UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For
the quarterly period ended
For the transition period from ______ to _______
Commission
File Number
(Name of small business issuer in its charter)
| (State of incorporation) | (I.R.S. Employer Identification No.) |
| (Address of principal executive offices) |
| (Registrant’s telephone number) |
Securities registered pursuant to Section 12(b) of the Act: None
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 website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Sec.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, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |
| ☒ | Smaller reporting company | |||
| Emerging growth company |
If an emerging company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
☐ Yes ☐ No
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
☐ Yes
As
of March 15, 2024, there were
VERDE BIO HOLDINGS, INC.*
| TABLE OF CONTENTS | ||
| Page | ||
| PART I. FINANCIAL INFORMATION | ||
| ITEM 1. | CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | 1 |
| ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 14 |
| ITEM 3. | QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK | 17 |
| ITEM 4. | CONTROLS AND PROCEDURES | 17 |
| PART II. OTHER INFORMATION | ||
| ITEM 1. | LEGAL PROCEEDINGS | 19 |
| ITEM 1A. | RISK FACTORS | 19 |
| ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS | 19 |
| ITEM 3. | DEFAULTS UPON SENIOR SECURITIES | 19 |
| ITEM 4. | MINE SAFETY DISCLOSURES | 19 |
| ITEM 5. | OTHER INFORMATION | 19 |
| ITEM 6. | EXHIBITS | 20 |
Special Note Regarding Forward-Looking Statements
Information included in this Quarterly Report on Form 10-Q (this “Quarterly Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”). This information may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Verde Bio Holdings, Inc. (the “Company”), to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements. Forward-looking statements, which involve assumptions and describe future plans, strategies and expectations of the Company, are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” or “project” or the negative of these words or other variations on these words or comparable terminology. These forward-looking statements are based on assumptions that may be incorrect, and there can be no assurance that these projections included in these forward-looking statements will come to pass. Actual results of the Company could differ materially from those expressed or implied by the forward-looking statements as a result of various factors. Except as required by applicable laws, the Company has no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.
| * | Please note that throughout this Quarterly Report, except as otherwise indicated by the context, references to the “Company”, “we”, “us” or “our” are references to Verde Bio Holdings, Inc., a Nevada corporation. |
i
PART I - FINANCIAL INFORMATION
ITEM 1. CONDENSED FINANCIAL STATEMENTS
VERDE BIO HOLDINGS, INC.
Condensed Consolidated Financial Statements
For the Three Months and Nine Months Ended January 31, 2024 (unaudited)
INDEX TO FINANCIAL STATEMENTS
1
VERDE BIO HOLDINGS, INC.
Condensed Consolidated Balance Sheets
as of January 31, 2024 and April 30, 2023
(Expressed in U.S. Dollars)
| January 31, 2024 $ | April 30, 2023 $ | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash | ||||||||
| Accounts receivable | ||||||||
| Prepaid expenses | ||||||||
| Total current assets | ||||||||
| Non-current assets | ||||||||
| Right-of-use operating lease asset | ||||||||
| Property and equipment, net | ||||||||
| Oil and natural gas properties, net based on the full cost method of accounting | ||||||||
| Total assets | ||||||||
| LIABILITIES | ||||||||
| Current Liabilities | ||||||||
| Accounts payable and accrued liabilities | ||||||||
| Convertible notes payable | ||||||||
| Due to related party | ||||||||
| Current portion of operating lease liability | ||||||||
| Warrant liabilities | ||||||||
| Total Liabilities | ||||||||
| TEMPORARY EQUITY | ||||||||
| Series C Preferred Stock | ||||||||
| Designated: | ||||||||
| Issued and outstanding: | ||||||||
| Series C accrued dividends | ||||||||
| Total Temporary Equity | ||||||||
| STOCKHOLDERS’ EQUITY | ||||||||
| Series A Preferred Stock | ||||||||
| Designated: 500,000 shares, par value of $ | ||||||||
| Issued and outstanding: | ||||||||
| Common stock – | ||||||||
| Issued and outstanding: | ||||||||
| Common stock issuable | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity | ||||||||
| Total Liabilities and Stockholders’ Equity | ||||||||
(The accompanying notes are an integral part of these condensed consolidated financial statements)
2
VERDE BIO HOLDINGS, INC.
