
|
|
| - |
|
|
|
|
|
|
| |||||
Loss before income tax |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
Income tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net loss |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | (4,158 | ) |
| $ | ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets at March 31, 2024 |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||||
|
| Nine Months ended March 31, 2023 |
| |||||||||||||||||||||||||
|
| Gold mineral mining |
|
| Distribution of THC-free cannabinoid (CBD) products |
|
| Production and distribution of renewable commodities |
|
| Holding property |
|
| Licensor of proprietary pyrolysis technology |
|
| Corporate unallocated |
|
| Consolidated |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Revenue |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| |||||||
Cost of revenue |
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) | ||||
Gross (loss) profit |
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
|
|
|
| ( | ) | |||||
Selling, general & administrative expenses |
|
|
|
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) | |
Loss from operations |
|
|
|
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) | |
Interest expenses |
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) | ||||
Rental income |
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
Other income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Loss before income tax |
|
|
|
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) | |
Income tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Loss from continuing operation |
|
|
|
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) | |
Loss from discontinued operation |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) | |||||
Net loss |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
|
| ( | ) |
|
| (8,935 | ) |
| $ | ( | ) |
| $ | ( | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets as March 31, 2023 |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
|
|
|
| $ |
| |||||||
The below revenues are based on the countries in which the customer is located. Summarized financial information concerning the geographic segments is shown in the following tables:
|
| Three Months ended March 31, |
|
| Nine Months ended March 31, |
| ||||||||||
|
| 2024 |
|
| 2023 |
|
| 2024 |
|
| 2023 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Malaysia |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
United States |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
| F-16 |
| Table of Contents |
NOTE 5 – INVENTORIES
Inventories as of March 31, 2024 and June 30, 2023 consisted of the following:
|
| March 31, 2024 |
|
| June 30, 2023 |
| ||
|
|
|
|
|
|
| ||
Finished goods |
| $ |
|
| $ |
| ||
Raw materials |
|
|
|
|
|
| ||
|
| $ |
|
| $ |
| ||
NOTE 6 – ADVANCE TO SUPPLIER
This represents advance to a supplier for the supply of THC-free cannabinoid (CBD) products pursuant to an agreement dated July 7, 2021 and are secured by a security deposit with legally enforceable right to recover.
NOTE 7 – OTHER RECEIVABLES, DEPOSITS AND PREPAYMENTS
Other receivable, deposits and prepayments as of March 31, 2024 and June 30, 2023 consisted of the following:
|
| March 31, 2024 |
|
| June 30, 2023 |
| ||
|
|
|
|
|
|
| ||
Deposits |
| $ |
|
| $ |
| ||
Other receivables |
|
|
|
|
|
| ||
|
| $ |
|
| $ |
| ||
Less: impairment on other receivables |
|
| ( | ) |
|
|
| |
Other receivables and deposits, net |
| $ |
|
| $ |
| ||
Prepayments |
|
|
|
|
|
| ||
|
| $ |
|
| $ |
| ||
NOTE 8 – PROPERTY, PLANT AND EQUIPMENT
A summary of property and equipment at March 31, 2024 and June 30, 2023 is as follows:
|
| March 31, 2024 |
|
| June 30, 2023 |
| ||
|
|
|
|
|
|
| ||
Land and building |
| $ |
|
| $ |
| ||
Plant and machinery |
|
|
|
|
|
| ||
Office equipment |
|
|
|
|
|
| ||
Computer |
|
|
|
|
|
| ||
Motor vehicles |
|
|
|
|
|
| ||
Furniture and fittings |
|
|
|
|
|
| ||
Renovation |
|
|
|
|
|
| ||
|
|
|
|
|
|
| ||
Less: accumulated depreciation |
|
| ( | ) |
|
| ( | ) |
Foreign exchange adjustment |
|
| ( | ) |
|
|
| |
|
| $ |
|
| $ |
| ||
Depreciation expense for the three months ended March 31, 2024 and 2023 totaled $
Depreciation expense for the nine months ended March 31, 2024 and 2023 totaled $
Land and building with the net carrying value of $
Plant and machinery and motor vehicles with carrying values of $
| F-17 |
| Table of Contents |
NOTE 9 –INTANGIBLE ASSETS
The intangible assets comprise (i) a global intellectual property (“IP”) of $
The “Catalytic Biofraction Process” is a slow pyrolysis process using a proprietary catalyst to depolymerize palm biomass wastes (empty fruit bunches or palm kernel shells) in temperature range of 350 degrees Celsius to 500 degrees 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 palm biomass wastes is used as feedstock. Upon fulfilling UN’s (United Nations) ACM 22 protocol as well as LCA (Life Cycle Assessment) requirements, it is anticipated that the by-products from this IP would lead to certification and issuance of Carbon Avoidance Credits as well as Carbon Removal Credits to generate carbon revenue for the Company.
NOTE 10 – DEPOSITS PAID
At March 31, 2024 and June 30, 2023, deposits consist of the following:
|
| March 31, 2024 |
|
| June 30, 2023 |
| ||
Deposits paid for acquisition of subsidiaries |
|
|
|
|
|
| ||
- Vata VM Synergy (M) Sdn Bhd (“VATA”) (#1) |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Security deposit |
|
|
|
|
|
|
|
|
- Factory site (#2) |
| $ |
|
| $ |
| ||
(#1) On March 23, 2023, the Company, through its wholly-owned subsidiary Verde Resources (Malaysia) Sdn. Bhd. (“Verde Malaysia”), entered into a Shares Sale Agreement (the “SSA Agreement”) with Murugesu A/L M. Narasimha and Deivamalar A/P Kandiah (“Vendors”), the legal and beneficial owners of Vata VM Synergy (M) Sdn. Bhd. (“VATA”), a company incorporated under the laws of Malaysia, to acquire 60% of the issued and paid-up share capital of VATA, a company engaged in the business of providing green technology to government and private sectors and in creating high quality compost using agricultural waste and biomass products in Malaysia. In relation to the SSA Agreement, the Company through Verde Malaysia also entered into a Shareholders Agreement with Murugesu A/L M. Narasimha and VATA. Under the terms of the SSA Agreement, the consideration for the acquisition of 60% of the issued and paid-up share capital of VATA shall be satisfied by the total purchase consideration of MYR
The SSA, however, has since been terminated on the basis of non-disclosure of material information by the vendor, and the deposits written off during the nine months ended March 31, 2024.
