Company Quick10K Filing
Verde Resources
Price0.10 EPS-0
Shares115 P/E-51
MCap12 P/FCF-209
Net Debt0 EBIT-0
TEV12 TEV/EBIT-51
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-31 Filed 2020-05-20
10-Q 2019-12-31 Filed 2020-02-20
10-Q 2019-09-30 Filed 2019-11-19
10-K 2019-06-30 Filed 2019-10-11
10-Q 2019-03-31 Filed 2019-05-20
10-Q 2018-12-31 Filed 2019-02-19
10-Q 2018-09-30 Filed 2018-11-19
10-K 2018-06-30 Filed 2018-09-28
10-Q 2018-03-31 Filed 2018-05-15
10-Q 2017-12-31 Filed 2018-02-12
10-Q 2017-09-30 Filed 2017-11-17
10-K 2017-06-30 Filed 2017-09-26
10-Q 2017-03-31 Filed 2017-05-15
10-Q 2016-12-31 Filed 2017-02-17
10-Q 2016-09-30 Filed 2016-11-14
10-K 2016-06-30 Filed 2016-09-26
10-Q 2016-03-31 Filed 2016-05-16
10-Q 2015-12-31 Filed 2016-02-16
10-Q 2015-09-30 Filed 2015-11-23
10-K 2015-06-30 Filed 2015-10-13
10-Q 2015-03-31 Filed 2015-05-15
10-Q 2014-12-31 Filed 2015-02-13
10-Q 2014-09-30 Filed 2014-11-19
10-K 2014-06-30 Filed 2014-09-29
10-Q 2014-03-31 Filed 2014-05-20
10-Q 2013-12-31 Filed 2014-02-21
10-Q 2013-09-30 Filed 2013-11-14
10-K 2013-06-30 Filed 2013-09-30
10-Q 2013-03-31 Filed 2013-05-14
10-Q 2012-12-31 Filed 2013-02-14
10-Q 2012-09-30 Filed 2012-11-02
10-K 2012-06-30 Filed 2012-09-28
10-Q 2012-03-31 Filed 2012-05-04
10-Q 2011-12-31 Filed 2012-02-14
10-Q 2011-09-30 Filed 2011-11-14
10-K 2011-06-30 Filed 2011-09-28
8-K 2018-02-02

VRDR 10Q Quarterly Report

Part I - Financial Information
Item 1. Financial Statements.
Note 1 - Organization and Description of Business
Note 2 - Summary of Significant Accounting Policies
Note 3 - Cash and Cash Equivalent
Note 4 - Amount Due From Related Parties
Note 5 - Inventories
Note 6 - Accounts Payable and Advanced From Related Parties
Note 7 - Property, Plant and Equipment
Note 8 - Loans From Banks (Hire Purchase Installment Loans)
Note 9 - Income Tax
Note 10 - Commitments and Contingencies
Note 11 - Earnings/(Loss) per Share
Note 12 - Capital Stock
Note 13 - Related Party Transactions
Note 14 - Going Concern and Liquidity Considerations
Note 15 - Concentrations
Note 16 - Subsequent Events
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Item 4. Controls and Procedures.
Part II - Other Information
Item 1. Legal Proceedings.
Item 1A. Risk Factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Item 3. Defaults Upon Senior Securities.
Item 4. Mine Safety Disclosure.
Item 5. Other Information.
Item 6. Exhibits.
EX-31.1 vrdr_ex311.htm
EX-31.2 vrdr_ex312.htm
EX-32.1 vrdr_ex321.htm

Verde Resources Earnings 2020-03-31

Balance SheetIncome StatementCash Flow
1.91.20.4-0.3-1.1-1.82012201420172020
Assets, Equity
0.30.20.10.1-0.0-0.12012201420172020
Rev, G Profit, Net Income
0.20.10.0-0.0-0.1-0.22012201420172020
Ops, Inv, Fin

10-Q 1 vrdr_10q.htm FORM 10-Q vrdr_10q.htm

 

  

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10–Q

 

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2020

 

or

 

o 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: 000-55276

 

Verde Resources, Inc.

(Exact name of registrant as specified in its charter)

 

Nevada

 

32-0457838

(State or other jurisdiction of

 incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

Block B-5, 20/F, Great Smart Tower, 230 Wanchai Road, Wanchai, Hong Kong

(Address of principal executive offices)

 

(852) 21521223

(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. Yes x No o

 

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). Yes x No o

 

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

¨

Non-accelerated filer

¨

Smaller reporting company

x

(Do not check if a smaller reporting company)

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

 

As of May 20, 2020 there were 115,038,909 shares of the issuer’s common stock, par value $0.001, outstanding.

 

 

 

 

  VERDE RESOURCES, INC.

 

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2020

 

TABLE OF CONTENTS

 

 

 
2

Table of Contents

  

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

VERDE RESOURCES, INC.

 

INDEX TO INTERIMCONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

FOR THE PERIOD OF ENDED MARCH 31, 2020

 

 

Page

 

Condensed Consolidated Balance Sheets

 

4

 

Condensed Consolidated Statements of Operations

 

5

 

Condensed Consolidated Statements of Equity

 

6

 

Condensed Consolidated Statements of Cash Flows

 

7

 

Notes to Condensed Consolidated Financial Statements

 

8

 

 
3

Table of Contents

 

Verde Resources, Inc.

Condensed Consolidated Balance Sheets

 

 

 

As at

March 31,

 

 

As at

June 30,

 

 

 

2020

 

 

2019

 

 

 

(Unaudited)

 

 

(Audited)

 

ASSETS

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

Cash and cash equivalents

 

$ 19,209

 

 

$ 10,662

 

Amount due from related parties

 

 

-

 

 

 

-

 

Inventories

 

 

-

 

 

 

-

 

Deposit & prepayment

 

 

20,829

 

 

 

974

 

Total Current Assets

 

$ 40,038

 

 

$ 11,636

 

Long Term Assets

 

 

 

 

 

 

 

 

Property, plant and equipment

 

$ 742

 

 

$ 1

 

Total Long Term Assets

 

$ 742

 

 

$ 1

 

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

$ 40,780

 

 

$ 11,637

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ DEFICIT

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$ 1,496,219

 

 

$ 1,563,102

 

Advanced from related parties

 

 

706,428

 

 

 

592,683

 

Accrual

 

 

50,220

 

 

 

33,296

 

Other payables

 

 

43,194

 

 

 

43,194

 

Loans from banks

 

 

-

 

 

 

193

 

Total Current Liabilities

 

$ 2,296,061

 

 

$ 2,232,468

 

Long term Liabilities

 

 

 

 

 

 

 

 

Loans from banks (non-current)

 

$ -

 

 

$ -

 

Total Long Term Liabilities

 

$ -

 

 

$ -

 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES

 

$ 2,296,061

 

 

$ 2,232,468

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS’ DEFICIT

 

 

 

 

 

 

 

 

Preferred stock, par value $0.001, 50,000,000 shares authorized, none issued and outstanding

 

 

-

 

 

 

-

 

Common stock, par value $0.001, 10,000,000,000 shares authorized, 115,038,909 shares issued and outstanding as of March 31, 2020 & June 30, 2019 respectively

 

$ 115,039

 

 

$ 115,039

 

Additional paid-in capital

 

 

2,416,243

 

 

 

2,416,243

 

Accumulated deficit

 

 

(5,107,988 )

 

 

(4,839,749 )

Accumulated other comprehensive income (loss)

 

 

857,057

 

 

 

614,603

 

Non-controlled interest

 

 

(535,632 )

 

 

(526,967 )

Total Stockholders’ Deficit

 

$ (2,255,281 )

 

$ (2,220,831 )

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT

 

$ 40,780

 

 

$ 11,637

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 
4

Table of Contents

   

Verde Resources, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

 

 

 

Three Months Ended

March 31,

 

 

Nine Months Ended

March 31,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

REVENUES

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

 

-

 

 

 

-

 

 

$ -

 

 

$ 8,879

 

Cost of revenue

 

 

-

 

 

 

(1,934 )

 

 

-

 

 

 

(14,739 )

Gross loss

 

 

-

 

 

 

(1,934 )

 

 

-

 

 

 

(5,860 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general & administrative expenses

 

 

(96,858 )

 

 

(25,917 )

 

 

(276,904 )

 

 

(119,172 )

LOSS FROM OPERATIONS

 

 

(96,858 )

 

 

(27,851 )

 

$ (276,904 )

 

$ (125,032 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER INCOME(EXPENSES)

 

 

-

 

 

 

3,334

 

 

 

-

 

 

 

303,353

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET LOSS BEFORE INCOME TAX

 

 

(96,858 )

 

 

(24,517 )

 

$ (276,904 )

 

$ 178,321

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision of Income Tax

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

NET PROFIT (LOSS)

 

 

(96,858 )

 

 

(24,517 )

 

$ (276,904 )

 

$ 178,321

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-controlled interest

 

 

3,386

 

 

 

2,342

 

 

 

8,665

 

 

 

(37,738 )

Net loss contributed to the group

 

 

(93,472 )

 

 

(22,175 )

 

 

(268,239 )

 

 

140,583

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income(loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation income(loss)

 

 

136,228

 

 

 

(33,951 )

 

$ 242,454

 

 

$ 32,923

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income(loss)

 

$ 42,756

 

 

$ (56,126 )

 

$ (25,785 )

 

$ 173,506

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and Diluted Loss per Common Share

 

$ (0.0008 )

 

$ (0.0002 )

 

$ (0.0023 )

 

$ 0.0012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted Average Number of Common Shares Outstanding

 

 

115,038,909

 

 

 

115,038,909

 

 

 

115,038,909

 

 

 

115,038,909

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 
5

Table of Contents

  

Verde Resources, Inc.

Condensed Consolidated Statements of Equity (Deficit)

(Unaudited)

 

 

 

Common Shares

 

 

Additional

Paid-In

 

 

Accumulated

 

 

Non-Controlling

 

 

Accumulated Other Comprehensive

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Interest

 

 

Income (Loss)

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance - June 30, 2018

 

 

115,038,909

 

 

$ 115,039

 

 

$ 2,416,243

 

 

$ (4,934,011 )

 

$ (561,438 )

 

$ 548,707

 

 

$ (2,415,460 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net profit for the period

 

 

-

 

 

 

-

 

 

 

-

 

 

 

140,583

 

 

 

37,738

 

 

 

-

 

 

 

178,321

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation gain

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

32,923

 

 

 

32,923

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance - March 31, 2019

 

 

115,038,909

 

 

$ 115,039

 

 

$ 2,416,243

 

 

$ (4,793,428 )

 

$ (523,700 )

 

$ 581,630

 

 

$ (2,204,216 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance - June 30, 2019

 

 

115,038,909

 

 

$ 115,039

 

 

$ 2,416,243

 

 

$ (4,839,749 )

 

$ (526,967 )

 

$ 614,603

 

 

$ (2,220,831 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss for the period

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(268,239 )

 

 

(8,665 )

 

 

-

 

 

 

(276,904 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation gain

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

242,454

 

 

 

242,454

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance - March 31, 2020

 

 

115,038,909

 

 

$ 115,039

 

 

$ 2,416,243

 

 

$ (5,107,988 )

 

$ (535,632 )

 

$ 857,057

 

 

$ (2,255,281 )

 

 

 

Common Shares

 

 

Additional

Paid-In

 

 

Accumulated

 

 

Non-Controlling

 

 

Accumulated Other Comprehensive

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Interest

 

 

Income (Loss)

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance – December 31, 2018

 

 

115,038,909

 

 

$ 115,039

 

 

$ 2,416,243

 

 

$ (4,771,253 )

 

$ (521,358 )

 

$ 615,581

 

 

$ (2,145,748 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net profit( loss) for the period

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(22,175 )

 

 

(2,342 )

 

 

-

 

 

 

(24,517 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation gain (loss)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(33,951 )

 

 

(33,951 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance - March 31, 2019

 

 

115,038,909

 

 

$ 115,039

 

 

$ 2,416,243

 

 

$ (4,793,428 )

 

$ (523,700 )

 

$ 581,630

 

 

$ (2,204,216 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance - December 31, 2019

 

 

115,038,909

 

 

$ 115,039

 

 

$ 2,416,243

 

 

$ (5,014,516 )

 

$ (532,246 )

 

$ 720,829

 

 