Condensed Consolidated Statements of Operations
For the three and nine month period ended January 31, 2024 and 2023
(Expressed in U.S. Dollars)
(unaudited)
| For the three months ended January 31, 2024 $ | For the three months ended January 31, 2023 $ | For the nine months ended January 31, 2024 $ | For the nine Months ended January 31, 2023 $ | |||||||||||||
| Revenue | ||||||||||||||||
| Mineral property and royalty revenues | ||||||||||||||||
| Operating Expenses | ||||||||||||||||
| Consulting fees | ||||||||||||||||
| Depletion expense | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Depreciation expense | ||||||||||||||||
| Professional fees | ||||||||||||||||
| Project expenditures | ||||||||||||||||
| Total Operating Expenses | ||||||||||||||||
| Net Operating Loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other Income (Expenses) | ||||||||||||||||
| Finance charges | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ||||||||||
| Loss on disposal of property | ( | ) | ( | ) | ||||||||||||
| Other revenue | ||||||||||||||||
| Total Other Income (Expenses) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss Before Income Taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Provision for Income Taxes | ||||||||||||||||
| Net Loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Series C Preferred Stock Dividends | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net Loss to Stockholders | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| ( | ) | ( | ) | ( | ) | ( | ) | |||||||||
(The accompanying notes are an integral part of these condensed consolidated financial statements)
3
VERDE BIO HOLDINGS, INC.
Consolidated Statements of Stockholders’ Equity (Deficit)
For the three and nine month period ended January 31, 2024 and 2023
(Expressed in U.S. Dollars)
(unaudited)
| Additional | ||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Paid-in | Accumulated | |||||||||||||||||||||||||
| Shares | Par Value | Shares | Par Value | Capital | Deficit | Total | ||||||||||||||||||||||
| # | $ | # | $ | $ | $ | $ | ||||||||||||||||||||||
| Balance – October 31, 2022 | ( | ) | ||||||||||||||||||||||||||
| Common shares issued for conversion of Series C preferred stock | ( | ) | ||||||||||||||||||||||||||
| Series C preferred stock issued for cash | – | – | ||||||||||||||||||||||||||
| Series C preferred stock dividend | – | – | ( | ) | ( | ) | ||||||||||||||||||||||
| Net loss for the period | – | – | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance – January 31, 2023 | ( | ) | ||||||||||||||||||||||||||
| Additional | ||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Paid-in | Accumulated | |||||||||||||||||||||||||
| Shares | Par Value | Shares | Par Value | Capital | Deficit | Total | ||||||||||||||||||||||
| # | $ | # | $ | $ | $ | $ | ||||||||||||||||||||||
| Balance – October 31, 2023 | ( | ) | ||||||||||||||||||||||||||
| Series C preferred stock issued for commitment fee | – | – | ||||||||||||||||||||||||||
| Common shares issued for conversion of Series C preferred stock | ( | ) | ||||||||||||||||||||||||||
| Common shares issued for services | ||||||||||||||||||||||||||||
| Series C preferred stock issued for cash | – | – | ||||||||||||||||||||||||||
| Series C preferred stock dividend | – | – | ( | ) | ( | ) | ||||||||||||||||||||||
| Net loss for the period | – | – | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance – January 31, 2024 | ( | ) | ||||||||||||||||||||||||||
(The accompanying notes are an integral part of these condensed consolidated financial statements)
4
VERDE BIO HOLDINGS, INC.
Consolidated Statements of Stockholders’ Equity
For the three and nine months ended January 31, 2024 and 2023
(Expressed in U.S. Dollars)
(unaudited)
| Additional | ||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Paid-in | Accumulated | |||||||||||||||||||||||||
| Shares | Par Value | Shares | Par Value | Capital | Deficit | Total | ||||||||||||||||||||||
| # | $ | # | $ | $ | $ | $ | ||||||||||||||||||||||
| Balance – April 30, 2022 | ( | ) | ||||||||||||||||||||||||||
| Series C preferred stock issued for commitment fee | – | – | ||||||||||||||||||||||||||
| Common shares issued for conversion of Series C preferred stock | ( | ) | ||||||||||||||||||||||||||
| Common shares issued for services | ||||||||||||||||||||||||||||
| Series C preferred stock issued for cash | – | – | ||||||||||||||||||||||||||
| Series C preferred stock dividend | – | – | ( | ) | ( | ) | ||||||||||||||||||||||
| Net loss for the period | – | – | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance – January 31, 2023 | ( | ) | ||||||||||||||||||||||||||
| Additional | ||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Paid-in | Accumulated | |||||||||||||||||||||||||
| Shares | Par Value | Shares | Par Value | Capital | Deficit | Total | ||||||||||||||||||||||
| # | $ | # | $ | $ | $ | $ | ||||||||||||||||||||||
| Balance – April 30, 2023 | ( | ) | ||||||||||||||||||||||||||
| Series C preferred stock issued for commitment fee | – | – | ||||||||||||||||||||||||||
| Common shares issued for conversion of Series C preferred stock | ( | ) | ||||||||||||||||||||||||||
| Common shares issued for services | ||||||||||||||||||||||||||||
| Series C preferred stock issued for cash | – | – | ||||||||||||||||||||||||||
| Series C preferred stock dividend | – | – | ( | ) | ( | ) | ||||||||||||||||||||||
| Net loss for the period | – | – | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance – January 31, 2024 | ( | ) | ||||||||||||||||||||||||||
(The accompanying notes are an integral part of these condensed consolidated financial statements)
5
VERDE BIO HOLDINGS INC.