(#2) On March 2, 2022, the Company, through VRAP, entered into a Commercial Lease Agreement and Option to Purchase (“Segama Lease Agreement”) the factory site from Segama Ventures for a lease term of seven (
NOTE 11 - MINING RIGHT
A lump sum payment of MYR260,500 ($
The table below presents the movement of the right as recorded on the balance sheets.
|
| Nine months ended March 31, 2024 |
|
| Year Ended June 30, 2023 |
| ||
Balance as at July 1, 2023 and July 1, 2022 |
| $ |
|
| $ |
| ||
Amortization charge for the period / year |
|
|
|
|
| ( | ) | |
Foreign exchange adjustment |
|
|
|
|
| ( | ) | |
Disposal of subsidiary |
|
|
|
|
| ( | ) | |
Balance as of March 31, 2024 and June 30, 2023 |
| $ | - |
|
| $ | - |
|
Amortization charge of mining right was $
Amortization charge of mining right was $
| F-18 |
| Table of Contents |
NOTE 12 – BANK LOAN
The bank loan represents a rolling facility to a maximum principal of $
For the three and nine months ended March 31, 2024, the interest expense amounted to $
NOTE 13 – AMOUNTS DUE TO RELATED PARTIES
The following breakdown of the balances due to related parties, consisted of:-
|
| March 31, 2024 |
|
| June 30, 2023 |
| ||
|
|
|
|
|
|
| ||
Amount due to related parties |
|
|
|
|
|
| ||
Borneo Oil Corporation Sdn (“BOC”) (#1) |
| $ |
|
| $ |
| ||
Borneo Oil Berhad (“BOB”) (#1) |
|
|
|
|
|
| ||
Taipan International Limited (#2) |
|
|
|
|
|
| ||
Borneo Energy Sdn Bhd (#1) |
|
|
|
|
|
| ||
Victoria Capital Sdn Bhd (#3) |
|
|
|
|
|
| ||
|
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Amount due to director |
|
|
|
|
|
|
|
|
Mr. Jack Wong (#4) |
| $ |
|
| $ |
| ||
(#1) Borneo Energy Sdn Bhd is a wholly owned subsidiary of Borneo Oil Corporation Sdn Bhd (“BOC”) and BOC is a wholly owned subsidiary of Borneo Oil Berhad (“BOB”) (holding
(#2) Taipan International Limited who, pursuant to the disposal of BRL to the Company, became one of the shareholders of the Company and held
(#3) Victoria Capital Sdn. Bhd. is one of the shareholders of the Company, and held
(#4) Mr. Jack Wong is the Chief Executive of the Company effective October 1, 2022. Further, effective March 30, 2023, Mr. Jack Wong was re-appointed Director of the Company for a one (
NOTE 14 – PROMISSORY NOTES
|
| March 31, 2024 |
|
| June 30, 2023 |
| ||
|
|
|
|
|
|
| ||
Promissory Notes (#1) |
| $ |
|
| $ |
| ||
Promissory Notes (#2) – related party |
|
|
|
|
|
| ||
|
| $ |
|
| $ |
| ||
The following is a reconciliation of the beginning and ending balances of promissory notes payable using Level 3 inputs:
|
| March 31, |
|
| June 30, |
| ||
|
| 2024 |
|
| 2023 |
| ||
Balance at the beginning of period or year |
| $ |
|
| $ |
| ||
Promissory notes issued to related party at fair value (#2) |
|
|
|
|
|
| ||
Interest expense #1 |
|
|
|
|
|
| ||
Interest expense #2 |
|
|
|
|
|
| ||
Converted to Company’s restricted Common Stock (#1) |
|
|
|
|
| ( | ) | |
Balance at the end of period or year |
| $ |
|
| $ |
| ||
| F-19 |
| Table of Contents |
(#1) Promissory notes with a principal amount of $
(#2) On March 13, 2023, the Company and its indirect wholly-owned subsidiary CSB entered into a Settlement of Debts Agreement (the “SDA Agreement”) for the settlement in full of CSB’s account payable to a related party, Borneo Oil Corporation Sdn Bhd (“BOC”) by way of the issuance on March 13, 2023 of a two year term Promissory Notes with the face value (principal) amount of $
The Company recorded accretion of liability on promissory notes of $
The Company recorded accretion of liability on promissory notes of $
NOTE 15 - LEASES
The Company adopted ASU No. 2016-02, Leases and determines whether an arrangement is a lease at inception. This determination generally depends on whether the arrangement conveys the right to control the use of an identified fixed asset explicitly or implicitly for a period of time in exchange for consideration. Control of an underlying asset is conveyed if we obtain the rights to direct the use of and to obtain substantially all of the economic benefit from the use of the underlying asset. Some of our leases include both lease and non-lease components which are accounted for as a single lease component as the Company has elected the practical expedient. Some of the operating lease agreements include variable lease costs, primarily taxes, insurance, common area maintenance or increases in rental costs related to inflation. Substantially all of our equipment leases and some of our real estate leases have terms of less than one year and, as such, are accounted for as short-term leases as we have elected the practical expedient.
Operating leases are included in the right-of-use lease assets, and current and non-current lease liabilities on the Unaudited Condensed Consolidated Balance Sheet. Right-of-use assets and lease liabilities are recognized at each lease’s commencement date based on the present values of its lease payments over its respective lease term. When a borrowing rate is not explicitly available for a lease, the incremental borrowing rate is used based on information available at the lease’s commencement date to determine the present value of its lease payments. Operating lease payments are recognized on a straight-line basis over the lease term.
The Company adopts a
| F-20 |
| Table of Contents |
The table below presents the lease-related assets and liabilities recorded on the balance sheet.
|
| March 31, 2024 |
|
| June 30, 2023 |
| ||
|
|
|
|
|
|
| ||
Assets |
|
|
|
|
|
| ||
Right-of-use asset (#1) |
| $ |
|
| $ |
| ||
Right-of-use asset (#2) |
|
|
|
|
|
| ||
Total RoU assets |
| $ |
|
| $ |
| ||
Less: Amortisation |
|
| ( | ) |
|
| ( | ) |
|
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
Current: |
|
|
|
|
|
|
|
|
Operating lease liabilities |
| $ |
|
| $ |
| ||
Finance lease liabilities |
|
|
|
|
|
| ||
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Non-current: |
|
|
|
|
|
|
|
|
Operating lease liabilities |
|
|
|
|
|
| ||
Finance lease liabilities |
|
|
|
|
|
| ||
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Total lease liabilities |
| $ |
|
| $ |
| ||
As of March 31, 2024, right-of-use assets were $
As of June 30, 2023, right-of-use assets were $
For the three months ended March 31, 2024 and 2023, the amortization charge on right-of use assets was $
For the nine months ended March 31, 2024 and 2023, the amortization charge on right-of-use assets was $
(#1) This leasing arrangement for the lease of the Segama factory amounting to $
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.