$ (2,294,651 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net profit( loss) for the period

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(93,472 )

 

 

(3,386 )

 

 

-

 

 

 

(96,858 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation gain (loss)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

136,228

 

 

 

136,228

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance - March 31, 2020

 

 

115,038,909

 

 

$ 115,039

 

 

$ 2,416,243

 

 

$ (5,107,988 )

 

$ (535,632 )

 

$ 857,057

 

 

$ (2,255,281 )

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 
6

Table of Contents

 

Verde Resources, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

March 31,

2020

 

 

March 31,

2019

 

Cash flows from operating activities:

 

 

 

 

 

 

Net profit(loss)

 

$ (276,904 )

 

$ 178,321

 

Adjustments to reconcile loss to net cash used in operations

 

 

 

 

 

 

 

 

Amortization and depreciation

 

 

3,136

 

 

 

4,787

 

Waiver of consultancy service fee

 

 

-

 

 

 

-

 

Stock-based compensation

 

 

-

 

 

 

-

 

Gain on disposal of property, plant and equipment

 

 

-

 

 

 

(246,617 )

Changes in operating assets and liabilities

 

 

 

 

 

 

 

 

(Increase) decrease in:

 

 

 

 

 

 

 

 

Accounts receivable from related parties

 

 

-

 

 

 

4,536

 

Deposits and prepayment

 

 

(23,593 )

 

 

1,160

 

Inventory

 

 

-

 

 

 

4,576

 

Other receivable

 

 

-

 

 

 

-

 

Increase (decrease) in:

 

 

 

 

 

 

 

 

Accounts payable

 

 

(1,058 )

 

 

(4,163 )

Accrued liabilities

 

 

17,169

 

 

 

(92 )

GST payable

 

 

-

 

 

 

(460 )

Advanced from sub-contractor & related parties

 

 

(38,338 )

 

 

(4,105 )

Deposit received from customer

 

 

-

 

 

 

-

 

Net cash provided by (used in) operating activities

 

 

(319,588 )

 

 

(62,057 )

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Proceeds from disposal of plant and equipment

 

 

-

 

 

 

-

 

Addition of motor vehicle

 

 

-

 

 

 

-

 

Net cash provided by investing activities

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from bank loans

 

 

-

 

 

 

-

 

Repayments of bank loans

 

 

(191 )

 

 

(1,801 )

Shareholders’ loans waived

 

 

-

 

 

 

-

 

Proceeds from issuance of common stock

 

 

-

 

 

 

-

 

Net cash (used in) provided by financing activities

 

 

(191 )

 

 

(1,801 )

 

 

 

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalent

 

 

(319,779 )

 

 

(63,858 )

 

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash

 

 

328,326

 

 

 

59,541

 

 

 

 

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

 

8,547

 

 

 

(4,317 )

Cash and cash equivalents at beginning of period

 

 

10,662

 

 

 

10,032

 

Cash and cash equivalents at end of period

 

$ 19,209

 

 

$ 5,715

 

 

 

 

 

 

 

 

 

 

Supplementary cash flow information

 

 

 

 

 

 

 

 

Income taxes paid

 

$ -

 

 

$ -

 

Interest paid

 

$ 1

 

 

$ 67

 

Supplementary non-cash information

 

 

 

 

 

 

 

 

Reorganization

 

 

-

 

 

 

-

 

Issuance of common stock

 

 

-

 

 

 

-

 

 

The accompanying notes are an integral part of these condensed financial statements.

 

 
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Verde Resources, Inc.

Notes to Condensed Consolidated Financial Statements

March 31, 2020

(Unaudited)

 

NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS

 

Verde Resources, Inc. (the “Company” or “VRDR”) was incorporated on April 22, 2010, in the State of Nevada, U.S.A. The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America, and the Company’s fiscal year end is June 30.

 

Gold Billion Global Limited (“Gold Billion” or “GBL”) was incorporated in British Virgin Islands on February 7, 2013. GBL was setup by the Board of Directors of Federal Mining Resources Limited (“FMR”). The major operation of GBL is to manage and monitor the mineral exploration and mining projects of FMR.

 

On July 1, 2013, FMR assigned its rights and obligation on Champmark Sdn Bhd (“CSB”) to GBL. Four of the five members of CSB Board of Directors were appointed by FMR, with two of the GBL Board of Directors currently sitting on the CSB Board. According to ASC 810-05-08 A, CSB is a deemed subsidiary of GBL, where it has controlled the CSB Board of Directors, has assigned rights to receive future benefits and residual value, and obligations to absorb loss and finance for CSB by GBL. GBL has the power to direct the activities of CSB that most significantly impact CSB’s economic performance and the obligation to absorb losses of CSB that could potentially be significant to the CSB or the right to receive benefits from CSB that could potentially be significant to CSB. GBL is the primary beneficiary of CSB because it has been assigned with all relevant rights and obligation and can direct the activities of CSB through the common directors and the 85% shareholder, FMR. Under 810-23-42, 43, it is determined that CSB is de-facto agent of GBL and GBL is the de-facto principal of CSB. GBL started to consolidate CSB from July 1, 2013, and the Company consolidated GBL and CSB from October 25, 2013, onwards.

 

On February 17, 2014, the Company entered into a Supplementary Agreement to the Assignment Agreement and completed an acquisition of GBL pursuant to the Supplementary Agreement. The acquisition was a reverse acquisition in accordance with ASC 805-40 “Reverse Acquisitions”. The legal parent was VRDR which was the accounting acquiree while GBL was the accounting acquirer. There was a 15% non-controlling interest of Champmark SDN BHD (“CSB”) after the acquisition. This transaction was accounted for as a recapitalization effected by a share exchange, wherein GBL with its 85% deemed subsidiary CSB was considered the acquirer for accounting and financial reporting purposes. The assets and liabilities of the acquired entity have been brought forward at their book value and no goodwill has been recognized.

 

As a result of the acquisition, the Company holds 100% equity interest in GBL and 85% variable interest in CSB. Our consolidated subsidiaries include GBL being our wholly-owned subsidiary and 85% of CSB being a variable interest entity (VIE) and deemed subsidiary of GBL.

 

On March 17, 2014, the Company through GBL and its deemed subsidiary CSB entered into a Sub-Contract Agreement with Borneo Oil & Gas Corporation Sdn Bhd (“BOG”) for the engagement of its sub-contractor services to carry out exploration and exploitation works on alluvial and lode gold resources at Site IV-1 of the Merapoh Mine. The Sub-Contract Agreement is for a period of 5 years with a renewal for another 5 years subject to review by both parties. BOG is a wholly-owned subsidiary of Borneo Oil Berhad (BOB) which is listed on the main market of Kuala Lumpur Stock Exchange. BOG being a local company in Malaysia provides the Company with the advantage of local knowledge and well-established connection in dealing with the relevant local authorities in our mining operations.

 

On April 1, 2014, GBL purchased 85% equity interest of CSB, and CSB became indirect subsidiary of the Company.

 

Effective August 27, 2014, the Company’s Articles of Incorporation were amended to increase the authorized shares of the Company from 100,000,000 shares of common stock to 250,000,000 shares of common stock. A copy of the Certificate of Amendment was filed with the Nevada Secretary of State. The Form 8K announcing the increase of the authorized shares of the Company was filed with SEC on September 15, 2014.

 

Effective February 20, 2016, Mr. Wu Ming Ding resigned all of his positions as President and Director of the Company with Mr. Balakrishnan B S Muthu being appointed President to fill the vacancy created. Effective February 20, 2016, Mr. Chen Ching was appointed Director of the Company and the entire Board of Directors now consists of Mr. Balakrishnan B S Muthu and Mr. Chen Ching. The SC 14F1 and Form 8-K announcing the change in officers and directors were filed with SEC on February 10, 2016 and February 22, 2016 respectively.

 

Effective February 2, 2018, the Company s Articles of Incorporation were amended to increase the authorized shares of the Company from 250,000,000 shares of common stock to 10,000,000,000 shares of common stock. A copy of the Certificate of Amendment was filed with the Nevada Secretary of State. The Form 8K announcing the increase of the authorized shares of the Company was filed with SEC on February 6, 2018.

 

 
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NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Condensed Consolidated Financial Statements

 

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. The results of operations for the periods ended March 31, 2020 are not necessarily indicative of the operating results for the full years.

 

Basis of Presentation

 

The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America (GAAP). These condensed consolidated financial statements are expressed in United States dollars ($). Financial statements prepared in accordance with GAAP contemplate the realization of assets and the satisfaction of liabilities in the normal course of business. These condensed consolidated audited financial statements include all adjustments that, in the opinion of management, are necessary in order to make the financial statements not misleading.

 

Basis of Consolidation

 

The condensed consolidated financial statements include the financial statements of Verde Resources, Inc., its wholly owned subsidiary Gold Billion Global Limited (“GBL”) and the 85% of the deemed subsidiary variable interest of Champmark SDN BHD (“CSB”). All inter-company balances and transactions between the Company and variable interest entity (VIE) have been eliminated upon consolidation.

 

The Company has adopted ASC Topic 810-10-5-8, “Variable Interest Entities”, which requires a variable interest entity or VIE to be consolidated by a company if that company is subject to a majority of the risk of loss for the VIE or is entitled to receive a majority of the VIE’s residual returns.

 

Variable Interest Entity

 

On July 1, 2013, the Company’s subsidiary, GBL entered into a series of agreements (“VIE agreements”) with FMR and details of the VIE agreements are as follows :

 

1.

Management Agreement, FMR entrusted the management rights of its subsidiary CSB to GBL that include:

 

i)

management and administrative rights over the day-to-day business affairs of CSB and the mining operation at Site IV-1 of the Merapoh Gold Mine;

 

ii)

final right for the appointment of members to the Board of Directors and the management team of CSB;

 

iii)

act as principal of CSB;

 

iv)

obligation to provide financial support to CSB;

 

v)

option to purchase an equity interest in CSB;

 

vi)

entitlement to future benefits and residual value of CSB;

 

vii)

right to impose no dividend policy;

 

viii)

human resources management.

 

2.

Debt Assignment, FMR assigned to GBL the sum of money in the amount of US Dollars One Hundred Nine Thousand Eight Hundred One And Cents Seventy-Two Only (US$ 109,801.72), now due to GBL from CSB under the financing obligation from the FMR to CSB.

 

With the above agreements, GBL demonstrates its ability to control CSB as the primary beneficiary and the operating results of the VIE was included in the condensed consolidated financial statements for the year ended June 30, 2014.

 

On April 1, 2014, the Board of Director of GBL notified FMR upon the decision to exercise the right of option to purchase 85% equity interest of CSB under Management Agreement Section 3.2.4 dated July 1, 2013 between GBL and FMR. This acquisition was completed on April 1, 2014 with consideration of US$1. GBL then became 85% shareholder of CSB and is required to consolidate CSB as a subsidiary.

 

 
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Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company’s periodic filings with the Securities and Exchange Commission include, where applicable, disclosures of estimates, assumptions, uncertainties and markets that could affect the financial statements and future operations of the Company.

 

Cash and Cash Equivalents

 

Cash and cash equivalents include cash in banks, 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 $19,209 and $10,662 in cash and cash equivalents at March 31, 2020 and June 30, 2019, respectively.

 

Concentrations of Credit Risk

 

The Company’s financial instruments that are exposed to concentrations of credit risk primarily consist of its cash and cash equivalents and related party payables it will likely incur in the near future. The Company places its cash and cash equivalents with financial institutions of high credit worthiness. At times, its cash and cash equivalents with a particular financial institution may exceed any applicable government insurance limits. The Company’s management plans to assess the financial strength and credit worthiness of any parties to which it extends funds, and as such, it believes that any associated credit risk exposures are limited.

 

Risks and Uncertainties

 

The Company operates in the resource exploration industry that is subject to significant risks and uncertainties, including financial, operational, technological, and other risks associated with operating a resource exploration business, including the potential risk of business failure.

 

Accounts Receivable

 

Accounts receivable are recognized and carried at net realizable value. An allowance for doubtful accounts will be recorded in the period when a loss is probable based on an assessment of specific evidence indicating troubled collection, historical experience, accounts aging, ongoing business relation and other factors. Accounts are written off after exhaustive efforts at collection. If accounts receivable are to be provided for, or written off, they would be recognized in the consolidated statement of operations within operating expenses. At and, the Company has no allowance for doubtful accounts, as per management’s judgment based on their best knowledge. As of March 31, 2020 and June 30, 2019, the longest credit term for certain customers are 60 days.