Condensed Consolidated Statements of Cash Flow
For the nine months ended January 31, 2024 and 2023
(Expressed in U.S. Dollars)
(unaudited)
| For the nine months ended January 31, 2024 $ | For the nine months ended January 31, 2023 $ | |||||||
| Operating Activities | ||||||||
| Net loss | ( | ) | ( | ) | ||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Amortization of right-of-use asset | ||||||||
| Depletion expense | ||||||||
| Depreciation expense | ||||||||
| Loss on disposal of property and equipment | ||||||||
| Original issuance discount and issuance fees | ||||||||
| Shares issued for services | ||||||||
| Shares issued or issuable for commitment fees | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ||||||||
| Prepaid expenses | ( | ) | ||||||
| Accounts payable and accrued liabilities | ( | ) | ( | ) | ||||
| Operating lease liability | ( | ) | ( | ) | ||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Investing Activities | ||||||||
| Acquisition of property and equipment | ( | ) | ||||||
| Oil and gas property expenditures | ( | ) | ( | ) | ||||
| Proceeds from sale of mineral property | ||||||||
| Net Cash provided by activities | ||||||||
| Financing Activities | ||||||||
| Proceeds from issuance of series C preferred shares | ||||||||
| Proceeds from related party loan | ||||||||
| Repayment of related party loan | ( | ) | ||||||
| Proceeds from convertible debentures | ||||||||
| Repayment of convertible debenture | ( | ) | ( | ) | ||||
| Net cash provided by financing activities | ||||||||
| Change in Cash | ( | ) | ( | ) | ||||
| Cash – Beginning of Period | ||||||||
| Cash – End of Period | ||||||||
| Supplemental Disclosures | ||||||||
| Interest paid | ||||||||
| Income taxes | ||||||||
| Non-cash investing and financing activities | ||||||||
| Series C preferred stock accrued dividend | ( | ) | ( | ) | ||||
| Settlement of related party loan | ||||||||
| Common stock issued for conversion of Series C preferred stock | ||||||||
(The accompanying notes are an integral part of these condensed consolidated financial statements)
6
VERDE BIO HOLDINGS INC.
Notes to the Condensed Consolidated Financial Statements
For the three and nine months ended January 31, 2024 and 2023
(Expressed in U.S. Dollars)
(unaudited)
| 1. | Nature of Operations and Continuance of Business |
Verde Bio Holdings Inc. (the “Company”, “we”, “us” or “our”) was incorporated in the State of Nevada on February 24, 2010. The Company is a growing U.S. energy company based in Frisco, Texas, engaged in the acquisition and development of high-probability, lower risk onshore oil and gas properties within the major oil and gas plays in the U.S. The Company’s dual-focused growth strategy relies primarily on leveraging management’s expertise to grow through the strategic acquisition of non-operating, working interests and royalty interests with the goal of developing into a major company in the industry. Through this strategy of acquisition of royalty and non-operating properties, the Company has the unique ability to rely on the technical and scientific expertise of the world-class energy and power companies operating in the area.
Verde began purchasing mineral and oil and gas royalty interests and surface properties in September 2020 and since such time has completed a total of 18 purchases.
Going Concern
These condensed consolidated financial
statements have been prepared on a going concern basis, which implies that the Company will continue to realize its assets and discharge
its liabilities in the normal course of business. During the period ended January 31, 2024, the Company incurred a net loss of $
| 2. | Summary of Significant Accounting Policies |
| (a) | Basis of Presentation and Principles of Consolidation |
The accompanying condensed consolidated financial statements of the Company should be read in conjunction with the consolidated financial statements and accompany notes filed with the U.S. Securities and Exchange Commission for the fiscal year ended April 30, 2023. These condensed consolidated financial statements are unaudited and have been prepared on the same basis as the annual consolidated financial statements and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s financial position, results of operations and cash flows for the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for a full year or for any future period.
These condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and are expressed in U.S. dollars. The condensed consolidated financial statements are comprised of the records of the Company and its wholly owned, inactive subsidiary, IP Control Risk Inc., a Nevada corporation. All intercompany transactions have been eliminated on consolidation. The Company’s fiscal year end is April 30.
| (b) | Use of Estimates |
The preparation of these condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
7
VERDE BIO HOLDINGS INC.