(#2) This leasing arrangement as stated at fair value above is for the lease of an executive vehicle with a total liability of $
The accretion of lease liability for the three and nine months ending March 31, 2024, were $
The Company excludes short-term leases (those with lease terms of less than one year at inception) from the measurement of lease liabilities or right-of-use assets. The following tables summarize the lease expense for the periods.
|
| Nine Months ended March 31, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
|
|
|
|
|
|
| ||
Finance lease cost: |
|
|
|
|
|
| ||
Interest on lease liabilities (per ASC 842) |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Operating lease cost: |
|
|
|
|
|
|
|
|
Operating lease expense (per ASC 842) |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Total lease expense |
| $ |
|
| $ |
| ||
Components of Lease Expense
The Company recognizes operating lease expense on a straight-line basis over the term of the operating leases, comprising interest expense determined using the effective interest method, and amortization of the right-of-use asset, as reported within “general and administrative” expense on the accompanying unaudited condensed consolidated statement of operations.
Finance lease expense comprise of interest expenses determined using the effective interest method.
| F-21 |
| Table of Contents |
Future Contractual Lease Payments as of March 31, 2024
The below table summarizes our (i) minimum lease payments over the next five years, (ii) lease arrangement implied interest, and (iii) present value of future lease payments for the next five years and thereafter ending March 31:
Years ending March 31, |
| Operating and finance lease amount |
| |
|
|
|
| |
2025 |
| $ |
| |
2026 |
|
|
| |
2027 |
|
|
| |
2028 |
|
|
| |
2029 |
|
|
| |
Thereafter |
|
|
| |
|
|
|
|
|
Total minimum lease liabilities payment |
|
|
| |
Less: interest |
|
| ( | ) |
Present value of lease liabilities |
| $ |
| |
|
|
|
|
|
Representing:- |
|
|
|
|
Current liabilities |
| $ |
| |
Non-current liabilities |
|
|
| |
|
| $ |
| |
NOTE 16 - STOCKHOLDERS’ EQUITY
Authorized Stock
The Company has authorized
Preferred stock outstanding
There are no preferred shares outstanding as of March 31, 2024 and June 30, 2023.
Common Stock outstanding
On September 8, 2023, the Company, through its wholly-owned subsidiary Verde Renewables, Inc. (“VRI”) entered into a Service and Stock Cancellation Agreement with Steven Sorhus to cancel the Services Agreement dated December 1, 2022. Pursuant to the Service Agreement,
On September 8, 2023, the Company, through its wholly-owned subsidiary Verde Renewables, Inc. (“VRI”) entered into a Service and Stock Cancellation Agreement with EMGTA LLC to cancel the Services Agreement dated December 1, 2022, including the cancellation of
On September 12, 2023, the Company, through its wholly-owned subsidiary Verde Renewables, Inc. (“VRI”) entered into a Service and Stock Cancellation Agreement with YM Tengku Chanela Jamidah YAM Tengku Ibrahim to cancel the Services Agreement dated November 30, 2022. Pursuant to the Service Agreement,
On October 23, 2023, the Company, through its wholly-owned subsidiary VRI, entered into a Services Agreement (the “Agreement”) with Donald R. Fosnacht to engage him as National Certification and Extensive BCR (Biochar Carbon Removal) Implementation Specialist to develop and implement a comprehensive strategy to obtain national and regional certification and endorsement for carbon net-negative construction products with high biochar content, encompassing asphalt, concrete, and soil stabilization as designated in the Agreement. Under the Agreement, the Company will pay Donald R. Fosnacht by the issuance of
| F-22 |
| Table of Contents |
On November 22, 2023, the Company issued a total of
On December 4, 2023, the Company issued a total of
On February 26, 2024, the Company issued
Not considering the commitment to issue and cancel shares as above, there were
As of March 31, 2024 and June 30, 2023, the common stock subscribed but yet to be issued amounted to
As of March 31, 2024 and June 30, 2023,
The Company has no stock option plan, warrants, or other dilutive securities issued during the period.
NOTE 17 - INCOME TAX
For the nine months ended March 31, 2024 and 2023, the local (“United States of America”) and foreign components incurred loss before income taxes as follows: |
|
| Nine Months ended March 31, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
|
|
|
|
|
|
| ||
Tax jurisdiction from: |
|
|
|
|
|
| ||
- Local (US regime) |
| $ | ( | ) |
| $ | ( | ) |
- Foreign, including |
|
|
|
|
|
|
|
|
British Virgin Island |
|
| ( | ) |
|
| ( | ) |
Malaysia |
|
| ( | ) |
|
| ( | ) |
Labuan, Malaysia |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
Loss before income taxes |
| $ | ( | ) |
| $ | ( | ) |
The provision for income taxes consisted of the following:
|
| Nine Months ended March 31, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
|
|
|
|
|
|
| ||
Current tax: |
|
|
|
|
|
| ||
- Local |
| $ |
|
| $ |
| ||
- Foreign |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Deferred tax |
|
|
|
|
|
|
|
|
- Local |
|
|
|
|
|
| ||
- Foreign |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Income tax expense (benefit) |
| $ |
|
| $ |
| ||
The effective tax rate in the periods presented is the result of the mix of income earned in various tax jurisdictions that apply a broad range of income tax rates. The Company mainly operates in U.S.A. and Malaysia and are subject to taxes in the jurisdictions in which they operate, as follows:
United States of America
VRDR, VRI and VLI are subject to the tax laws of United States of America. The U.S. corporate income tax rate is
The Company has provided for a full valuation allowance against the deferred tax assets of $
Net Operating Losses (NOLs) generated prior to January 1, 2018 are able to be carried forward up to twenty subsequent years. Any NOLs created for tax years subsequent to that may be carried forward indefinitely. However, any NOLs arising from tax years ending after December 31, 2020, can only be used to offset up to
For the nine months ended March 31, 2024 and 2023, there were no operating income under US tax regime.
| F-23 |
| Table of Contents |
BVI
Under the current BVI law, VRAP is not subject to tax on income.