 

Provision for Doubtful Accounts

 

The Company maintains an allowance for doubtful accounts to reserve for potentially uncollectible receivables and reviews accounts receivable by amounts due by customers which are past due to identify specific customers with known disputes or collectability issues. In determining the amount of the reserve, the Company makes judgments about the creditworthiness of customers based on past collection experience and ongoing credit risk evaluations. At March 31, 2020 and June 30, 2019 there was no allowance for doubtful accounts.

 

Fair Value

 

ASC Topic 820 “Fair Value Measurement and Disclosures” establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market.

 

 
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These tiers include:

 

 

Level 1—defined as observable inputs such as quoted prices in active markets;

 

Level 2—defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and

 

Level 3—defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

 

The Company’s financial instruments consist of cash and cash equivalents, trade receivables, other receivables, payables, and short term and long term debt. The carrying values of cash and cash equivalents, trade receivables, other receivables, and payables approximate their fair value due to their short maturities. The carrying value of long term debt approximates the fair value of debt of similar terms and remaining maturities available to the company.

 

The Company’s non-financial assets are measured on a recurring basis. These non-financial assets are measured for impairment annually on the Company’s measurement date at the reporting unit level using Level 3 inputs. For most assets, ASC 820 requires that the impact of changes resulting from its application be applied prospectively in the year in which the statement is initially applied.

 

The Company’s non-financial assets measured on a non-recurring basis include the Company’s property, plant and equipment and finite-use intangible assets which are measured for recoverability when indicators for impairment are present. ASC 820 requires companies to disclose assets and liabilities measured on a non-recurring basis in the period in which the re-measurement at fair value is performed.

 

The Company did not have any convertible bonds as of March 31, 2020 and June 30, 2019.

 

Foreign Currency Translation

 

The Company’s reporting currency is the United States dollar (“$”) and the accompanying consolidated financial statements have been expressed in United States dollars. The Company’s functional currency is the Malaysian Ringgit ( “MYR”) which is a functional currency as being the primary currency of the economic environment in which their operations are conducted.

 

In accordance with ASC Topic 830 “Translation of Financial Statements” , capital accounts of the consolidated financial statements are translated into United States dollars from MYR at their historical exchange rates when the capital transactions occurred. Assets and liabilities are translated at the exchange rates as of balance sheet date. Income and expenditures are translated at the average exchange rate of the respective year. The resulting exchange differences are recorded in the consolidated statement of operations.

 

 

 

March 31,

2020

 

 

June 30,

2019

 

Period-end MYR : $1 exchange rate

 

 

0.2318

 

 

 

0.2420

 

Average MYR : $1 exchange rate

 

 

0.2395

 

 

 

0.2425

 

 

Comprehensive Income

 

Comprehensive income is defined to include all changes in equity except those resulting from investments by owners and distributions to owners. Among other disclosures, all items that are required to be recognized under current accounting standards as components of comprehensive income are required to be reported in a financial statement that is presented with the same prominence as other financial statements. Comprehensive income includes net income and the foreign currency translation changes.

 

 
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Segment Reporting

 

The Company currently engages in one operation segment: Gold Mining. The expenses incurred were consisting principally of management services. The Company’s major operation is located in Malaysia.

 

Mineral Acquisition and Exploration Costs

 

The Company has been primarily engaged in the acquisition, exploration, and development of mining properties. The Company was no longer considered an exploration stage company after the reverse take-over with its subsidiary GBL.

 

Mineral property acquisition and exploration costs are expensed as incurred. When it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves, the costs incurred to develop such property are capitalized. Such costs will be amortized using the units-of-production method over the estimated life of the probable reserves.

 

Environmental Expenditures

 

The operations of the Company have been, and may in the future be, affected from time to time in varying degree by changes in environmental regulations, including those for future reclamation and site restoration costs. Both the likelihood of new regulations and their overall effect upon the Company vary greatly and are not predictable. The Company’s policy is to meet or, if possible, surpass standards set by relevant legislation by application of technically proven and economically feasible measures.

 

Environmental expenditures that relate to ongoing environmental and reclamation programs are charged against earnings as incurred or capitalized and amortized depending on their future economic benefits. All of these types of expenditures incurred since inception have been charged against earnings due to the uncertainty of their future recoverability. Estimated future reclamation and site restoration costs, when the ultimate liability is reasonably determinable, are charged against earnings over the estimated remaining life of the related business operation, net of expected recoveries.

 

Revenue Recognition

 

In accordance with the ASC Topic 605, “Revenue Recognition”, the Company recognizes revenue when persuasive evidence of an arrangement exists, transfer of title has occurred or services have been rendered, the selling price is fixed or determinable and collectibility is reasonably assured.

 

The Company derives revenues primarily from the sales of gold mineral to registered gold trading companies in Malaysia. The Company generally recognizes its revenues at the time of gold sales and its selling price is determined by the prevailing market value of gold bullion quoted by the leading registered gold trading company in Malaysia. Sales invoice will be duly presented to the trading companies when delivery is completed and revenue is then recognized.

 

Cost of Revenue

 

The cost of revenue consists of exploration cost, mine equipment depreciation, production cost, mine site management cost, sub-contractor cost, and royalty and tribute payment which are levied on the gross revenue at the rate of 18% on the invoiced value of gold sales.

 

Advertising Expenses

 

Advertising costs are expensed as incurred under ASC Topic 720, “Advertising Costs” . Advertising expenses incurred for the periods ended March 31, 2020 and June 30, 2019 were $0.

 

 
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Income Taxes

 

The provision for income taxes is determined in accordance with the provisions of ASC Topic 740, “Accounting for Income Taxes” (“ASC 740”). Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Any effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

 

ASC 740 prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their financial statements uncertain tax positions taken or expected to be taken on a tax return. Under ASC 740, tax positions must initially be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions must initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts. As of March 31, 2020 and June 30, 2019, the Company did not have any significant unrecognized uncertain tax positions.

 

Recent Accounting Pronouncements

 

 

ASU 2018-01 is expected to reduce the cost of adopting the new leases standard for certain land easements. It is also an attempt to help ensure that companies can make a successful transition to the standard without compromising the quality of information provided to investors about these transactions. Land easements (also commonly referred to as rights of way) represent the right to use, access, or cross another entity’s land for a specified purpose. Land easements are used by utility and telecommunications companies, for example, when they need to take a small strip of land, or easement, to bury wires. Not all companies have historically accounted for them as leases. Stakeholders pointed out that the requirement to evaluate all old and existing land easements, sometimes numbering in the tens of thousands, to determine if they meet the definition of a lease under the new standard could be very costly. They also noted there would be limited benefit to applying this requirement, as many of their land easements would not meet the definition of a lease, or even if they met that definition, many of their easements are prepaid and, therefore, already are recognized on the balance sheet.

 

The land easements ASU addresses this by:

 

·

Providing an optional transition practical expedient that, if elected, would not require an organization to reconsider their accounting for existing land easements that are not currently accounted for under the old leases standard; and

 

·

Clarifying that new or modified land easements should be evaluated under the new leases standard, once an entity has adopted the new standard.

 

The FASB issued an Accounting Standards Update (ASU) that helps organizations address certain stranded income tax effects in accumulated other comprehensive income (AOCI) resulting from the Tax Cuts and Jobs Act.

 

ASU No. 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, provides financial statement preparers with an option to reclassify stranded tax effects within AOCI to retained earnings in each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act (or portion thereof) is recorded.

 

 
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The ASU requires financial statement preparers to disclose:

 

·

A description of the accounting policy for releasing income tax effects from AOCI;

 

·

Whether they elect to reclassify the stranded income tax effects from the Tax Cuts and Jobs Act; and

 

·

Information about the other income tax effects that are reclassified.

 

The amendments affect any organization that is required to apply the provisions of Topic 220, Income Statement—Reporting Comprehensive Income, and has items of other comprehensive income for which the related tax effects are presented in other comprehensive income as required by GAAP. The amendments are effective for all organizations for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted. Organizations should apply the proposed amendments either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized.

 

The FASB has issued Accounting Standards Update (ASU) No. 2018-03, Technical Corrections and Improvements to Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, that clarifies the guidance in ASU No. 2016-01, Financial Instruments—Overall (Subtopic 825-10), as follows:

 

 

·

Issue 1: Equity Securities without a Readily Determinable Fair Value— Discontinuation. The amendment clarifies that an entity measuring an equity security using the measurement alternative may change its measurement approach to a fair value method in accordance with Topic 820,Fair Value Measurement, through an irrevocable election that would apply to that security and all identical or similar investments of the same issuer. Once an entity makes this election, the entity should measure all future purchases of identical or similar investments of the same issuer using a fair value method in accordance with Topic 820.

 

·

Issue 2: Equity Securities without a Readily Determinable Fair Value— Adjustments. The amendment clarifies that the adjustments made under the measurement alternative are intended to reflect the fair value of the security as of the date that the observable transaction for a similar security took place.

 

·

Issue 3: Forward Contracts and Purchased Options. The amendment clarifies that remeasuring the entire value of forward contracts and purchased options is required when observable transactions occur on the underlying equity securities.

 

·

Issue 4: Presentation Requirements for Certain Fair Value Option Liabilities. The amendment clarifies that when the fair value option is elected for a financial liability, the guidance in paragraph 825-10- 45-5 should be applied, regardless of whether the fair value option was elected under either Subtopic 815-15,Derivatives and Hedging— Embedded Derivatives, or 825-10,Financial Instruments— Overall.

 

·

Issue 5: Fair Value Option Liabilities Denominated in a Foreign Currency. The amendments clarify that for financial liabilities for which the fair value option is elected, the amount of change in fair value that relates to the instrument-specific credit risk should first be measured in the currency of denomination when presented separately from the total change in fair value of the financial liability. Then, both components of the change in the fair value of the liability should be remeasured into the functional currency of the reporting entity using end-of-period spot rates.

 

·

Issue 6: Transition Guidance for Equity Securities without a Readily Determinable Fair Value. The amendment clarifies that the prospective transition approach for equity securities without a readily determinable fair value in the amendments in ASU No. 2016-01 is meant only for instances in which the measurement alternative is applied. An insurance entity subject to the guidance in Topic 944,Financial Services— Insurance, should apply a prospective transition method when applying the amendments related to equity securities without readily determinable fair values. An insurance entity should apply the selected prospective transition method consistently to the entity’s entire population of equity securities for which the measurement alternative is elected.

 

For public business entities, ASU 2018-03 is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years beginning after June 15, 2018. Public business entities with fiscal years beginning between December 15, 2017, and June 15, 2018, are not required to adopt ASU 2018-03 until the interim period beginning after June 15, 2018, and public business entities with fiscal years beginning between June 15, 2018, and December 15, 2018, are not required to adopt these amendments before adopting the amendments in ASU 2016-01. For all other entities, the effective date is the same as the effective date in ASU 2016-01.

 

All entities may early adopt ASU 2018-03 for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, as long as they have adopted ASU 2016-01.

 

 
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The FASB issued Accounting Standards Update (ASU) No. 2018-04, Investments—Debt Securities (Topic 320 and Regulated Operations (Topic 980): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 117 and SEC Release No. 33-9273, which supersedes previous SEC guidance in the Codification in SAB Topic 5.M, Other-Than-Temporary Impairment of Certain Investments in Equity Securities and special balance sheet requirements in Regulation S-X Rule 3A-05 for Public Utility Holding Companies. The changes are effective when issued.

  

The FASB has issued Accounting Standards Update (ASU) No. 2018-05, Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118. ASU 2018-05 amends certain SEC material in Topic 740 for the income tax accounting implications of the recently issued Tax Cuts and Jobs Act (Act).

  

ASU 2018-05 adds the following guidance, among other things, to the FASB Accounting Standards Codification™ regarding the Act:

 

·

Question 1:If the accounting for certain income tax effects of the Act is not completed by the time a company issues its financial statements that include the reporting period in which the Act was enacted, what amounts should a company include in its financial statements for those income tax effects for which the accounting under Topic 740 is incomplete?