Notes to the Condensed Consolidated Financial Statements
For the three and nine months ended January 31, 2024 and 2023
(Expressed in U.S. Dollars)
(unaudited)
| 2. | Summary of Significant Accounting Policies (continued) |
| (b) | Use of Estimates (continued) |
The Company regularly evaluates estimates and assumptions related to the collectability of accounts receivable relating to oil and gas interests which is based on the operator’s production statements, carrying value of oil and gas properties, the useful life, carrying value, and incremental borrowing rate used for right-of-use assets and lease liabilities, the fair value of stock-based compensation, revenue recognition including the calculation of the reserves and the fair value of the reserves for oil and gas interests, and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
| (c) | Basic and Diluted Net Loss per Share |
The Company computes net loss per share
in accordance with ASC 260, Earnings per Share. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”)
on the face of the income statement. Basic EPS is computed by dividing net loss available to common shareholders (numerator) by the weighted
average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares
outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing
diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise
of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. As of January 31, 2024,
the Company had
| (d) | Fair Value Measurements |
The Company measures and discloses the estimated fair value of financial assets and liabilities using the fair value hierarchy prescribed by U.S. GAAP. The fair value hierarchy has three levels, which are based on reliable available inputs of observable data. The hierarchy requires the use of observable market data when available. The three-level hierarchy is defined as follows:
Level 1 – quoted prices for identical instruments in active markets;
Level 2 – quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model derived valuations in which significant inputs and significant value drivers are observable in active markets; and
Level 3 – fair value measurements derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
Financial instruments consist principally of cash, accounts payable and accrued liabilities, notes payable, convertible debentures and amounts due to related parties. The fair value of cash is determined based on Level 1 inputs. There were no transfers into or out of “Level 3” during the period ended January 31, 2024. The recorded values of all other financial instruments approximate their current fair values because of their nature and respective relatively short maturity dates or durations.
8
VERDE BIO HOLDINGS INC.
Notes to the Condensed Consolidated Financial Statements
For the three and nine months ended January 31, 2024 and 2023
(Expressed in U.S. Dollars)
(unaudited)
| 2. | Summary of Significant Accounting Policies (continued) |
| (d) | Fair Value Measurements (continued) |
Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
| (e) | Recent Accounting Pronouncements |
The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
| 3. | Right-of-Use Operating Lease Asset and Lease Liability |
ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease calculated by discounting fixed lease payments over the lease term at the rate implicit in the lease or the Company’s incremental borrowing rate. Lease liabilities are increased by interest and reduced by payments each period, and the ROU asset is amortized over the lease term. For operating leases, interest on the lease liability and the amortization of the ROU asset result in straight-line rent expense over the lease term. ROU assets and liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term.
On March 11, 2021, the Company entered
into a sublease agreement with a sublandlord regarding its office at 5750 Genesis Court, Suite 220, Frisco, Texas 75036. The agreement
was treated as an operating lease in accordance with ASC 842, Lease, which resulted in initial recognition of right-of-use asset
and lease liability of $
| January 31, 2024 |
April 30, 2023 |
|||||||
| $ | $ | |||||||
| Components of lease expense were as follows: | ||||||||
| Operating lease cost | ||||||||
| Supplemental cash flow information related to leases: | ||||||||
| Cash paid for amounts included in the measurement of lease liabilities: | ||||||||
| Operating cash flows from operating leases | ||||||||
| Supplemental balance sheet information related to leases: | ||||||||
| Operating Leases | ||||||||
| Operating lease right-of-use assets | ||||||||
| Operating lease liabilities | ||||||||
9
VERDE BIO HOLDINGS INC.
Notes to the Condensed Consolidated Financial Statements
For the three and nine months ended January 31, 2024 and 2023
(Expressed in U.S. Dollars)
(unaudited)
| 3. | Right-of-Use Operating Lease Asset and Lease Liability (continued) |
| January 31, 2024 | April 30, 2023 | |||||||
| Weighted Average Remaining Lease Term | ||||||||
| Operating leases | ||||||||
| Weighted Average Discount Rate | ||||||||
| Operating leases | % | % | ||||||
| Operating Leases | Operating Leases | |||||||
| Year Ending April 30, | ||||||||
| 2024 | ||||||||
| Less: imputed interest | ( | ) | ||||||
| Total | ||||||||
| 4. | Royalty Interests in Oil and Gas Properties |
| $ | ||||
| Balance, April 30, 2023 | ||||
| Acquisition and exploration cost | ||||
| Disposal of mineral property | ( | ) | ||
| Depletion expense | ( | ) | ||
| Balance, January 31, 2024 | ||||
On June 19, 2023, the Company entered
into a purchase and sale agreement for the sale of
On November 1, 2023, The Company entered
into a purchase and sale agreement for the sale of
| 5. | Property and Equipment |
| Land $ | Vehicles $ | Equipment $ | Leasehold Improvements $ | Total $ | ||||||||||||||||
| Cost | ||||||||||||||||||||
| Balance, April 30, 2023 | ||||||||||||||||||||
| Additions | ||||||||||||||||||||
| Disposal | ( | ) | ( | ) | ||||||||||||||||
| Balance, January 31, 2024 | ||||||||||||||||||||
10
VERDE BIO HOLDINGS INC.