Labuan
Under the current laws of the Labuan applicable to BRL, income derived from an intellectual property right is subject to tax under the Malaysian Income Tax Act 1967 (ITA) at
Malaysia
The Company’s subsidiaries, Verde Malaysia and Wision are registered in Malaysia and are subject to the Malaysia corporate income tax at a standard income tax rate of
The operation in Malaysia incurred $
|
| Nine Months ended March 31, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
|
|
|
|
|
|
| ||
Loss before income taxes |
| $ | ( | ) |
| $ | ( | ) |
Statutory income tax rate |
|
| % |
|
| % | ||
Income tax expense at statutory rate |
|
| ( | ) |
|
| ( | ) |
Non-deductible items |
|
|
|
|
|
| ||
Operating losses unable to carried forward |
|
|
|
|
|
| ||
Valuation allowance |
|
|
|
|
|
| ||
Income tax expense |
| $ |
|
| $ |
| ||
The following table sets forth the significant components of the deferred tax assets of the Company:
|
| March 31, 2024 |
|
| June 30, 2023 |
| ||
|
|
|
|
|
|
| ||
Deferred tax assets: |
|
|
|
|
|
| ||
Net operating loss carryforwards, from |
|
|
|
|
|
| ||
US tax regime |
| $ |
|
| $ |
| ||
Malaysia tax regime |
|
|
|
|
|
| ||
Less: valuation allowance |
|
| ( | ) |
|
| ( | ) |
Deferred tax assets, net |
| $ |
|
| $ |
| ||
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 reversed in the unaudited condensed consolidated statement of operations. The Company did not have uncertainty tax positions or events leading to uncertainty tax position within the next 12 months.
| F-24 |
| Table of Contents |
NOTE 18 - RELATED PARTY TRANSACTIONS
|
| Nine Months ended |
| |||||
|
| March 31, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
Related party transactions: |
|
|
|
|
|
| ||
Sales to: |
|
|
|
|
|
| ||
Borneo Eco Food Sdn Bhd (#1) |
| $ |
|
| $ |
| ||
Rental income: |
|
|
|
|
|
|
|
|
Mr. Jack Wong (#3) |
| $ |
|
| $ |
| ||
Site expenses: |
|
|
|
|
|
|
|
|
Warisan Khidmat Sdn Bhd (#4) |
| $ |
|
| $ |
| ||
Professional services provided by: |
|
|
|
|
|
|
|
|
Warisan Khidmat Sdn Bhd (#4) |
| $ |
|
| $ |
| ||
Interest expense payable to: |
|
|
|
|
|
|
|
|
BOC (#2) |
| $ |
|
| $ |
| ||
Related party balances: |
|
| ||||||
|
| As of |
| |||||
|
| March 31, 2024 |
|
| June 30, 2023 |
| ||
Advanced from related parties |
|
|
|
|
|
| ||
BOC (#2) |
| $ |
|
| $ |
| ||
Borneo Oil Berhad (“BOB”) (#1) |
| $ |
|
| $ |
| ||
Borneo Energy Sdn Bhd (#1) |
| $ |
|
| $ |
| ||
Taipan International Limited (#5) |
| $ |
|
| $ |
| ||
Victoria Capital Sdn Bhd (#6) |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Trade payables |
|
|
|
|
|
|
|
|
Warisan Khidmat Sdn Bhd (#4) |
| $ |
|
| $ |
| ||
BOC (#2) |
| $ |
|
| $ |
| ||
J. Ambrose & Partners (#7) |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Advanced to related party |
|
|
|
|
|
|
|
|
Vetrolysis Limited (#8) |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Trade receivable |
|
|
|
|
|
|
|
|
Borneo Eco Food Sdn Bhd (#1) |
| $ |
|
| $ |
| ||
J. Ambrose & Partners (#7) |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Other payables |
|
|
|
|
|
|
|
|
J. Ambrose & Partners (#7) |
| $ |
|
| $ |
| ||
SB Supplies & Logistic Sdn Bhd (#1) |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Promissory notes issued to related party |
|
|
|
|
|
|
|
|
BOC (#2) |
| $ |
|
| $ |
| ||
(#1)
(#2)
(#3)
(#4) Warisan Khidmat Sdn. Bhd. is a company whose shareholdings is entirely held by a Director of Verde Malaysia.
(#5)
(#6)
(#7) Datuk Joseph Lee Yok Min, an indirect significant shareholder, is a partner of J. Ambrose & Partners. The advances received are related to ordinary business transactions and bear no interest or collateral, repayable and renewable under normal business advancement terms. Mr. Joseph Ambrose Lee who was also appointed as a Director and Chairman of the Board of Directors of the Company effective January 23, 2024, is also the Managing Director of BOB.
(#8) Encik Anuar bin Ismail, an indirect significant shareholder, is a director of Vetrolysis Limited.
Apart from the transactions and balances detailed elsewhere in these accompanying unaudited condensed consolidated financial statements, the Company has no other significant or material related party transactions during the periods presented.
| F-25 |
| Table of Contents |
NOTE 19 - CONCENTRATIONS OF RISK
The Company is exposed to the following concentrations of risk:
(a) Major customers
For the three and nine months ended March 31, 2024 and 2023,
(b) Economic and political risk
The Company’s major operations are conducted in U.S.A. and Malaysia. Accordingly, the political, economic, and legal environments in U.S.A. and Malaysia, as well as the general state of U.S.A. and Malaysia’s economy may influence the Company’s business, financial condition, and results of operations.
(c) Exchange rate risk
The Company cannot guarantee that the current exchange rate will remain steady; therefore there is a possibility that the Company could post the same amount of profit for two comparable periods and because of the fluctuating exchange rate actually post higher or lower profit depending on exchange rate of HKD converted to US$ on that date. The exchange rate could fluctuate depending on changes in political and economic environments without notice.
(d) Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company’s policy is to ensure that it has sufficient cash to meet its liabilities when they become due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation. A key risk in managing liquidity is the degree of uncertainty in the cash flow projections. If future cash flows are fairly uncertain, the liquidity risk increases.
NOTE 20 - PENSION COSTS
The Company is required to make contribution to their employees under a government-mandated defined contribution pension scheme for its eligible full-times employees in Malaysia. The Company is required to contribute a specified percentage of the participants’ relevant income based on their ages and wages level. During the nine months ended March 31, 2024, and 2023, $
NOTE 21 - COMMITMENTS AND CONTINGENCIES
Future commitments with regards to repayment of Promissory Note and lease liabilities are disclosed in Notes 14 and 15 respectively.