 

·

Answer 1:In a company’s financial statements that include the reporting period in which the Act was enacted, a company must first reflect the income tax effects of the Act in which the accounting under Topic 740 is complete. These completed amounts would not be provisional amounts. The company would then also report provisional amounts for those specific income tax effects of the Act for which the accounting under Topic 740 will be incomplete, but a reasonable estimate can be determined. For any specific income tax effects of the Act for which a reasonable estimate cannot be determined, the company would not report provisional amounts and would continue to apply Topic 740 based on the provisions of the tax laws that were in effect immediately prior to the Act being enacted. For those income tax effects for which a company was not able to determine a reasonable estimate (such that no related provisional amount was reported for the reporting period in which the Act was enacted), the company would report provisional amounts in the first reporting period in which a reasonable estimate can be determined.

 

·

Question 2: If an entity accounts for certain income tax effects of the Act under a measurement period approach, what disclosures should be provided?

 

·

Answer 2:The staff believes an entity should include financial statement disclosures to provide information about the material financial reporting impacts of the Act for which the accounting under Topic 740 is incomplete, including: 

 

 

a.

Qualitative disclosures of the income tax effects of the Act for which the accounting is incomplete;

 

b.

Disclosures of items reported as provisional amounts;

 

c.

Disclosures of existing current or deferred tax amounts for which the income tax effects of the Act have not been completed;

 

d.

The reason why the initial accounting is incomplete;

 

e.

The additional information that is needed to be obtained, prepared, or analyzed in order to complete the accounting requirements under Topic 740;

 

f.

The nature and amount of any measurement period adjustments recognized during the reporting period;

 

g. 

The effect of measurement period adjustments on the effective tax rate; and

 

h.

When the accounting for the income tax effects of the Act has been completed.

 

 

ASU 2018-05 is effective upon inclusion in the FASB Codification.

 

The FASB has issued an Accounting Standards Update (ASU) 2018-07 intended to reduce cost and complexity and to improve financial reporting for nonemployee share-based payments.

 

The ASU expands the scope of Topic 718, Compensation—Stock Compensation (which currently only includes share-based payments to employees) to include share-based payments issued to nonemployees for goods or services. Consequently, the accounting for share-based payments to nonemployees and employees will be substantially aligned. The ASU supersedes Subtopic 505-50, Equity—Equity-Based Payments to Non-Employees.

 

 
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The amendments in this ASU are effective for public companies for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. For all other companies, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted, but no earlier than a company’s adoption date of Topic 606, Revenue from Contracts with Customers. 

 

FASB Releases ASU No. 2018-09. The FASB has released Accounting Standards Update (ASU) No. 2018-09, Codification Improvements. ASU 2018-09 affects a wide variety of Topics in the Codification including:

 

·

Amendments to Subtopic 220-10,Income Statement— Reporting Comprehensive Income—Overall. The guidance in paragraph 220-10-45-10B(b) states that taxes not payable in cash are required to be reported as a direct adjustment to paid-in capital. This requirement conflicts with other guidance in Topic 740,Income Taxes, Subtopic 805-740,Business Combinations—Income Taxes, and Subtopic 852-740,Reorganizations—Income Taxes, which generally states that income taxes and adjustments to those accounts upon a business combination or a bankruptcy that is eligible for fresh-start reporting must be recognized in income. ASU No. 2018-09 clarifies the guidance in paragraph 220-10-45-10B by removing the generic phrase taxes not payable in cash and adding guidance that is specific to certain quasi-reorganizations.

 

·

Amendments to Subtopic 470-50,Debt—Modifications and Extinguishments. The guidance in paragraph 470-50-40-2 requires that the difference between the reacquisition price of debt and the net carrying amount of extinguished debt be recognized in income in the period of extinguishment. The guidance in that paragraph was not amended by FASB Statement No. 155, Accounting for Certain Hybrid Financial Instruments, or FASB Statement No. 159,The Fair Value Option for Financial Assets and Financial Liabilities; therefore, it does not specifically address extinguishments of debt when the fair value option is elected. ASU No. 2018-09 clarifies that:

 

 

1. 

When the fair value option has been elected on debt that is extinguished, the net carrying amount of the extinguished debt equals its fair value at the reacquisition date, and

 

2. 

Related gains or losses in other comprehensive income must be included in net income upon extinguishment of the debt.

 

 

·

Amendments to Subtopic 480-10,Distinguishing Liabilities from Equity—Overall. The guidance in paragraph 480-10-25-15 prohibits the combination of freestanding financial instruments within the scope of Subtopic 480-10 with noncontrolling interest, unless the combination is required by Topic 815,Derivatives and Hedging. The example in paragraphs 480-10-55-55 and 480-10-55-59 conflicts with that guidance by stating that freestanding option contracts with the terms in Derivative 2 should be accounted for on a combined basis with the noncontrolling interest. The source of the example in paragraph 480-10-55-59 is from EITF Issue No. 00-4, “Majority Owner’s Accounting for a Transaction in the Shares of a Consolidated Subsidiary and a Derivative Indexed to the Noncontrolling Interest in That Subsidiary.” Issue 00-4 was nullified by FASB Statement No. 150,Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity, but a conforming amendment to the example in paragraph 480-10-55-59 was not made to align it with the guidance in Statement 150. The amendment in this Update conforms the guidance in paragraphs 480-10-55-55 and 480-10-55-59 with the guidance in Statement 150.

 

 

·

Amendments to Subtopic 718-740,Compensation—Stock Compensation—Income Taxes. The guidance in paragraph 718-740-35-2, as amended, is unclear on whether an entity should recognize excess tax benefits (or tax deficiencies) for compensation expense that is taken on the entity’s tax return. The amendment to paragraph 718-740-35-2 in ASU No. 2018-09 clarifies that an entity should recognize excess tax benefits (that is, the difference in tax benefits between the deduction for tax purposes and the compensation cost recognized for financial statement reporting) in the period when the tax deduction for compensation expense is taken on the entity’s tax return. This includes deductions that are taken on the entity’s return in a different period from when the event that gives rise to the tax deduction occurs and the uncertainty about whether (1) the entity will receive a tax deduction and (2) the amount of the tax deduction is resolved.

 

 
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·

Amendments to Subtopic 805-740,Business Combinations— Income Taxes. The amendments to paragraph 805-740-25-13 removes a list of three methods for allocating the consolidated tax provision to an acquired entity after acquisition that is inconsistent with guidance in Topic 740. The three methods for tax allocation described in paragraph 805-740-25-13 do not follow the broad principles of being systematic, rational, and consistent with Topic 740. The amendment removes the allocation methods in paragraph 805-740-25-13 and conforms the guidance in Subtopic 805-740 with the guidance in Topic 740.

 

·

Amendments to Subtopic 815-10,Derivatives and Hedging— Overall. The amendment to paragraphs 815-10-45-4 and 815-10-45-5 in ASU No. 2018-09 clarifies the circumstances in which derivatives may be offset. Under certain specific conditions, derivatives may be offset if three of the four criteria in paragraph 210-20-45-1 are met. One of the criteria—the intent to set off—is not required to offset derivative assets and liabilities for certain amounts arising from derivative instruments recognized at fair value and executed with the same counterparty under a master netting agreement.

 

·

Amendments to Subtopic 820-10,Fair Value Measurement— Overall. The amendments to paragraph 820-10-35-16D in ASU No. 2018-09 clarify the Board’s decisions about the measurement of the fair value of a liability or instrument classified in a reporting entity’s shareholder’s equity from the perspective of a market participant that holds an identical item as an asset at the measurement date. A technical inquiry questioned how transfer restrictions embedded in an asset should affect the fair value of the corresponding liability or equity instrument from the perspective of the issuer. The amendments correct the wording of paragraph 820-10-35-16D to clarify how an entity should account for those restrictions. The amendments are not intended to substantively change the application of GAAP. However, it is possible that the amendments may result in a change to existing practice for some entities.

 

The amendments to paragraphs 820-10-35-18D through 35-18F and 820-10-35- 18H through 35-18L revise the current guidance to allow portfolios of financial instruments and nonfinancial instruments accounted for as derivatives in accordance with Topic 815 to use the portfolio exception to valuation. The amendments improve guidance by adding wording that explicitly states that a group of financial assets, financial liabilities, nonfinancial items accounted for as derivatives in accordance with Topic 815, or a combination of these items that otherwise meet the criteria to do so are permitted to apply the portfolio exception for measuring fair value of the group. This allows entities to measure fair value on a net basis for those portfolios in which financial assets and financial liabilities and nonfinancial instruments are managed and valued together.

 

 

·

Amendments to Subtopic 940-405,Financial Services—Brokers and Dealers—Liabilities. Paragraph 940-405-55-1 contains incomplete guidance about offsetting on the balance sheet. The current guidance focuses only on explicit settlement dates as a determining criterion for offsetting when, in fact, an entity should consider all the requirements in Section 210-20-45,Balance Sheet—Offsetting—Other Presentation Matters, to determine whether a right of offset exists. There is similar guidance in paragraph 942-210-45-3. Paragraphs 940-405-55-1 and 942-210-45- 3 originated from two different AICPA Audit and Accounting Guides and paraphrase the guidance in Subtopic 210-20, albeit each slightly differently. The Board decided to amend both paragraphs so that the industry Topic guidance refers to the complete guidance for offsetting.

 

·

Amendments to Subtopic 962-325,Plan Accounting—Defined Contribution Pension Plans—Investments—Other. The amendment to Subtopic 962-325 removes the stable value common collective trust fund from the illustrative example in paragraph 962-325-55-17 to avoid the interpretation that such an investment would never have a readily determinable fair value and, therefore, would always use the net asset value per share practical expedient. Rather, a plan should evaluate whether a readily determinable fair value exists to determine whether those investments may qualify for the practical expedient to measure at net asset value in accordance with Topic 820.

 

Transition and Effective Date. The transition and effective date guidance is based on the facts and circumstances of each amendment. Some of the amendments in ASU No. 2018-09 do not require transition guidance and will be effective upon issuance of ASU No. 2018-09. However, many of the amendments do have transition guidance with effective dates for annual periods beginning after December 15, 2018, for public business entities.

  

In addition, there are some conforming amendments in ASU No. 2018-09 that have been made to recently issued guidance that is not yet effective that may require application of the transition and effective date guidance in the original ASU. For example, there are conforming amendments to Topic 820 and Subtopic 944-310, Financial Services—Insurance—Receivables, that are related to the amendments in Accounting Standards Update No. 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, which require application of the transition and effective date guidance in that ASU.

 

The FASB has issued Accounting Standards Update (ASU) No. 2018-10, Codification Improvements to Topic 842, Leases.

 

 
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ASU No. 2018-10, among other things, amends Topic 842 as follows:

 

·

Issue 1: Residual Value Guarantees - Paragraph 460-10-60-32 in Topic 460, Guarantees - This paragraph incorrectly refers readers to the guidance in Topic 842 about sale-leaseback-sublease transactions, when, in fact, it should refer readers to the guidance about guarantees by a seller-lessee of the underlying asset’s residual value in a sale and leaseback transaction. The amendment corrects the cross-reference in paragraph 460-10-60-32.

 

·

Issue 2: Rate Implicit in the Lease - The amendment clarifies that a rate implicit in the lease of zero should be used when applying the definition of the term “rate implicit” in the lease results in a rate that is less than zero.

 

·

Issue 3: Lessee Reassessment of Lease Classification - The amendment consolidates the requirements about lease classification reassessments into one paragraph and better articulates that an entity should perform the lease classification reassessment on the basis of the facts and circumstances, and the modified terms and conditions, if applicable, as of the date the reassessment is required.

 

·

Issue 4: Lessor Reassessment of Lease Term and Purchase Option - The amendment clarifies that a lessor should account for the exercise by a lessee of an option to extend or terminate the lease or to purchase the underlying asset as a lease modification unless the exercise of that option by the lessee is consistent with the assumptions that the lessor made in accounting for the lease at the commencement date of the lease (or the most recent effective date of a modification that is not accounted for as a separate contract).

 

·

Issue 5: Variable Lease Payments That Depend on an Index or a Rate - The amendment clarifies that a change in a reference index or rate upon which some or all of the variable lease payments in the contract are based does not constitute the resolution of a contingency subject to the guidance in paragraph 842-10-35-4(b). Variable lease payments that depend on an index or a rate should be remeasured, using the index or rate at the remeasurement date, only when the lease payments are remeasured for another reason (that is, when one or more of the events described in paragraph 842-10-35- 4(a) or (c) occur or when a contingency unrelated to a change in a reference index or rate under paragraph 842-10-35-4(b) is resolved).