Notes to the Condensed Consolidated Financial Statements
For the three and nine months ended January 31, 2024 and 2023
(Expressed in U.S. Dollars)
(unaudited)
| 5. | Property and Equipment (continued) |
| Accumulated depreciation | ||||||||||||||||||||
| Balance, April 30, 2023 | ||||||||||||||||||||
| Additions | ||||||||||||||||||||
| Balance, January 31, 2024 | ||||||||||||||||||||
| Balance, April 30, 2023 | ||||||||||||||||||||
| Balance, January 31, 2024 | ||||||||||||||||||||
| 6. | Convertible Loans |
On January 9, 2023, the Company entered
into a convertible loan agreement with an arms-length party for $
On March 2, 2023, the Company entered
into an additional convertible loan agreement with the same arms-length party for $
On October 4, 2023, the Company entered
into an additional convertible loan agreement with the same arms-length party for $
| 7. | Related Party Transactions |
| (a) | On December 12, 2023, the Company transferred a property
located in Jacks County, Texas to the President and Director of the Company to settle a loan balance of $ |
| (b) | As of January 31, 2024, the Company owed $ |
11
VERDE BIO HOLDINGS INC.
Notes to the Condensed Consolidated Financial Statements
For the three and nine months ended January 31, 2024 and 2023
(Expressed in U.S. Dollars)
(unaudited)
| 8. | Common Shares |
Authorized:
On May 23, 2023, the Company issued
On July 10, 2023, the Company issued
On September 7, 2023, the Company issued
On November 13, 2023, the Company issued
On November 20, 2023 the Company issued
On January 4, 2024, the Company issued
| 9. | Preferred Shares |
As of January 31, 2024, we had authorized:
Series A Shares
The holder of the Series A shares is
entitled to receive dividends equal to the amount of the dividend or distribution per common share payable multiplied by the number of
common shares of Series A shares held by such holder are convertible into. Each Series A share is convertible into
Series C Shares
| Balance April 30, 2023 | ||||
| Series C preferred stock issued | ||||
| Series C preferred stock converted into common shares | ( | ) | ||
| Balance January 31, 2024 |
On December 3, 2021, the Company entered
into a securities purchase agreement (the “December Agreement”) with an arms-length party for the issuance of up to
On May 24, 2022, the Company entered
into an additional securities purchase agreement (the “May Agreement”) with an arms-length party for the issuance of up to
12
VERDE BIO HOLDINGS INC.
Notes to the Condensed Consolidated Financial Statements
For the three and nine months ended January 31, 2024 and 2023
(Expressed in U.S. Dollars)
(unaudited)
| 9. | Preferred Shares (continued) |
The Series C shares and the accrued
dividends relating to the stock are classified as temporary equity. As at January 31, 2024, the Company had
In addition to the Series C shares,
the Company issued warrants to purchase up to
| 10. | Share Purchase Warrants |
| Number of warrants | Weighted average exercise price $ | |||||||
| Balance, April 30, 2023 and January 31, 2024 | ||||||||
| Outstanding and exercisable | ||||||||||
| Range
of Exercise Prices $ | Number of Warrants | Weighted Average Remaining Contractual Life (years) | ||||||||
| 11. | Commitments and Contingencies |
On May 28, 2020, the Company and an
unrelated party entered into equity financing agreement, whereby the investor shall invest up to $
| 12. | Subsequent Event |
| (a) | On December 11, 2023, the Company entered into an agreement
and plan of merger (the “Merger Agreement”) with SensaSure Technologies, Inc. (“SSTC”), a Nevada corporation,
and its subsidiary, Formation Mineral Inc. (“Merger Sub”), upon which, at the effective time of the merger, Merger Sub will
be merged with and into the Company (the “Merger”). The separate corporate existence of Merger Sub will cease and the Company
will continue as the surviving corporation of the Merger and as a subsidiary of SSTC. At the closing, the Company’s stockholders
will be entitled to receive a number of shares of SSTC capital stock having an aggregate value equal to $ |
| (b) | On February 19, 2024, the Company issued |
| (c) | On March 20, 2024, the Company completed the sale of certain minerals located in Howard County, Texas to an unrelated third party
for $ |
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
Overview
The Company is a growing U.S. energy company based in Jacksboro, Texas, engaged in the acquisition and development of high-probability, lower risk onshore oil and gas properties within the major oil and gas plays in the U.S. The Company’s dual-focused growth strategy relies primarily on leveraging management’s expertise to grow through the strategic acquisition of non-operating, working interests and royalty interests with the goal of developing into a major company in the industry. In order to develop as a well-positioned oil and gas minerals pure play company squarely focused on the acquisition of high quality, cash flowing oil and gas minerals and royalties, on December 11, 2023, the Company entered into that certain agreement and plan of merger with SensaSure Technologies Inc., a Nevada corporation (“SSTC”), and Formation Minerals Inc., a Nevada corporation and wholly-owned subsidiary of SSTC (“Merger Sub”), as amended as of February 8, 2024 (the “Merger Agreement”), providing for the merger of Merger Sub with and into the Company, with the Company continuing as the surviving entity (the “Merger”). Subject to the satisfaction or waiver of closing conditions, the Merger is expected to close in the second calendar quarter of 2024.