Apart from the above, as of March 31, 2024, the Company had the following capital commitment:
a) commitment to re-issue restricted Common Shares to the following service provider for services performed pursuant to the Service Agreements signed and Service and Stock Cancellation Agreement as disclosed in Note 16:
|
| Number of shares to be issued |
| |
|
|
|
| |
YM Tengku Chanela Jamidah YAM Tengku Ibrahim |
|
|
| |
Steven Sorhus |
|
|
| |
|
|
|
| |
b) commitment to repay Promissory Notes with the face value (principal) amount of $
c) commitment to cancel
d) commitment to issue restricted Common Shares, comprising of
As of March 31, 2024, the Company has no material contingencies.
| F-26 |
| Table of Contents |
NOTE 22 - SUBSEQUENT EVENTS
On April 12, 2024, shares that were committed to be issued as of March 31, 2024 were fully settled by way of issuance of
On April 15, 2024, the Company further issued a total of
On April 20, 2024, the Company entered into two Services Agreements (the “Agreements”) with Dr. Nam Tran and Dr. Raymond Powell to engage them as National Implementation Experts for its wholly-owned subsidiary Verde Renewables, Inc. (“VRI”) to initiate connections with esteemed asphalt contractors, identify potential partners, explore potential collaborations through their extensive networks in the asphalt industry and recommend strategies to capitalize on emerging opportunities as designated in the Agreements.
On May 14, 2024, the Company entered into a Heads of Agreement (the “HOA”) with Zym-Tec Technologies Limited (“ZT”), granting the Company (i) the right to form a collaboration entity (“Collaboration”) to further develop ZT’s aforementioned technologies by incorporating Biochar as a carbon input for use in the road infrastructure and construction industry (the “Products”) and (ii) the Master Licensing Rights for the USA Territory for ZT’s patented technologies to the Collaboration entity, including Soil Stabilization, Reclaimed Asphalt Pavement (RAP), wearing course materials, concrete, other building material products. This Collaboration aims to generate Carbon Removal Credits through the use of biochar and create new net-zero or carbon net-negative IP products that are higher performing, more durable, sustainable, and cost-effective. These new IPs will be co-owned equally by the Company and ZT. In consideration of the Collaboration, the Company and ZT will establish a new Special Purpose Vehicle (the "SPV") to be equally held by both parties. The SPV will be responsible for executing the new VERDE-ZymTec Net-Zero and Carbon-Negative Technologies and Building Material Products. The Company and ZT will integrate the collaborative activities into the SPV. The share structure and income split shall be confirmed by the Company and ZT in the final agreement. Subsequently, the Company will apply for an uplift to the Nasdaq stock exchange as part of the final restructuring process. The Collaboration will distribute the royalties, license fees, carbon avoidance credits, and carbon removal credits (the “Income”) to the Company and ZT. The HOA outlines the terms and conditions for the cooperation between both parties, with the intent to execute a more detailed agreement (the "Detailed Agreement") within an agreed timeframe. The Detailed Agreement will supersede the obligations outlined in the HOA.
On May 15, 2024, the Company, Andre van Zyl and Green Carbon Industries Group of Companies mutually agreed to terminate the collaboration laid out in the Memorandum of Understanding (the “MOU”) that was entered into on August 7, 2023. The MOU is rendered null and void effective May 15, 2024.
Effective May 15, 2024, Andre van Zyl stepped down from his position as Chief Technology Officer (“CTO”) of the Company.
In accordance with ASC Topic 855, “Subsequent Events”, which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before unaudited condensed consolidated financial statements are issued, the Company has evaluated all events or transactions that occurred after March 31, 2024, up through the date the Company issued the audited unaudited condensed consolidated financial statements and determined that there are no further significant subsequent items which are required to be disclosed.
NOTE 23 – RECLASSIFICATION
Certain prior period amounts have been reclassified to conform to the current period’s presentation. These reclassifications had no impact on reported income or losses and are considered to be immaterial.
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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 October 16, 2023. 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.
Overview
Verde Resources, Inc. (the “Company” or “VRDR”) was incorporated in the State of Nevada on April 22, 2010.
The Company currently is engaged in the production and distribution of renewable commodities, distribution of THC-free cannabinoid (CBD) products, and real property holding. However, the Company has been undergoing a restructuring exercise to shift its focus towards renewable energy and sustainable development with the world faced with challenges of climate change and environmental dehydration. The Company had announced the disposition of the mining business through the sale of the entire issued and paid-up share capital of CSB on March 13, 2023. The disposition of CSB was completed on April 20, 2023.
The Company conducts business operations in La Belle, Missouri, U.S.A., through Verde Renewables, Inc. (“VRI”), a company incorporated in the State of Missouri, U.S.A., and an indirect wholly-owned subsidiary Verde Estates, LLC (“VEL”), a Missouri limited liability company. We currently operate in the production and distribution of renewable commodities through Verde Resources (Malaysia) Sdn. Bhd., a Malaysian corporation. We intend to develop operations in the distribution of THC-free cannabinoid products through Verde Life Inc., an Oregon corporation. The Company is also considering investment opportunities in other non-mining areas including the bioenergy industry and the food & beverage sector.
The Company took a significant strategic shift by divesting its mining operations in Malaysia to concentrate exclusively on advancing its green and climate focused initiatives. Our overarching ambition is to emerge as a prominent leader in delivering net-zero solutions while pioneering efforts in decarbonization and regenerative environmental projects. The Company has since undergone a restructuring exercise to focus on renewable energy and sustainability development with the world faced with challenges of climate change and environmental dehydration. The Company is working alongside lawmakers that will assist in shaping future climate bills, where increased standards and beneficial solutions in agriculture can be implemented to help aid with further political legislation towards climate mitigation and adaptation. We will engage key stakeholders to develop licensed and accountable measures that will assist in shaping and defining a sustainable credit exchange for the commercial market.
The Company announced a momentous partnership with Green Carbon Industries (“GCI”), securing exclusive access to their invaluable intellectual property (IP) rights. This collaboration lays the foundation for revolutionary infrastructure development, marked by innovative biochar asphalt showcase projects within the United States. Biochar-asphalt, an innovative, eco-friendly, high performance, and cost-saving alternative to conventional high CO2 footprint asphalt production and installation, holds immense promise in addressing environmental concerns. Through the integration and extensive utilization of biochar – a carbon-rich material derived from organic waste, the Company aims to reduce carbon emissions and the carbon footprint of infrastructure projects. The American showcase projects will serve as compelling evidence of the technology’s capability in carbon sequestration, efficiently mitigating greenhouse gas, enhancing durability and cost efficiencies, all while simultaneously addressing pressing environmental challenges. On May 15, 2024, the Company and GCI mutually agreed to terminate the collaboration laid out in this partnership in its entirety.