 

·

Issue 6: Investment Tax Credits - There is an inconsistency in terminology used about the effect that investment tax credits have on the fair value of the underlying asset between the definition of the term rate implicit in the lease and the lease classification guidance in paragraph 842-10-55-8. The amendment removes that inconsistency by clarifying that the period covered by a lessor-only option to terminate the lease is included in the lease term.

 

·

Issue 7: Lease Term and Purchase Option - The description in paragraph 842-10-55- 24 about lessor-only termination options is inconsistent with the description in paragraph 842-10-55- 23 about the noncancellable period of a lease. The amendment removes that inconsistency by clarifying that the period covered by a lessor-only option to terminate the lease is included in the lease term.

 

·

Issue 8: Transition Guidance for Amounts Previously Recognized in Business Combinations - The transition guidance for lessors in paragraph 842-10-65-1(h)(3) is unclear because it relates to leases classified as direct financing leases or sales-type leases under Topic 840, while the lead-in sentence to paragraph 842-10-65-1(h) provides transition guidance for leases classified as operating leases under Topic 840. The amendment clarifies that paragraph 842-10-65-1(h)(3) applies to lessors for leases classified as direct financing leases or sales-type leases under Topic 842, not Topic 840. In other words, paragraph 842- 10-65-1(h)(3) applies when an entity does not elect the package of practical expedients in paragraph 842-10-65-1(f), and, for a lessor, an operating lease acquired as part of a previous business combination is classified as a direct financing lease or a sales-type lease when applying the lease classification guidance in Topic 842. The amendment also cross-references to other transition guidance applicable to those changes in lease classification for lessors.

 

 
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·

Issue 9: Certain Transition Adjustments - The amendments clarify whether to recognize a transition adjustment to earnings rather than through equity when an entity initially applies Topic 842 retrospectively to each prior reporting period.

 

·

Issue 10: Transition Guidance for Leases Previously Classified as Capital Leases under Topic 840 - Paragraph 842-10-65-1(r) provides guidance to lessees for leases previously classified as capital leases under Topic 840 and classified as finance leases under Topic 842. Paragraph 842-10-65-1(r)(4) provides subsequent measurement guidance before the effective date when an entity initially applies Topic 842 retrospectively to each prior reporting period, but it refers readers to the subsequent measurement guidance in Topic 840 about operating leases. It should refer them to the subsequent measurement guidance applicable to capital leases. The amendment corrects that reference.

 

·

Issue 11: Transition Guidance for Modifications to Leases Previously Classified as Direct Financing or Sales-Type Leases under Topic 840 - Paragraph 842-10-65-1(x) provides transition guidance applicable to lessors for leases previously classified as direct financing leases or sales-type leases under Topic 840 and classified as direct financing leases or sales-type leases under Topic 842. For modifications to those leases beginning after the effective date, paragraph 842-10-65-1(x)(4) refers readers to other applicable guidance in Topic 842 to account for the modification, specifically paragraphs 842-10-25-16 through 25- 17, depending on how the lease is classified after the modification. Stakeholders noted that it should refer to how the lease is classified before the modification to be consistent with the guidance provided in paragraphs 842-10-25-16 through 25-17. The amendment corrects that inconsistency.

 

·

Issue 12: Transition Guidance for Sale and Leaseback Transactions - The amendments clarify that the transition guidance on sale and leaseback transactions in paragraph 842-10-65-1(aa) through (ee) applies to all sale and leaseback transactions that occur before the effective date and corrects the referencing issues noted.

 

·

Issue 13: Impairment of Net Investment in the Lease - Paragraph 842-30-35-3 provides guidance to lessors for determining the loss allowance of the net investment in the lease and describes the cash flows that should be considered when the lessor determines that loss allowance. Stakeholders questioned whether the guidance, as written, would accelerate and improperly measure the loss allowance because the cash flows associated with the unguaranteed residual asset appear to be excluded from the evaluation. The amendment clarifies the application of the guidance for determining the loss allowance of the net investment in the lease, including the cash flows to consider in that assessment.

 

·

Issue 14: Unguaranteed Residual Asset - The amendment clarifies that a lessor should not continue to accrete the unguaranteed residual asset to its estimated value over the remaining lease term to the extent that the lessor sells substantially all of the lease receivable associated with a direct financing lease or a sales-type lease, consistent with Topic 840.

 

·

Issue 15: Effect of Initial Direct Costs on Rate Implicit in the Lease - The ordering of the illustration in Case C of Example 1 in paragraphs 842-30-55- 31 through 55-39 raised questions about how initial direct costs factor into determining the rate implicit in the lease for lease classification purposes for lessors only. The amendment more clearly aligns the illustration to the guidance in paragraph 842-10-25-4.

 

·

Issue 16: Failed Sale and Leaseback Transaction - The amendment clarifies that a seller lessee in a failed sale and leaseback transaction should adjust the interest rate on its financial liability as necessary to ensure that the interest on the financial liability does not exceed the total payments (rather than the principal payments) on the financial liability. This clarification is also reflected in the relevant illustration on failed sale and leaseback transactions that is contained in Subtopic 842-40.

 

Effective Date

 

The amendments in ASU No. 2018-10 affect the amendments in ASU No. 2016-02, which are not yet effective, but for which early adoption upon issuance is permitted. For entities that early adopted Topic 842, the amendments are effective upon issuance of ASU No. 2018-10, and the transition requirements are the same as those in Topic 842. For entities that have not adopted Topic 842, the effective date and transition requirements will be the same as the effective date and transition requirements in Topic 842.

 

FASB Issues Targeted Improvements to Lease Standard . The FASB has issued Accounting Standards Update (ASU) No. 2018-11, Leases (Topic 842): Targeted Improvements. This ASU is intended to reduce costs and ease implementation of the leases standard for financial statement preparers.

 

“The targeted improvements in the ASU address areas our stakeholders identified as sources of unnecessary cost or complexity in the leases standard,” stated FASB Chairman Russell G. Golden. “They represent the FASB’s commitment to proactively address implementation issues raised by our stakeholders to ensure a successful transition to the new standard without compromising the quality of information provided to investors.”

 

ASU 2018-11 provides a new transition method and a practical expedient for separating components of a contract.

 

 
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Transition: Comparative Reporting at Adoption

 

The amendments ASU 2018-11 provide entities with an additional (and optional) transition method to adopt the new leases standard. Under this new transition method, an entity initially applies the new leases standard at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption consistent with preparers’ requests. Consequently, an entity’s reporting for the comparative periods presented in the financial statements in which it adopts the new leases standard will continue to be in accordance with current GAAP in Topic 840, Leases.

 

An entity that elects this additional (and optional) transition method must provide the required Topic 840 disclosures for all periods that continue to be in accordance with Topic 840. The amendments do not change the existing disclosure requirements in Topic 840 (for example, they do not create interim disclosure requirements that entities previously were not required to provide).

 

Separating Components of a Contract

 

The amendments in ASU 2018-11 provide lessors with a practical expedient, by class of underlying asset, to not separate nonlease components from the associated lease component and, instead, to account for those components as a single component if the nonlease components otherwise would be accounted for under the new revenue guidance (Topic 606) and both of the following are met:

 

·

The timing and pattern of transfer of the nonlease component(s) and associated lease component are the same.

 

·

The lease component, if accounted for separately, would be classified as an operating lease.

 

An entity electing this practical expedient (including an entity that accounts for the combined component entirely in Topic 606) is required to disclose certain information, by class of underlying asset, as specified in the ASU.

 

Effective Date

 

The amendments in ASU 2018-11 related to separating components of a contract affect the amendments in ASU No. 2016-02, which are not yet effective but can be early adopted.

 

For entities that have not adopted Topic 842 before the issuance of this ASU, the effective date and transition requirements for the amendments in this update related to separating components of a contract are the same as the effective date and transition requirements in ASU 2016-02.

 

For entities that have adopted Topic 842 before the issuance of ASU 2018-11, the transition and effective date of the amendments related to separating components of a contract in this ASU are as follows:

 

 

·

The practical expedient may be elected either in the first reporting period following the issuance of this ASU or at the original effective date of Topic 842 for that entity.

 

·

The practical expedient may be applied either retrospectively or prospectively.

 

All entities, including early adopters, that elect the practical expedient related to separating components of a contract in this ASU must apply the expedient, by class of underlying asset, to all existing lease transactions that qualify for the expedient at the date elected.

 

The FASB has issued Accounting Standards Update (ASU) No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement.

 

ASU No. 2018-13 modifies the disclosure requirements on fair value measurements in Topic 820 as follows:

 

 
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Removals

 

The following disclosure requirements were removed from Topic 820:

 

·

The amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy;

 

·

The policy for timing of transfers between levels;

 

·

The valuation processes for Level 3 fair value measurements; and

 

·

For nonpublic entities, the changes in unrealized gains and losses for the period included in earnings for recurring Level 3 fair value measurements held at the end of the reporting period.

 

Modifications

 

The following disclosure requirements were modified in Topic 820:

 

 

·

In lieu of a rollforward for Level 3 fair value measurements, a nonpublic entity is required to disclose transfers into and out of Level 3 of the fair value hierarchy and purchases and issues of Level 3 assets and liabilities;

 

·

For investments in certain entities that calculate net asset value, an entity is required to disclose the timing of liquidation of an investee’s assets and the date when restrictions from redemption might lapse only if the investee has communicated the timing to the entity or announced the timing publicly; and

 

·

The amendments clarify that the measurement uncertainty disclosure is to communicate information about the uncertainty in measurement as of the reporting date.

 

Additions

 

The following disclosure requirements were added to Topic 820; however, the disclosures are not required for nonpublic entities:

 

 

·

The changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period; and

 

·

The range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. For certain unobservable inputs, an entity may disclose other quantitative information (such as the median or arithmetic average) in lieu of the weighted average if the entity determines that other quantitative information would be a more reasonable and rational method to reflect the distribution of unobservable inputs used to develop Level 3 fair value measurements.

 

In addition, the amendments eliminate at a minimum from the phrase “an entity shall disclose at a minimum” to promote the appropriate exercise of discretion by entities when considering fair value measurement disclosures and to clarify that materiality is an appropriate consideration of entities and their auditors when evaluating disclosure requirements.

 

Effective Date

 

The amendments in ASU No. 2018-13 are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.

 

The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date.

 

Early adoption is permitted. An entity is permitted to early adopt any removed or modified disclosures upon issuance of ASU No. 2018-13 and delay adoption of the additional disclosures until their effective date.

 

The FASB has issued ASU No. 2018-14, Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans, that applies to all employers that sponsor defined benefit pension or other postretirement plans.

 

The amendments modify the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans.

 

 
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Disclosure Requirements Deleted

 

·

The amounts in accumulated other comprehensive income expected to be recognized as components of net periodic benefit cost over the next fiscal year.

 

·

The amount and timing of plan assets expected to be returned to the employer.

 

·

The disclosures related to the June 2001 amendments to the Japanese Welfare Pension Insurance Law.

 

·

Related party disclosures about the amount of future annual benefits covered by insurance and annuity contracts and significant transactions between the employer or related parties and the plan.

 

·

For nonpublic entities, the reconciliation of the opening balances to the closing balances of plan assets measured on a recurring basis in Level 3 of the fair value hierarchy. However, nonpublic entities will be required to disclose separately the amounts of transfers into and out of Level 3 of the fair value hierarchy and purchases of Level 3 plan assets.

 

·

For public entities, the effects of a one-percentage-point change in assumed health care cost trend rates on the (a) aggregate of the service and interest cost components of net periodic benefit costs and (b) benefit obligation for postretirement health care benefits.

 

Disclosure Requirements Added

 

 

·

The weighted-average interest crediting rates for cash balance plans and other plans with promised interest crediting rates

 

·

An explanation of the reasons for significant gains and losses related to changes in the benefit obligation for the period.

 

 

·

The amendments also clarify the disclosure requirements in paragraph 715-20-50-3, which state that the following information for defined benefit pension plans should be disclosed:

 

·

The projected benefit obligation (PBO) and fair value of plan assets for plans with PBOs in excess of plan assets.

 

·

The accumulated benefit obligation (ABO) and fair value of plan assets for plans with ABOs in excess of plan assets.

 

Effective Date

 

ASU No. 2018-14 is effective for fiscal years ending after December 15, 2020, for public business entities and for fiscal years ending after December 15, 2021, for all other entities. Early adoption is permitted for all entities.