RESULTS OF OPERATIONS
Working Capital
| January 31, 2024 | April 30, 2023 | |||||||
| $ | $ | |||||||
| (unaudited) | ||||||||
| Current Assets | 104,378 | 97,748 | ||||||
| Current Liabilities | 1,596,787 | 1,839,182 | ||||||
| Working Capital Deficit | (1,492,409 | ) | (1,741,434 | ) | ||||
Cash Flows
| January 31, 2024 | January 31, 2023 | |||||||
| $ | $ | |||||||
| (unaudited) | (unaudited) | |||||||
| Cash Flows used in Operating Activities | (943,209 | ) | (717,018 | ) | ||||
| Cash Flows provided by Investing Activities | 479,869 | 148,015 | ||||||
| Cash Flows provided by Financing Activities | 449,065 | 477,860 | ||||||
| Net increase (decrease) in Cash During Period | (14,275 | ) | (91,143 | ) | ||||
Operating Revenues
Three Months Ended January 31, 2024 Compared to Three Months Ended January 31, 2023
During the three months ended January 31, 2024, the Company earned royalty revenues of $75,991 compared to royalty revenues of $170,312 for the three months ended January 31, 2023. The revenue is derived from its interests in various oil and gas properties and the decrease in royalty revenues in the current period was attributed to lower production by the operators due to lower oil and gas prices as well as the sale of oil and gas properties during the current year. As part of the revenues generated from the oil and gas properties, the Company recorded depletion expense of $47,003 during the three months ended January 31, 2024 compared to depletion expense of $84,700 during the three month period ended January 31, 2023 which represents the proportionate use of the produced units in the properties relative to proven and probable reserves.
Nine Months Ended January 31, 2024 Compared to Nine Months Ended January 31, 2023
During the nine months ended January 31, 2024, the Company earned royalty revenues of $211,181 compared to royalty revenues of $794,578 for the nine months ended January 31, 2023. The revenue is derived from its interests in various oil and gas properties and the decrease in royalty revenues in the current period was attributed to lower production by the operators due to lower oil and gas prices as well as the sale of oil and gas properties during the current year. As part of the revenues generated from the oil and gas properties, the Company recorded depletion expense of $142,286 during the nine months ended January 31, 2024 compared to depletion expense of $395,916 during the period ended January 31, 2023 which represents the proportionate use of the produced units in the properties relative to proven and probable reserves.
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Operating Expenses and Net Loss
Three Months Ended January 31, 2024 Compared to Three Months Ended January 31, 2023
During the three months ended January 31, 2024, the Company incurred operating expenses of $486,481 compared to operating expenses of $584,489 during the three months ended January 31, 2023. The decrease in operating expenses was due to an overall decrease in operating activities for the current year compared to prior year due to lower oil and gas prices, as highlighted by a decline of $178,591 in general and administrative costs, and $37,697 decrease in depletion expense as the Company incurred less costs in analyzing new potential acquisitions and current operations, but was offset by an increase in professional fees of $105,520 relating to legal fees and expenses in connection with the pending Merger.
Net loss for the three months ended January 31, 2024 was $1,493,092 compared to a net loss of $439,836 during the three months ended January 31, 2023. The increase in the net loss was attributed to lower revenues for the current period. In addition to net operating loss, the Company recorded a loss of $1,070,842 relating to the settlement of outstanding related party debts with property located in Jack County.
For the three months ended January 31, 2024 and 2023, the Company recorded a net loss of $1,493,092 and $439,836, respectively, which resulted in a basic and diluted net loss per share of $0.00 for both periods.
Nine Months Ended January 31, 2024 Compared to Nine Months Ended January 31, 2023
During the nine months ended January 31, 2024, the Company incurred operating expenses of $1,251,952 compared to operating expenses of $2,032,491 during the nine months ended January 31, 2023. The decrease in operating expenses was due to an overall decrease in operating activities for the current year compared to prior year due to lower oil and gas prices, as highlighted by a decline of $542,614 in general and administrative costs, $67,265 decrease in consulting expenses, and $15,147 decrease in project expenditures as the Company incurred less costs in analyzing new potential acquisitions. The Company also saw a decrease in depletion expense of $253,630 due in part to an overall decrease in production, which also resulted in a comparable decrease in royalty revenues earned by the Company. The decreases were offset by an increase in professional fees of $97,788 relating to legal fees and expenses in connection with the pending Merger.
Net loss for the nine months ended January 31, 2024 was $2,141,800 compared to a net loss of $1,333,835 during the nine months ended January 31, 2023. In addition to operating expenses, the Company recorded a loss of $1,070,842 relating to the settlement of outstanding related party debts. The Company also incurred finance charges of $30,510 and interest expense of $11,562, which was lower than the comparative 2023 period which showed finance charges of $56,160 and interest expense of $39,762, as the Company utilized lower amounts of debt financing given the fact that the Company divested of some investment property and corresponding debt. The Company also recorded other revenue of $11,885 relating to sublease revenues.