Puro.earth, the crediting platform for durable carbon removal, has officially registered the Company as a Carbon Removal Credit supplier as part of its Accelerate program. This partnership was formalized through a platform agreement signed in April 2023. The Company’s endeavors are poised to unlock revenue opportunities by generating Carbon Removal Credits (CORCs). This critical step incentivizes the broader adoption of climate technologies and enables the Company to supply these credits to companies seeking to offset their carbon footprint in pursuit of net-zero objectives. Simultaneously, this approach creates an additional and substantial revenue stream for the Company. The following diagram illustrates our current corporate structure:
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| Table of Contents |
The following diagram illustrates our current corporate structure:
On August 7, 2023, the Company entered into a Memorandum of Understanding (the “MOU”) with Andre van Zyl (“AvZ”) and Green Carbon Industries Group of Companies (“GCI”), headquartered in Western Australia, to actively pursue and put in place a mutually agreeable and fully funded project venture in North America, through the Company to securely ring-fence, support, preserve and implement the existing and related Intellectual Property of both parties and their respective subsidiaries/representatives, as well as to fund and support ongoing and future Research and Developments. The intended project venture will also be responsible to establish a phased implementation plan for modified, scaled Biochar and Construction Char operations, that will be paired with new Cold Bio Emulsion and Cold Bio Mix technology plant production operations to be established for the production of low CO2 footprint construction material in the territory of North America. Upon successful implementation of the project venture, there will be further option to expand operations throughout the continents of South America’s, APAC, Europe, and Africa. This technology makes possible high duty road base and road wearing course installations with superior performance, utilizing more cost-effective local soils and gravels with extended life of road performance, and substantially lower maintenance activities and cost. On May 15, 2024, the Company, AvZ and GCI mutually agreed to terminate the collaboration laid out in the MOU in its entirety. The MOU is rendered null and void effective May 15, 2024.
On September 12, 2023, Jack Wong stepped down from his position as President of the Company but remains as Chief Executive Office of the Company.
On September 12, 2023, the Board of Directors of the Company appointed Jack Wong, CEO and Director of the Company, as Chairman of the Board of Directors. Subsequently, on January 23, 2024, Jack Wong stepped down from his position as Chairman of the Board of Directors of the Company, and Joseph Ambrose Lee was appointed Director and Chairman of the Board for a one year term, and Tay Hong Choon was appointed Special Advisor to the Board for a one year term.
On October 1, 2023, the Company appointed Eric Bava and Andre van Zyl as Chief Operating Officer and Chief Technology Officer respectively to drive the Company’s climate-tech innovation. Effective May 15, 2024, Andre van Zyl stepped down from his position as Chief Technology Officer (“CTO”) of the Company.
On October 23, 2023, the Company, through its wholly-owned subsidiary VRI, entered into a Services Agreement (the “Agreement”) with Donald R. Fosnacht to engage him as National Certification and Extensive BCR (Biochar Carbon Removal) Implementation Specialist to develop and implement a comprehensive strategy to obtain national and regional certification and endorsement for carbon net-negative construction products with high biochar content, encompassing asphalt, concrete, and soil stabilization as designated in the Agreement. Under the Agreement, the Company will pay Donald R. Fosnacht by the issuance of 1,000,000 shares of the Company’s restricted common stock, par value $0.001 per share (the “Common Stock”) on or before January 31, 2024. The term of the Agreement will remain effective until December 31, 2025 and both parties may renew the agreement or enter into a new agreement as may be mutually agreed on terms to be separately negotiated. On January 31, 2024, the Company issued 1,000,000 restricted common shares to Donald R. Fosnacht.
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Stage of Operation
The Company took a significant strategic shift by divesting its mining operations in Malaysia to concentrate exclusively on advancing its green and climate-focused initiatives. Our overarching ambition is to emerge as a prominent leader in delivering net-zero solutions while pioneering efforts in decarbonization and regenerative environmental projects. The Company has since undergone a restructuring exercise to focus on renewable energy and sustainability development with the world faced with challenges of climate change and environmental dehydration. The Company has completed the disposition of the mining business via the sale of the entire issued and paid-up share capital of CSB on April 20, 2023.
The Company has diversified 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 Company’s BioFraction technology produces high-quality raw biochar using recycled organic biomass from the dairy, palm, and other natural resource industries. The Company also produces activated biochar, which undergoes further processing combined with natural enzymes, minerals, and microbial additives.
Biochar can be the key component towards rebuilding and enhancing coral life and marine ecosystems throughout coastal regions. The Company will explore developing blue carbon technologies using biochar as an additive within carbon-negative cement mixtures that can be molded into a variety of useful marine structures and environments. We have begun research and development of various biochar cement compound mixtures, such as raw atmospheric injected CO2, precast eco-friendly cement. We will engage international and regional industry experts, institutes and educational communities, focused towards developing a unique line of blue carbon capturing products for coastal aquatic and marine environments.
The Company is working alongside lawmakers that will assist in shaping future climate bills, where increased standards and beneficial solutions in agriculture can be implemented to help aid with further political legislation towards climate mitigation and adaptation. We will engage key stakeholders to develop licensed and accountable measures that will assist in shaping and defining a sustainable credit exchange for the commercial market.
On August 7, 2023, the Company announced a momentous partnership with Green Carbon Industries (“GCI”), securing exclusive access to their invaluable intellectual property (IP) rights. This groundbreaking collaboration lays the foundation for revolutionary infrastructure development, marked by innovative biochar asphalt showcase projects within the United States. These projects complement GCI’s established successes in the Asia Pacific (APAC), Middle East, and Africa regions. Our shared commitment revolves around validating the concept’s feasibility and scalability for carbon sequestration, thereby transforming global infrastructure development, and proactively addressing pressing environmental challenges. On May 15, 2024, the Company and GCI mutually agreed to terminate the collaboration laid out in this partnership in its entirety.
Biochar-asphalt, an innovative, eco-friendly, high performance, and cost-saving alternative to conventional high CO2 footprint asphalt production and installation, holds immense promise in addressing environmental concerns. Through the integration and extensive utilization of biochar – a carbon-rich material derived from organic waste, the Company aims to reduce carbon emissions and the carbon footprint of infrastructure projects. The American showcase projects will serve as compelling evidence of the technology’s capability in carbon sequestration, efficiently mitigating greenhouse gas, enhancing durability and cost efficiencies, all while simultaneously addressing pressing environmental challenges.
In early 2023, Puro.earth, the world’s foremost crediting platform for durable carbon removal, officially registered the Company as a Carbon Removal Credit supplier as part of its Accelerate program. This partnership was formalized through a platform agreement signed in April 2023. It is worth noting that Puro.earth was acquired by Nasdaq in June 2021.
Furthermore, the Company’s endeavors are poised to unlock revenue opportunities by generating Carbon Removal Credits (CORCs). This critical step incentivizes the broader adoption of climate technologies and enables the Company to supply these credits to companies seeking to offset their carbon footprint in pursuit of net-zero objectives. Simultaneously, this approach creates an additional and substantial revenue stream for the Company.