 

The FASB has issued Accounting Standards Update (ASU) No. 2018-17, Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities, that reduces the cost and complexity of financial reporting associated with consolidation of variable interest entities (VIEs). A VIE is an organization in which consolidation is not based on a majority of voting rights.

 

The new guidance supersedes the private company alternative for common control leasing arrangements issued in 2014 and expands it to all qualifying common control arrangements.

 

Under the new standard, a private company could make an accounting policy election to not apply VIE guidance to legal entities under common control (including common control leasing arrangements) when certain criteria are met. This accounting policy election must be applied by a private company to all current and future legal entities under common control that meet the criteria for applying the alternative. A private company will be required to continue to apply other consolidation guidance, specifically the voting interest entity guidance.

 

Additionally, a private company electing the alternative is required to provide detailed disclosures about its involvement with, and exposure to, the legal entity under common control.

 

 
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The ASU also amends the guidance for determining whether a decision-making fee is a variable interest. The amendments require organizations to consider indirect interests held through related parties under common control on a proportional basis rather than as the equivalent of a direct interest in its entirety (as currently required in GAAP). Therefore, these amendments likely will result in more decision makers not consolidating VIEs.

 

For organizations other than private companies, the amendments in this ASU are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The amendments in this ASU are effective for a private company for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021. Early adoption is permitted.

 

The FASB has issued Accounting Standards Update (ASU) No. 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction Between Topic 808 and Topic 606, that clarifies the interaction between the guidance for certain collaborative arrangements and the Revenue Recognition financial accounting and reporting standard.

 

A collaborative arrangement is a contractual arrangement under which two or more parties actively participate in a joint operating activity and are exposed to significant risks and rewards that depend on the activity’s commercial success. The ASU provides guidance on how to assess whether certain transactions between collaborative arrangement participants should be accounted for within the revenue recognition standard.

 

The ASU also provides more comparability in the presentation of revenue for certain transactions between collaborative arrangement participants. It accomplishes this by allowing organizations to only present units of account in collaborative arrangements that are within the scope of the revenue recognition standard together with revenue accounted for under the revenue recognition standard. The parts of the collaborative arrangement that are not in the scope of the revenue recognition standard should be presented separately from revenue accounted for under the revenue recognition standard.

 

For public companies, the amendments in ASU No. 2018-18 are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. For all other organizations, the amendments are effective for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021. Early adoption is permitted.

 

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on our consolidated financial statements upon adoption.

 

 
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NOTE 3 - CASH AND CASH EQUIVALENT

 

The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. At March 31, 2020 and June 30, 2019 cash and cash equivalents consisted of bank deposits in Malaysia bank and petty cash on hands.

 

NOTE 4 - AMOUNT DUE FROM RELATED PARTIES

 

Amount due from related parties at March 31, 2020 and June 30, 2019 consist of the following items:

 

 

 

March 31,

2020

 

 

June 30,

2019

 

 

 

 

 

 

 

 

Amount due from Stable Treasure Sdn. Bhd. (*)

 

$ -

 

 

$ -

 

________ 

(*) One of the directors of Stable Treasure Sdn. Bhd., Mr. Balakrishnan B S Muthu is also the director of the Company. The advances related to ordinary business transactions and bear no interest or collateral, repayable and renewable under normal business advancement terms.

 

NOTE 5 - INVENTORIES

 

Inventories are valued at cost, not in excess of market. Inventories are determined at first in first out basis and comprised of production cost, mine site management cost and sub-contractor cost. Inventories, at March 31, 2020 and June 30, 2019 are summarized as follows:

 

 

 

March 31,

2020

 

 

June 30,

2019

 

 

 

 

 

 

 

 

Inventories

 

$ -

 

 

$ -

 

 

The inventories represent the gold minerals as at March 31, 2020 and June 30, 2019, which were comprised of 8% share by the Company and 92% share by the sub-contractor and the other parties such as original mine assigner.

 

 
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NOTE 6 - ACCOUNTS PAYABLE AND ADVANCED FROM RELATED PARTIES

 

Accounts Payable

 

Accounts payable at March 31, 2020 and June 30, 2019 consist of the following items:

 

 

 

March 31,

2020

 

 

June 30,

2019

 

Due to Changxin Wanlin Technology Co Ltd(*)

 

$ 1,494,303

 

 

$ 1,560,032

 

Other accounts payable

 

 

1,916

 

 

 

3,070

 

 

 

$ 1,496,219

 

 

$ 1,563,102

 

__________ 

(*) Due to Changxin Wanlin Technology Co Ltd are accounts payable derived from ordinary business transactions. One of the directors of Changxin Wanlin Technology Co. Ltd., Mr. Wu Ming Ding, has resigned as director of VRDR (as of February 20, 2016), GBL (as of February 11, 2016) and CSB (as of February 17, 2016). This accounts payable bears no interest or collateral, repayable and renewable under normal business accounts payable terms.

 

Advanced from related parties

 

 Advanced from related parties at March 31, 2020 and June 30, 2019, consist of the following items:

 

 

 

March 31,

2020

 

 

June 30,

2019

 

Advanced from BOG (#1)

 

$ 373,963

 

 

$ 266,218

 

Advanced from Federal Mining Resources Limited(#2)

 

$ 173,465

 

 

$ 173,465

 

Advanced from Federal Capital Investment Limited (#3)

 

$ 132,000

 

 

$ 126,000

 

Advanced from Yorkshire Capital Limited (#4)

 

$ 27,000

 

 

$ 27,000

 

 

 

$ 706,428

 

 

$ 592,683

 

___________ 

(#1) BOG is one of the shareholders of the Company. The advances are related to ordinary business transactions and bear no interest or collateral, repayable and renewable under normal business advancement terms.

 

(#2) One of the directors of Federal Mining Resources Limited, Mr. Chen Ching, has been appointed as director of the Company effective February 20, 2016. Another director of Federal Mining Resources Limited, Mr. Wu Ming Ding, has resigned as director of the Company effective February 20, 2016. The advances are related to ordinary business transactions and bear no interest or collateral, repayable and renewable under normal business advancement terms.

 

(#3) One of the directors of Federal Capital Investment Limited, Mr. Wu Ming Ding, has resigned as director of the Company effective February 20, 2016. The advances are related to ordinary business transactions and bear no interest or collateral, repayable and renewable under normal business advancement terms.

 

(#4) One of the directors of Yorkshire Capital Limited, Mr. Lai Kui Shing, Andy, has resigned as director of CSB effective February 17, 2016. The advances are related to ordinary business transactions and bear no interest or collateral, repayable and renewable under normal business advancement terms.

 

 
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NOTE 7 - PROPERTY, PLANT AND EQUIPMENT

 

Property and equipment at March 31, 2020 and June 30, 2019 are summarized as follows:

 

 

 

March 31,

2020

 

 

June 30,

2019

 

Land and Building

 

$ 911,629

 

 

$ 951,728

 

Plant and Machinery

 

 

15,782

 

 

 

16,476

 

Office equipment

 

 

18,254

 

 

 

19,057

 

Project equipment

 

 

628,777

 

 

 

656,434

 

Computer

 

 

10,751

 

 

 

10,365

 

Motor Vehicle

 

 

34,365

 

 

 

35,877

 

Accumulated depreciation

 

 

(1,618,816 )

 

 

(1,689,936 )

 

 

$ 742

 

 

$ 1

 

 

The depreciation expenses charged for the period ended March 31, 2020 and 2019 was $85 and $4,787.

 

NOTE 8 - LOANS FROM BANKS (HIRE PURCHASE INSTALLMENT LOANS)

 

The loans from banks include long term and short term and are summarized as follow:

 

 

 

March 31,

2020

 

 

June 30,

2019

 

Loans from banks

 

$ -

 

 

$ 193

 

Loans from banks(non-current)

 

 

-

 

 

 

-

 

Total

 

$ -

 

 

$ 193

 

 

Hire purchase installment loans with total amount $0 and $2,050 as at March 31, 2020 and June 30, 2019 are $0 and $2,005 net of imprest charges equivalent to interest $0 and $45 are summarized as follows:

 

 

 

Interest

Rate

 

Monthly

Due

 

 

March 31,

2020

 

 

June 30,

2019

 

Financial institution in Malaysia

 

N/A*

 

$ -

 

 

$ -

 

 

$ -

 

Financial institution in Malaysia

 

N/A*

 

 

-

 

 

 

-

 

 

 

-

 

Financial institution in Malaysia

 

N/A*

 

 

-

 

 

 

-

 

 

 

2,050

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hire purchase loans payable to banks

 

 

 

 

 

 

 

$ -

 

 

$ 2,050

 

__________ 

(*) Hire purchase installment loans with Motor Vehicles as collateral. The financial institutions in Malaysia are Islamic banks and bear no interest in the installment agreement. However, there are certain imprest charges equivalent to interests which are being calculated at an average annual rate of approximate 0% for the entire loans life and periods.

 

 
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The scheduled maturities of the CSL’s hire purchase installment loans are as follows:

 

March 31,

 

 

 

2021

 

 

-

 

2022

 

 

-

 

2023

 

 

-

 

2024

 

 

-

 

Later years

 

 

-

 

Total minimum hire purchase installment payment

 

$ -

 

Less: Amount representing imprest charges equivalent to interest (current portion: - and non-current portion: -)

 

 

-

 

Present value of net minimum lease payments (#)

 

$ -

 

_______ 

(#) Minimum payment reflected in the balance sheet as current and noncurrent obligations under hire purchases installment loans as at March 31, 2020.

 

NOTE 9 - INCOME TAX

 

The Company and its subsidiaries are subject to income taxes on an entity basis on income arising in, or derived from, the tax jurisdiction in which they operate. The Company is a Nevada incorporated company and subject to United State Federal Income Tax. The Tax Cuts and Jobs Act of (“TCJ Act”) was signed into law in December 2017, and among its many provisions, it imposed a mandatory one-time transition tax on undistributed international earnings and reduced the U.S. corporate income tax rate to 21%, effective January 1, 2018. No provision for income taxes in the United States has been made as the Company had no taxable income for the periods ended March 31, 2019 and 2018. GBL is a British Virgin Islands incorporated company and not required to pay income tax on corporate income. CSB is a Malaysia incorporated company and required to pay corporate income tax at 25% of taxable income.

 

A reconciliation between the income tax computed at the relevant statutory rate and the Company’s provision for income tax is as follows:

 

 

 

Period ended

 

 

 

March 31,

2020

 

 

June 30,

2019

 

US Federal Income Tax Rate.

 

 

21 %

 

 

21 %

Valuation allowance – US Rate

 

 

(21 )%

 

 

(21 )%

BVI Income Tax Rate

 

 

0 %

 

 

0 %

Valuation allowance – BVI Rate

 

 

(0 )%

 

 

(0 )%

Malaysia Income Tax Rate

 

 

25 %

 

 

25 %

Valuation allowance – Malaysia Rate

 

 

(25 )%

 

 

(25 )%

Provision for income tax

 

 

-

 

 

 

-

 

 

Summary of the Company’s net deferred tax liabilities and assets are as follows:

 

 

 

March 31,

2020

 

 

June 30,

2019

 

Deferred tax assets:

 

 

 

 

 

 

Tax attribute carryforwards

 

$ -

 

 

$ -

 

Valuation allowances

 

 

-

 

 

 

-

 

Total

 

$ -

 

 

$ -

 

 

The Company has recorded valuation allowances for certain tax attribute carry forwards and other deferred tax assets due to uncertainty that exists regarding future realizability. If in the future the Company believes that it is more likely than not that these deferred tax benefits will be realized, the majority of the valuation allowances will be recognized in the consolidated statement of operations. The Company did not have any interest and penalty provided or recognized in the income statements for period March 31, 2020 and June 30, 2019 or balance sheet as of March 31, 2020 and June 30, 2019. The Company did not have uncertainty tax positions or events leading to uncertainty tax position within the next 12 months.

 

 
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NOTE 10 - COMMITMENTS AND CONTINGENCIES

 

As at March 31, 2020, the Company’s hire purchase installment agreements are disclosed in Note 8. See Note 8 for the commitments for minimum installment payments under these agreements.

 

NOTE 11 - EARNINGS/(LOSS) PER SHARE

 

The Company has adopted ASC Topic No. 260, “Earnings Per Share,” (“EPS”) which requires presentation of basic and diluted EPS on the face of the income statement for all entities with complex capital structures, and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. In the accompanying financial statements, basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period.