For the nine months ended January 31, 2024 and 2023, the Company recorded a net loss of $2,141,800 and $1,333,835, respectively, and a basic and diluted net loss per share of $0.00 per share for both periods.
Cash Flow from Operating Activities
During the nine months ended January 31, 2024, the Company used $943,209 of cash for operating activities compared to $717,018 of cash for operating activities during the nine months ended January 31, 2023. The increase in the use of cash for operating activities was due to a decrease in overall royalty income, which decreased the cash inflows from operating activities compared to prior year, as expenditures and use of cash for operating expenses were consistent with prior year.
Cash Flow from Investing Activities
During the nine months ended January 31, 2024, the Company received cash inflows of $479,869 from investing activities compared to cash proceeds of $148,015 during the nine months ended January 31, 2023. Proceeds from investing activities consists of the sale of oil and gas properties for aggregate proceeds of $548,750 less expenditures of $68,881 for oil and gas properties. Comparatively, the Company received proceeds of $175,000 and incurred oil and gas expenditures of $20,000 and acquired equipment for $6,985 during the nine months ended January 31, 2023.
Cash Flow from Financing Activities
During the nine months ended January 31, 2024, the Company received $605,503 of loan proceeds from the President of the Company offset by repayments of amounts owed to the President of the Company of $42,000. The Company also received proceeds of $80,000 from the issuance of a convertible note offset by repayment of outstanding carrying value of convertible notes of $293,438. Furthermore, the Company received proceeds of $99,000 pursuant to the issuance of shares of Series C convertible preferred stock, par value of $0.001 per share (“Series C shares”).
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During the nine months ended January 31, 2023, the Company received $477,860 of cash from financing activities, which included $235,000 from the issuance of a convertible note payable offset by a repayment of $140,140 on a convertible debenture, and proceeds of $363,000 from the issuance of Series C shares.
Liquidity and Capital Resources
As at January 31, 2024, the Company had cash of $11,561 and total assets of $1,882,562 compared to cash of $25,836 and total assets of $4,160,238 as at April 30, 2023. Overall, the Company saw a decrease in cash due to the fact that the Company is spending more cash on its operating activities compared to cash flows generated from its royalty income and supported by additional cash financing from investing and financing activities. The decrease in total assets was due to lower accounts receivable of $18,835 due to lower royalty revenues during the year, as well as a decrease in property and equipment of $1,642,290 and oil and gas properties of $622,155 due to the sale of properties
The Company had total liabilities of $1,596,787 as at January 31, 2024 compared to $1,839,182 as at April 30, 2023. The decrease in liabilities was due to a decrease in accounts payable of $63,873, and a decrease in convertible notes payable of $195,688 due to the repayments and conversions of outstanding convertible notes during the year.
As of January 31, 2024, the Company had a working capital deficit of $1,492,409 compared to a working capital deficit of $1,741,434 as at April 30, 2023. The increase in the working capital deficit was based on the use of cash for operating activities that was supported by financing proceeds. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. The unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q does not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
In 2022, the Company entered into a stock agreement that allowed investors to purchase up to 250 Series C shares at $1,000 per share for aggregate gross proceeds of $250,000. As at January 31, 2024, the Company had 836 Series C shares outstanding compared to 845 Series C shares outstanding at April 30, 2023. During the nine months ended January 31, 2024, the Company issued an additional 106 Series C shares and issued 387,555,556 common shares upon the conversion of 115 Series C shares.
The Company expects to continue to finance its future operations primarily through the stockholders of the Company, through the incurrence of debt, through public offerings and through other strategic financing opportunities. In the event that the Company requires additional funding to finance the growth of the Company’s current and expected future operations as well as to achieve our strategic objectives, certain stockholders of the Company have indicated their intent and ability to provide additional equity financing. Absent additional capital raising, we do not believe that our existing cash and cash equivalents and sources of liquidity will be sufficient to fund our operations for at least the next 12 months.
Issuances of additional shares will result in dilution to existing stockholders. There is no assurance that we will achieve any additional sales of the equity securities or arrange for debt or other financing to fund planned acquisitions and exploration activities.
We have not attained profitable operations and are dependent upon obtaining financing to pursue any extensive acquisitions and activities. During the nine months ended January 31, 2024, the Company incurred a net loss of $2,141,800 and used cash of $943,209 for operating activities. At January 31, 2024, the Company had a working capital deficit of $1,492,409 and an accumulated deficit of $18,174,870.
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Off-Balance Sheet Arrangements
We have no significant 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 are material to stockholders.
Critical Accounting Policies
Our condensed consolidated financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis. The preparation of the condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.
We regularly evaluate the accounting policies and estimates that we use to prepare our condensed consolidated financial statements. A complete summary of these policies is included in the notes to our financial statements. In general, management’s estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.