On August 30, 2023, the Company achieved a significant milestone by conducting the first-ever biochar-asphalt installation in the United States, just outside of Chicago, Illinois. Subsequently, we replicated this success at our own facility in La Belle, Missouri. On September 25, 2023, upon the invitation of the City of Gramercy, located near New Orleans, Louisiana, the Company executed another biochar-asphalt installation. As a testament to our efforts, we have already received several Letters of Intent (LOIs), and we are confident that our transition from mining to climate-tech and the green economy will yield tremendous results for the company in the years ahead.
Apart from the green industry, the Company is also working on a partnership, pursuant to an agreement dated July 7, 2021 with Decimal Engineered Systems (formerly known as MRX Technologies), a market leader in commercial extraction systems for cannabis and hemp. The partnership includes an agreement for VRAP to white-label THC-free CBD products from Decimal Engineered Systems. The Agreements expires on July 6, 2024.
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| Table of Contents |
Results of Operations
For the three months ended March 31, 2024 and 2023:
The following table sets forth selected financial information from our statements of comprehensive loss for the three months ended March 31, 2024 and 2023:
|
| March 31, 2024 |
|
| March 31, 2023 |
|
| Change |
| |||
|
| Amount |
|
| Amount |
|
| % |
| |||
|
| (Unaudited) |
|
| (Unaudited) |
|
|
| ||||
Revenue |
| $ | 79 |
|
| $ | 10,690 |
|
|
| (99.3 | )% |
Cost of revenue |
| $ | (264 | ) |
| $ | (44,308 | ) |
|
| (99.4 | )% |
Gross loss |
| $ | (185 | ) |
| $ | (33,618 | ) |
|
| (99.4 | )% |
Operating expenses |
| $ | (754,623 | ) |
| $ | (816,089 | ) |
|
| (7.5 | )% |
Interest expense |
| $ | (45,180 | ) |
| $ | (13,549 | ) |
|
| 233.5 | % |
Other(expense) income, net |
| $ | (65,784 | ) |
| $ | 210,813 |
|
|
| (141.9 | )% |
Loss from continuing operation |
| $ | (865,772 | ) |
| $ | (652,443 | ) |
|
| 32.7 | % |
Loss from discontinued operation |
| $ | - |
|
| $ | (55,884 | ) |
|
| (100.0 | )% |
NET LOSS |
| $ | (865,772 | ) |
| $ | (708,327 | ) |
|
| 22.0 | % |
The average rate of MYR : USD for three months ended March 31, 2024 and March 31, 2023 was 0.2110 and 0.2278 respectively.
Revenue
The revenue is derived from compost spreading and distribution of renewable commodities. We have generated $79 and $10,690 revenue for the three months ended March 31, 2024, and 2023, respectively. Revenue decreased primarily due to the non-generation of revenue from compost spreading and distribution of renewable commodities, which earned a lower margin. Accordingly, a gross loss of $185 compared to a gross loss of $33,618 was recorded for the three months ended March 31, 2024, and 2023 respectively.
Cost of revenue
Cost of revenue decreased from $44,308 to $264, during the three months ended March 31, 2024, and 2023, due to ceased of the operations in the production and distribution of renewable commodities.
Operating expense
Operating expenses comprised mainly of salaries, office costs, legal and professional fees, consultancy fee and travelling expenses. We have incurred $754,623 and $816,089 in operating expenses through March 31, 2024, and 2023. Operating expenses decreased by 7.5%, or $61,466, primarily due to decrease of consultancy fee for the three months ended March 31, 2024 as most of the agreements with service provider expired in previous financial period and operating expense contributed by CSB which was disposed on April 20, 2023.
Interest expense
The Company recorded interest expense of $29,667 and $0 on the promissory notes for the three months ended March 31, 2024, and 2023, respectively. Lease interest expenses amounted to $11,212 and $13,549 for the three months ended March 31, 2024, and 2023, respectively. Bank loan interest amounted to $4,301 and $1,151 for the three months ended March 31, 2024, and 2023, respectively.
The charge of interest in the current period is in respect of a new PN issued of $675,888. Promissory notes (“PN”) with a principal amount of $20,355,000 was converted on December 9, 2022, and accordingly no further interest charges recorded with regards to the PN thereafter for three months period ended March 31, 2023.
Other income (expense), net
Other expense of $65,784 for the three months ended March 31, 2024 mainly arose due to reversal of unrealized foreign exchange gain of $81,864. Other income of $194,917 for the three months ended March 31, 2023 was mainly due to fair value adjustment on convertible promissory note issued to BOC.
Net loss
As a result of the above factors, the Company incurred a net loss of $865,772 and $708,327 for the three months ended March 31, 2024 and 2023, respectively.
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For the nine months ended March 31, 2024 and 2023:
The following table sets forth selected financial information from our statements of comprehensive loss for the nine months ended March 31, 2024 and 2023:
|
| March 31, 2024 |
|
| March 31, 2023 |
|
| Change |
| |||
|
| Amount |
|
| Amount |
|
| % |
| |||
|
| (Unaudited) |
|
| (Unaudited) |
|
|
| ||||
Revenue |
| $ | 7,853 |
|
| $ | 94,921 |
|
|
| (91.7 | )% |
Cost of revenue |
| $ | (7,012 | ) |
| $ | (123,903 | ) |
|
| (94.3 | )% |
Gross profit (loss) |
| $ | 841 |
| $ | (28,982 | ) |
|
| (102.9 | )% | |
Operating expenses |
| $ | (1,867,418 | ) |
| $ | (2,381,155 | ) |
|
| (21.6 | )% |
Interest expense |
| $ | (130,103 | ) |
| $ | (1,893,209 | ) |
|
| (93.1 | )% |
Other income, net |
| $ | 55,109 |
|
| $ | 235,631 |
|
|
| (69.6 | )% |
Loss from continuing operation |
| $ | (1,941,571 | ) |
| $ | (4,067,715 | ) |
|
| (52.3 | )% |
Loss from discontinued operation |
| $ | - |
|
| $ | (157,284 | ) |
|
| (100.0 | )% |
NET LOSS |
| $ | (1,941,571 | ) |
| $ | (4,224,999 | ) |
|
| (54.0 | )% |
The average rate of MYR : USD for nine months ended March 31, 2024 and March 31, 2023 was 0.2138 and 0.2233 respectively.
Revenue
The revenue is derived from compost spreading and distribution of renewable commodities. We have generated $7,853 and $94,921 revenue for the nine months ended March 31, 2024, and 2023, respectively. Revenue decreased primarily due to the non-generation of revenue from compost spreading and distribution of renewable commodities, which earned a lower margins. Accordingly, a gross profit of $841 compared to a gross loss of $28,982 was recorded for the nine months ended March 31, 2024, and 2023.