 

The following table sets forth the computation of basic and diluted earnings per share:

 

 

 

Three Months Ended

March 31,

 

 

 

2020

 

 

2019

 

Net loss applicable to common shares

 

$ (93,472 )

 

$ (22,175 )

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding (Basic)

 

 

115,038,909

 

 

 

115,038,909

 

Options

 

 

-

 

 

 

-

 

Warrants

 

 

-

 

 

 

-

 

Weighted average common shares outstanding (Diluted)

 

 

115,038,909

 

 

 

115,038,909

 

 

 

 

 

 

 

 

 

 

Net loss per share (Basic and Diluted)

 

$ (0.0008 )

 

$ (0.0002 )

 

 

 

Nine Months Ended

March 31,

 

 

 

2020

 

 

2019

 

Net profit (loss) applicable to common shares

 

$ (268,239 )

 

$ 140,583

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding (Basic)

 

 

115,038,909

 

 

 

115,038,909

 

Options

 

 

-

 

 

 

-

 

Warrants

 

 

-

 

 

 

-

 

Weighted average common shares outstanding (Diluted)

 

 

115,038,909

 

 

 

115,038,909

 

 

 

 

 

 

 

 

 

 

Net profit (loss) per share (Basic and Diluted)

 

$ (0.0023 )

 

$ 0.0012

 

 

The Company has no potentially dilutive securities, such as options or warrants, currently issued and outstanding.

 

 
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NOTE 12 - CAPITAL STOCK

 

Authorized Stock

 

The Company has authorized 10,000,000,000 common shares and 50,000,000 preferred shares, both with a par value of $0.001 per share. Each common share entitles the holder to one vote, in person or proxy, on any matter on which action of the stockholders of the corporation is sought.

 

Effective February 2, 2018, the Company’s Articles of Incorporation were amended to increase the authorized shares of the Company from 250,000,000 shares of common stock to 10,000,000,000 shares of common stock. A copy of the Certificate of Amendment was filed with the Nevada Secretary of State. The Form 8K announcing the increase of the authorized shares of the Company was filed with SEC on February 6, 2018.

 

Share Issuance

 

On September 29, 2016, the Company issued a total of 4,750,000 common shares at US$0.04 per share, of which 2,375,000 common shares to Vincent Lee Sen Min and 2,375,000 common shares to Reggie Abraham, both are Malaysian citizens.

 

On March 1, 2018, the Company issued a total of 10,000,000 common shares at US$0.02 per share to each of the two directors, of which 5,000,000 common shares to Balakrishnan B S Muthu and 5,000,000 common shares to Chen Ching. An aggregate of $200,000 for this transaction was recognized as stock-based compensation under selling, general and administrative expenses during the three and six months ended March 31, 2018.

 

On March 1, 2018, the Company issued a total of 9,000,000 common shares at US$0.02 per share to three consultants under the Consultant Agreements, of which 5,000,000 common shares to Vincent Yong Tuck Seng, 2,500,000 common shares to Georgia Suzanne Lingam and 1,500,000 common shares to Liu Jiew Shin, all are Malaysian citizens. An aggregate of $180,000 for this transaction was recognized as stock-based compensation under selling, general and administrative expenses during the three and six months ended March 31, 2018.

 

There were 115,038,909 common shares issued and outstanding at March 31, 2020 and June 30, 2019 respectively.

 

There are no preferred shares outstanding. The Company has issued no authorized preferred shares. The Company has no stock option plan, warrants, or other dilutive securities.

 

 
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NOTE 13 - RELATED PARTY TRANSACTIONS

 

As of March 31, 2020, advances were made by five companies of $2,200,731 related to ordinary business transactions. All advances related to ordinary business transactions, bear no interest or collateral, repayable and renewable under normal advancement terms. Details are disclosed in Note 6.

 

As of March 31, 2020, amounts due from one company of $0 related to ordinary business transactions. The receivable amounts related to ordinary business transactions bear no interest or collateral, repayable and renewable under normal advancement terms. Details are disclosed in Note 4.

 

NOTE 14 - GOING CONCERN AND LIQUIDITY CONSIDERATIONS

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. As of and for the period ended March 31, 2020, the Company had a net loss of $276,904 and working capital deficiency of $2,256,023. The Company intends to fund operations through debt and equity financing arrangements, which may be insufficient to fund its capital expenditures, working capital and other cash requirements for the period ending March 31, 2020 and subsequently.

 

The ability of the Company to survive is dependent upon, among other things, obtaining additional financing to continue operations, and development of its business plan.

 

In response to these problems, management intends to raise additional funds through public or private placement offerings, and related party loans.

 

These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

 
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Table of Contents

   

NOTE 15 - CONCENTRATIONS

 

Suppliers

 

The Company’s major suppliers for the period ended March 31, 2020 and 2019 are listed as following:

 

 

 

Subcontractors

 

 

Accounts Payable

 

 

 

Nine

 

 

Nine

 

 

 

 

 

 

 

 

 

Months

 

 

Months

 

 

 

 

 

 

 

 

 

Ended

 

 

Ended

 

 

 

 

 

 

 

Major Suppliers

 

March 31,

2020

 

 

March 31,

2019

 

 

March 31,

2020

 

 

 March 31,

2019

 

Company A

 

 

0 %

 

 

100 %

 

 

0 %

 

 

0 %

 

Customers

 

The Company’s major customers for the period ended March 31, 2020 and 2019 are listed as following:

 

 

 

Sales

 

 

Accounts Receivable

 

 

 

Nine

 

 

Nine

 

 

 

 

 

 

 

 

 

Months

 

 

Months

 

 

 

 

 

 

 

 

 

Ended

 

 

Ended

 

 

 

 

 

 

 

Major Customers

 

March 31,

2020

 

 

March 31,

2019

 

 

March 31,

2020

 

 

March 31,

2019

 

Company M

 

 

0 %

 

 

0 %

 

 

0 %

 

 

0 %

Company N

 

 

0 %

 

 

0 %

 

 

0 %

 

 

0 %

Company O

 

 

0 %

 

 

100 %

 

 

0 %

 

 

0 %

 

NOTE 16 - SUBSEQUENT EVENTS

 

The Company has evaluated subsequent events from the balance sheet date through the date the financial statements were issued and determined that there are no additional items to disclose.

 

 
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Table of Contents

  

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

Forward-Looking Statements

 

Except for historical information, this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements involve risks and uncertainties, including, among other things, statements regarding our business strategy, future revenues and anticipated costs and expenses. Such forward-looking statements include, among others, those statements including the words “expects,” “anticipates,” “intends,” “believes” and similar language. Our actual results may differ significantly from those projected in the forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those discussed herein as well as in the “Description of Business – Risk Factors” section in our Annual Report on Form 10-K, as filed on September 30, 2013. You should carefully review the risks described in our Annual Report and in other documents we file from time to time with the Securities and Exchange Commission. You are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this report. We undertake no obligation to publicly release any revisions to the forward-looking statements or reflect events or circumstances after the date of this document.

 

Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, there are a number of risks and uncertainties that could cause actual results to differ materially from such forward-looking statements.

 

All references in this Form 10-Q to the “Company,” “Verde Resources,” “we,” “us,” or “our” are to Verde Resources, Inc.

 

Business Overview

 

The Company is a Nevada corporation that conducts business operations in Pahang Malaysia through Champmark Sdn Bhd (“CSB”), a privately limited liability company incorporated in Malaysia which is a deemed subsidiary under the management control of our 100% subsidiary GBL.

 

On October 25, 2013, we entered into an Assignment Agreement For the Assignment of Management Right in Merapoh Gold Mines in Malaysia (“Assignment Agreement”) with Federal Mining Resources Limited (“FMR”), a company incorporated under the laws of the British Virgin Islands.

 

FMR owns 85% equity interest in CSB, a privately limited liability company incorporated in Malaysia. CSB is the Mining Contractor of the Mining Lease for Site IV-1 at the Merapoh Gold Mine under the Contract for Work with MMC Corporation Berhad, the Permit Holder of the Mining Lease.

 

Under the terms of the Assignment Agreement, FMR assigned its management rights of CSB’s mining operation in the Mining Lease to the Company, through its wholly-owned subsidiary Gold Billion Global Limited (“GBL”), in exchange for 80,000,000 shares of the Company’s common stock, which constituted 95.26% of our issued and outstanding capital stock as of and immediately after the consummation of the acquisition.

 

GBL was established on February 7, 2013, by the Board of Directors of FMR to monitor the CSB operation. The acquisition of 100% of the issued and outstanding capital stock of GBL was agreed upon on October 18, 2013, and completed on October 25, 2013, subject to the approval of the Board of Directors and the audit of GBL.

 

On February 17, 2014, we entered into a Supplementary Agreement to the Assignment Agreement and completed a reverse acquisition of GBL pursuant to the Supplementary Agreement. As a result of the acquisition, the Company holds 100% equity interest in GBL and 85% variable interest in CSB. Our consolidated subsidiaries include GBL being our wholly-owned subsidiary and 85% of CSB being a variable interest entity (VIE) and deemed subsidiary of GBL. On April 1, 2014, GBL purchased 85% equity interest of CSB, and CSB became indirect subsidiary of the Company.

 

 
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Table of Contents

  

Corporate History and Structure

 

Verde Resources, Inc. was incorporated on April 22, 2010, in the State of Nevada, U.S.A. On October 17, 2013, Stephen Spalding and Michael Stiege resigned from all of their positions as officers and directors of the Company. In addition, the following persons were appointed to serve as directors and to assume the responsibilities of officers on October 17, 2013. Mr. Wu Ming Ding, as President and Director; Mr. Balakrishnan B S Muthu as Treasurer, Chief Financial Officer General Manager and Director; and Mr. Liang Wai Keen as Secretary. Mr. Wu and Mr. Muthu were added to the Board of Directors.

 

On April 1, 2014, the Board of Directors of Gold Billion Global Limited (“GBL”) notified Federal Mining Resources Limited (“FMR”) upon the decision to exercise the right of option to purchase 85% equity interest of Champmark Sdn Bhd (“CSB”) under Management Agreement Section 3.2.4 dated July 1, 2013, between GBL and FMR. This acquisition was completed on April 1, 2014, with consideration of US$1, and GBL then became 85% shareholder of CSB.

 

Effective February 20, 2016, Mr. Wu Ming Ding resigned all of his positions as President and Director of the Company with Mr. Balakrishnan B S Muthu being appointed President to fill the vacancy created. Effective February 20, 2016, Mr. Chen Ching was appointed Director of the Company, and the entire Board of Directors now consists of Mr. Balakrishnan B S Muthu and Mr. Chen Ching.

 

Effective February 2, 2018, the Company’s Articles of Incorporation were amended to increase the authorized shares of the Company from 250,000,000 shares of common stock to 10,000,000,000 shares of common stock. A copy of the Certificate of Amendment was filed with the Nevada Secretary of State. The Form 8K announcing the increase of the authorized shares of the Company was filed with SEC on February 6, 2018.

 

The following diagram illustrates our current corporate structure:

 

According to ASC 810-05-08 A, CSB is a deemed subsidiary of GBL where GBL has control the Board of Directors of CSB, rights to receive future benefits and residual value, and obligation to absorb loss and finance for CSB. GBL has the power to direct the activities of CSB that most significantly impact CSB’s economic performance and the obligation to absorb losses of CSB that could potentially be significant to the CSB or the right to receive benefits from CSB that could potentially be significant to CSB. GBL is the primary beneficiary of CSB because GBL can direct the activities of CSB through the common directors and 85% shareholder FMR. Under 810-23-42, 43, it is determined that CSB is de-facto agent of the principal GBL and so GBL will consolidate CSB from July 1, 2013.

 

 
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Table of Contents

  

Contractual Arrangements

 

Our exploration and mining business is currently provided through contractual arrangements with CSB through our wholly-owned subsidiary GBL.

 

CSB, the VIE of GBL, sells gold minerals directly to the registered gold trading company in Malaysia. We have been and are expected to continue to be dependent on our VIE to operate our exploration and mining business. GBL has entered into contractual arrangements with its VIE, which enable us to exercise effective control over the VIE, receive substantially all of the economic benefits from the VIE, and have the option to purchase equity interests in the VIE.