Recently Issued Accounting Pronouncements
The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our management, including our President who also acts as our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
At the end of the period being reported upon, the Company carried out an evaluation, under the supervision and with the participation of our President, who also acts as our Chief Financial Officer, in consultation with the Company’s independent public accounting firm, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures, and identified that the matters involving internal controls and procedures that the Company’s management were considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board.
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Based on the foregoing, our President who also acts as our Chief Financial Officer concluded that as of January 31, 2024, our disclosure controls and procedures were not effective to ensure that the material information required to be included in our Securities and Exchange Commission reports is accumulated and communicated to our management, including our principal executive and financial officer, as well as recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms relating to the Company.
Under the supervision and with the participation of management, including the President and Chief Financial Officer, the Company conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting as of April 30, 2023, using the criteria established in ” Internal Control - Integrated Framework - 2013” issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. As previously disclosed in our Annual Report on Form 10-K for the fiscal year ended April 30, 2023, we identified and continue to have the following material weakness in our internal controls over financial reporting:
| 1. | We do not have an Audit Committee – While not being legally obligated to have an audit committee, it is the management’s view that such a committee, including a financial expert member, is an utmost important entity level control over the Company’s financial statement. Currently the Board of Directors acts in the capacity of the Audit Committee and does not include a member that is considered to be independent of management to provide the necessary oversight over management’s activities. |
| 2. | We did not maintain appropriate cash controls – As of April 30, 2023, the Company has not maintained sufficient internal controls over financial reporting for the cash process, including failure to segregate cash handling and accounting functions, and did not require dual signature on the Company’s bank accounts. Alternatively, the effects of poor cash controls were mitigated by the fact that the Company had limited transactions in their bank accounts. |
| 3. | We did not implement appropriate information technology controls – As of April 30, 2023, the Company retains copies of all financial data and material agreements; however there is no formal procedure or evidence of normal backup of the Company’s data or off-site storage of the data in the event of theft, misplacement, or loss due to unmitigated factors. |
| 4. | We do not have sufficient monitoring and review controls with respect to accounting for complex transactions. |
| 5. | We have a lack of sufficient controls over financial reporting and day to day accounting, including oversight, monitoring and review, primarily from limited personnel and segregation of duties. |
As noted above, once the Company is engaged in a business of merit and has sufficient personnel available, then our board of directors, in particular and in connection with the aforementioned deficiencies, will implement the following remediation measures:
| 1. | Our board of directors will appoint additional members and establish an audit committee or a financial expert on our board of directors in the next fiscal year or as soon as practical thereafter. |
| 2. | We will appoint additional personnel to assist with the preparation of the Company’s monthly financial reporting, including preparation of the monthly bank reconciliations. |
Changes in Internal Control over Financial Reporting
There has been no change in our internal control over financial reporting identified in connection with our evaluation we conducted of the effectiveness of our internal control over financial reporting as of January 31, 2024, that occurred during the period that has materially affected, or is 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 our director, officer or any affiliates, or any registered or beneficial stockholder, is an adverse party or has a material interest adverse to our interest.
ITEM 1A. RISK FACTORS.
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and are not required to provide the information under this item.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
On November 13, 2023, the Company issued 86,666,667 common shares in connection with the conversion of 26 Series C shares.
On November 20, 2023, the Company issued 1,300,000 common shares with a fair value $519 for consulting services.
On January 4, 2024, the Company issued 88,888,889 common shares in connection with the conversion of 20 Series C shares.
On January 4, 2024, the Company issued 94 Series C shares pursuant to stock purchase agreement for aggregate gross proceeds of $94,000. The net proceeds from the issuance of 94 Series C shares were used for working capital purposes. The Series C shares are convertible into shares of common stock by dividing $1,200 by the conversion price, which is the lower of (i) a fixed price equaling the closing bid price of the common shares on the trading day immediately preceding the date of the securities purchase agreement among the company and the holder, as amended, modified or supplemented from time to time in accordance with its terms, and (ii) the amount equal to 100% of the lowest volume-weighted average price of the common shares during the fifteen (15) trading days immediately preceding, but not including, the date that such holder elects to convert in accordance with the terms of the certificate of designation for the Series C shares.
The above securities issuances were exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), in reliance on the exemptions provided by Regulation D and Section 4(a)(2), as applicable under the Securities Act.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES.
Not Applicable.
ITEM 5. OTHER INFORMATION.
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ITEM 6. EXHIBITS
| * | Filed herewith |
| ** | Furnished herewith. |
| *** | Pursuant to Regulation S-T, this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act, is deemed not filed for purposes of Section 18 of the Exchange Act and otherwise is not subject to liability under these sections. |
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company caused this amended report to be signed on its behalf by the undersigned, thereunto duly authorized.
| VERDE BIO HOLDINGS, INC. | ||
| Dated: March 25, 2024 | By: | /s/ Scott Cox |
| Scott Cox | ||
| President | ||
Pursuant to the requirement of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated:
| Dated: March 25, 2024 | By: | /s/ Scott Cox |
| Scott Cox President and Director (Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer) |
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