Cost of revenue
Cost of revenue decreased from $123,903 to $7,012, during the nine months ended March 31, 2024, and 2023, due to ceased of the operations in the production and distribution of renewable commodities.
Operating expense
Operating expenses comprised mainly of salaries, office costs, legal and professional fees, consultancy fee and travelling expenses. We have incurred $1,867,418 and $2,381,155 in operating expenses through March 31, 2024, and 2023. Operating expenses decreased by 21.6%, or $513,737, primarily due to decrease of consultancy fee for the nine months ended March 31, 2024 as most of the agreements with service provider expired in previous financial and operating expense contributed by CSB which was disposed on April 20, 2023.
Interest expense
The Company recorded interest expense of $85,962 and $1,870,972 on the promissory notes for the nine months ended March 31, 2024, and 2023, respectively. Lease interest expenses amounted to $35,137 and $22,237 for the nine months ended March 31, 2024, and 2023, respectively. Bank loan interest amounted to $9,004 and $0 for the nine months ended March 31, 2024, and 2023, respectively.
The decrease in interest expense is mainly due to conversion of promissory notes with a principal amount of $20,355,000 on December 9, 2022 and accordingly no further interest charges recorded with regards to the PN thereafter. The charge in the current period is in respect of a new PN issued of $675,888.
Other income (expense), net
We have other income of $55,109 and $235,631 for the nine months ended March 31, 2024, and 2023. Other income of $194,917 for the nine months ended March 31, 2023 was mainly due to fair value adjustment on convertible promissory note issued to BOC. The balance mainly represented rental income earned.
Net loss
As a result of the above factors, the Company incurred a net loss of $1,941,571 and $4,224,999 for the nine months ended March 31, 2024 and 2023, respectively.
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Liquidity and Capital Resources
The following summarizes the key component of our cash flows for the nine months ended March 31, 2024 and 2023.
Cash Flow Date |
| March 31, 2024 |
|
| March 31, 2023 |
| ||
|
|
|
|
|
|
| ||
Net Cash (Used in) operating activities |
| $ | (1,362,827 | ) |
| $ | (1,533,319 | ) |
Net Cash (Used in) investing activity |
|
| (16,621 | ) |
|
| (364,540 | ) |
Net Cash Provided by financing activities |
|
| 1,681,800 |
|
|
| 1,577,687 |
|
Effect of exchange rate fluctuation on cash and cash equivalents |
|
| 64,635 |
|
|
| 142,262 |
|
Net decrease in cash and cash equivalents |
|
| 302,352 |
|
|
| (320,172 | ) |
Cash and cash equivalents, beginning of period |
|
| 200,409 |
|
|
| 418,917 |
|
Cash and cash equivalents, ending of period |
| $ | 567,396 |
|
| $ | 241,371 |
|
Net Cash (Used in) Operating Activities
Cash used in operating activities reflects net loss adjusted for certain non-cash items, including depreciation expense, amortization of right of use assets and stock-based compensation, impairment on receivables and the effects of changes in operating assets and liabilities. The decrease in cash used in operating activities for the nine months ended March 31, 2024, as compared to 2023 was primarily due to lower net loss adjusted for depreciation expenses and the increase of inventories.
In the operation analysis, the net cash used in operating activities decreased from $1,533,319 to $1,362,827. The operation loss of $1,941,571 was partially offset by the noncash expenses such as $312,056 in depreciation, $77,144 in amortization, $78,726 in share-based compensation, $75,791 in interest expenses on promissory notes, $35,137 in lease interest expense, $31,982 in impairment of receivables and $21,376 from deposit on acquisition of subsidiary written off. In the operating assets and liabilities, the net increase of cash outflow in current assets such as other receivables, deposits and prepayments of inventories and cash inflow from accounts receivables greater than the net increase of cash inflow in current liabilities such as, advances from related parties, accrued liabilities and other payables and accounts payable which resulted in $74,648 negative cash flow effect adding to loss in operation and after offset by non-cash expenses , the final result of the cash flow used in operating activities was $1,362,827.
Net Cash (Used in) Investing Activity
The net cash used in investing activities resulted from purchase of property, plant and equipment of $16,621 for the nine months ended March 31, 2024.
Net Cash Provided by) Financing Activities
The net cash provided by financing activities of $1,681,800 resulted from proceeds from shares issued and shares to be issued of $1,661,379, advance from other payables of $136,837 and net proceeds from drawdown of loans of $20,440, set off partially by repayments to lease liabilities and related interests of $101,719 and $35,137 for the nine months ended March 31, 2024 respectively.
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.
Working Capital
As of March 31, 2024 and June 30, 2023, we had cash and cash equivalent of $567,396 and $200,409, respectively. As of March 31, 2024 and June 30, 2023, we have incurred accumulated operating losses of $12,234,001 and $10,292,430, respectively.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material to investors.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk.
As a “smaller reporting company”, we are not required to provide the information required by this Item.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our senior management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this Quarterly Report on Form 10-Q (the “Evaluation Date”). During the 2023, 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. In the meantime, management has appointed external consultants to minimize the risk and ascertain compliance with requirements.
As of March 31, 2024 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 2023, the Company has been undertaking tremendous enlargement and expansion which rendered the management to re-consider the available of more management talents and professional staff to meet the enlargement in operation during and after the coming acquisition and expansion move. Based on this consideration and that evaluation, the current management concluded that, during the period covered by this report, such internal controls and procedures were not effective to detect the inappropriate application of US GAAP rules as more fully described below. This was due to deficiencies that existed in the design or operation of our internal controls over financial reporting that adversely affected our internal controls and that may be considered to be material weaknesses. In the meantime, management has appointed external consultants to minimize the risk and ascertain compliance with requirements.
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 four 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, 2024.
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.
The senior management understands the need to ensure proper documentation of any material contracts and business operations through timely transmission of information and communications within the organization. The management also conducts regular consultation with our legal counsel to ensure compliance with SEC’s disclosure requirements.
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, 2024 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.
N/A.
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, 2024, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Balance Sheets as of March 31, 2024, and June 30, 2023, (ii) Condensed Statements of Operations for the three and nine months ended March 31, 2024 and 2023, (iii) Condensed Statements of Cash Flows for the nine months ended March 31, 2024 and 2023, 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.
| VERDE RESOURCES, INC. |
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| (Registrant) |
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Dated: May 20, 2024 | By: | /s/ Jack Wong |
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| Jack Wong |
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| Chief Executive Officer |
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| (Principal Executive Officer) |
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