 

On July 1, 2013, the Company’s subsidiary GBL entered into a series of agreements (“VIE agreements”) with FMR and details of the VIE agreements are as follows :

 

 

1.

Management Agreement, FMR entrusted the management rights of its subsidiary CSB to GBL that include:

 

i)

management and administrative rights over the day-to-day business affairs of CSB and the mining operation at Site IV-1 of the Merapoh Gold Mine;

 

ii)

final right for the appointment of members to the Board of Directors and the management team of CSB;

 

iii)

act as principal of CSB;

 

iv)

obligation to provide financial support to CSB;

 

v)

option to purchase an equity interest in CSB;

 

vi)

entitlement to future benefits and residual value of CSB;

 

vii)

right to impose no dividend policy;

 

viii)

human resources management.

 

 

2.

Debt Assignment, FMR assigned to GBL the sum of money in the amount of US Dollars Three Hundred Nine Thousand Three Hundred Thirty One And Ninety Two cents (US$ 309,331.92), now due to GBL from CSB under the financing obligation from the FMR to CSB.

 

With the above agreements, GBL controls CSB as the primary beneficiary and the operating results of the VIE was included in the condensed consolidated financial statements for the nine months ended March 31, 2014.

 

CSB holds the operating right to Merapoh Gold Mine (the “Mine”) with all regulatory and government operating licenses in Malaysia.

 

On April 1, 2014, GBL purchased 85% equity interest of CSB, and CSB became indirect subsidiary of the Company.

 

Stage of Operation

 

The Company does not own any title and/or concession right in any mines. The Company is undertaking natural mineral resource extraction management services.

 

The Company is in the process of negotiating with Malaysia state agency PKNP on a 2-year lease for a new mining location that is about 5 km from the current Merapoh mine site. For the period between January 2019 to December 2019, there was no production at the Merapoh Gold Mine. The objective of the Company is to improve the productivity at the new mine to ensure that the operation will be carried out effectively and efficiently at minimum cost.

 

 
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Table of Contents

  

Current Mining Property and Location

 

Merapoh Gold Mine (the “Mine”)

 

The Merapoh Gold Mine is located in northern Pahang, with convenient road access through Kelantan directly to mine site and is about 400 kilometers away from Kuala Lumpur. The Mine is located in the middle of Malaysia gold metallogenic belt. The central gold belt is the source of the majority of the gold deposits in the peninsula. It lies between the western and eastern tin belts and extends from Kelantan (Sungai Pergau, Sungai Galas) to Pahang (Merapoh, Kuala Lipis, Raub), Terengganu (Lubuk Mandi), Negri Sembilan and Johor (Gunung Ledang).

 

 
35

Table of Contents

  

Description of the Mining Process

 

A planned sequence of events is involved in mining a pit:

 

 

·

Identifying the resource

 

·

Creating access to the ore body

 

·

Removing the ore from the ore body

 

·

Refining of the concentrate

 

It is an ongoing effort of our in-house exploration team to identify potential targets and conduct study to assess the feasibility of undertaking further exploration. Before any hole is drilled or rock mined, much planning goes into making sure the mining sequence runs smoothly and safely as possible. The process of creating access to the possible ore body includes possible ore excavation, possible ore assessment and possible ore segregation.

 

Process for removing ore concentrates from the ore body

 

 

1.

The ore body is transported to the treatment plants in vehicles capable of hauling huge, heavy loads.

 

2.

The ore body is separated into Ore Type 1 Stockpile and Ore Type 2 Stockpile.

 

3.

The monitor washes finer gold bearing material off larger rocks which is screened on an inclined coarse wire screen.

 

4.

An excavator is used to turn over the rocks so wash is removed from all sides of the coarse material.

 

5.

A monitor pushes the rock down the inclined coarse screen where the course is removed and stockpiled at the bottom.

 

6.

Finer material passes through the mesh screen into the sluice system and runs over the sluice.

 

7.

The carpets are removed and taken to refining facility for gold recovery.

 

8.

A suction pipe recovers water of the fine tailings pond for use in the system.

 

Refining of the concentrate

 

 

1.

The carpets holding concentrate from the sluice are brought to a shed in the camp site where the gold refined.

 

2.

The first stage of the refining is to wash the gold containing concentrate into large bins. This is pumped to a jig and shaking table.

 

3.

Nuggets are handpicked from the coarse fraction and the fine fraction is amalgamated to remove the gold. After distillation gold from the amalgam and the coarse are melted with flux and the gold is poured into small bars.

 

 
36

Table of Contents

  

Results of Operations

 

For the three months ended March 31, 2020 and 2019 :

 

We have generated $0 and $0 revenues for the three months ended March 31, 2020 and 2019, and have recorded a gross profit of $0 and gross loss of $1,934 for the three months ended March 31, 2020 and 2019. We have incurred $96,858 and $25,917 in operating expenses through March 31, 2020 and March 31, 2019. We have other income $0 and $3,334 for the three months ended March 31, 2020 and 2019.

 

The following table provides selected financial data about our company for the three months ended March 31, 2020 and March 31, 2019.

 

 

 

3/31/2020

 

 

3/31/2019

 

 

Change

 

Statement of Operation

 

Amount

 

 

Amount

 

 

%

 

Revenue

 

$ -

 

 

$ -

 

 

-

Cost of revenue

 

$ -

 

 

$ 1,934

 

 

 

(100 )%

Gross Profit (Loss)

 

$ -

 

 

$ (1,934 )

 

 

(100 )%

Operating Expenses

 

$ 96,858

 

 

$ 25,917

 

 

 

274 %

Other Income

 

$ -

 

 

$ 3,334

 

 

 

(100 )%

 

For the nine months ended March 31, 2020 and 2019 :

 

We have generated $0 and $8,879 revenues for the nine months ended March 31, 2020 and 2019, and have recorded a gross profit of $0 and gross loss of $5,860 for the nine months ended March 31, 2020 and 2019. We have incurred $276,904 and $119,172 in operating expenses through March 31, 2020 and March 31, 2019. We have other income $0 and $303,353 for the nine months ended March 31, 2020 and 2019.

 

The following table provides selected financial data about our company for the nine months ended March 31, 2020 and March 31, 2019.

 

 

 

3/31/2020

 

 

3/31/2019

 

 

Change

 

Statement of Operation

 

Amount

 

 

Amount

 

 

%

 

Revenue

 

$ -

 

 

$ 8,879

 

 

 

(100 )%

Cost of revenue

 

$ -

 

 

$ 14,739

 

 

 

(100 )%

Gross Profit (Loss)

 

$ -

 

 

$ (5,860 )

 

 

(100 )%

Operating Expenses

 

$ 276,904

 

 

$ 119,172

 

 

 

132 %

Other Income

 

$ -

 

 

$ 303,353

 

 

 

(100 )%

 

The revenue derived from the sales of gold mineral to customers in Malaysia. The decrease of revenue for the period ended March 31, 2020, was mainly due to a decrease in gold production because of depleting mineral reserves in the mine and gold sales during the period. The decrease of cost of revenue was mainly due to a decrease of gold production corresponding to the decrease in revenue during the period. Operating expenses comprised mainly of salaries, office costs, legal and professional fees, stock-based compensation and travelling expenses. The increase in operating expenses for the period was mainly due to the share based payment and an increase in foreign exchange gain during the period. Net other income comprise mainly of miscellaneous non-operating expenses, equipment rental income and waiver of consultancy service fee. The increase in net other income for the period was mainly due to the increase of equipment rental income and the waiver of consultancy service fee.

 

The revenue derived from the sales of gold mineral to customers in Malaysia. The decrease of revenue for the period ended March 31, 2020, was mainly due to a decrease in gold production and gold sales during the period. Operating expenses comprised mainly of salaries, office costs, legal and professional fees, consultancy service fee, stock-based compensation and travelling expenses. The operating expenses were mainly denominated in MYR and decrease compared with nine months ended March 31, 2020, due to decrease of cost of revenue. Moreover, the average rate of MYR :USD for nine months March 31, 2020 and March 31, 2019 was 0.2395 and 0.2449 respectively.

 

 
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Plan of Operation

 

Our Industry and Principal Markets

 

The report by BMI Research states that global gold mine output growth will pick up in the next few years, supported by higher gold prices and solid projects in key countries. BMI Research forecasts global gold production to increase from 105moz in 2018 to 125moz by 2026, averaging 2.3% annual growth. While a steady pace of growth, this represents a slight deceleration in growth rate compared with the previous eight-year average of 3.1%.

 

Subcontractor

 

In an effort to enhance the efficiency of mine operations at the Merapoh Gold Mine, Champmark Sdn Bhd (“CSB”) entered into an Operation Term Sheet (“OTS”) agreement in July 2013 to outsource the exploitation works of alluvial gold resources at Site IV-1 of the Merapoh Gold Mine to a subcontractor Borneo Oil & Gas Corporation Sdn Bhd (“BOG”).

 

BOG has the experience and local knowledge in managing the exploitation of alluvial gold at the Merapoh Gold Mine. The Company will provide necessary disclosure when any significant agreements have been made with sub-contractors in the future.

 

BOG became the Company’s shareholder in January 29, 2014, and was no longer a third party subcontractor.

 

Expansion Plans

 

The Company is in the process of negotiating with Malaysia state agency PKNP on a 2-year lease for a new mining location that is about 5 km from the current Merapoh mine site. The leasing premium has been paid but the mining lease certificate will only be issued upon clearance from the Malaysia Forest Department, which is expected in mid-2020.

 

At present, we are well positioned working with our third party subcontractor, who has the experience and local knowledge to manage our exploitation of alluvial gold at the Merapoh Gold Mine. The Company believes that there are excellent growth opportunities for its business outside Malaysia. We are constantly exploring for potential acquisition of mining projects in other parts of the world.

 

The Company, through its wholly-owned subsidiary company Gold Billion Global Ltd (“GBL”) entered into a letter of intent with Xinjiang Changhe Mining Co., Ltd (“XCM”) on September 29, 2014. Under the letter of intent, GBL has offered to acquire ownership in XCM for the Ayigate Gold Project subject to due diligence. The Ayigate gold mine is located within the Tianshan region in Wuqia County, Xinjiang Uygur Autonomous Region of the People’s Republic of China. After several discussions, the Company decided not to proceed with the offer to acquire ownership in XCM.

 

As our business is affected by the fluctuations of gold prices, the Company intends to diversify its product line by acquiring mining projects with potential for different mineral resources other than gold. We continue to hold discussions with other mining companies for potential collaboration to carry out exploration and exploitation works on other mineral resources in Southeast Asia regions. Apart from the mining industry, the Company is taking steps to look into investment opportunities in the non-mining areas that include the bioenergy industry and the food & beverage sector.

 

Limited Operating History; Need for Additional Capital

 

There is no historical financial information about us upon which to base an evaluation of our performance. We cannot guarantee we will be successful in our business operations. Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources, possible delays in the exploration of our properties, and possible cost overruns due to price and cost increases in services.

 

We have no assurance that future financing will be available to us on acceptable terms. If financing is not available on satisfactory terms, we may be unable to continue, develop or expand our operations. Equity financing could result in additional dilution to existing shareholders.

 

 
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Liquidity and Capital Resources

 

The following table provides selected cash flow data about our company for the nine months ended March 31, 2020 and March 31, 2019.

 

Cash Flow Date

 

3/31/2020

 

 

3/31/2019

 

Net Profit (Loss) from operation

 

$ (276,904 )

 

$ 178,321

 

Net Cash Generated/(Used) from operating activities

 

$ (319,588 )

 

$ (62,057 )

Net Cash Generated/(Used) from investing activities

 

$ -

 

 

$ -

 

Net Cash Generated/(Used) from financing activities

 

$ (191 )

 

$ (1,801 )

 

For the nine months ended March 31, 2020, the Company had incurred net loss from operation of $276,904, which posted a negative impact to the company’s cash flow. The reconciliation on non-cash items such as depreciation of property, plant and equipment provide positive impact on cash.

 

In the operation analysis, the net cash used in operating activities increased from $62,057 to $319,588. The $276,904 net loss was partially offset by the noncash expense such as $3,136 in depreciation and amortisation. In the operating assets and liabilities, the net increase in current assets, such as deposits and prepayment was $23,593, whereas the net decrease in current liabilities, such as accounts payable, accrued liabilities and advanced from related parties was $22,227, which provided negative cash flow effect to the $276,904 loss in operation. The final result of the cash flow from operating activities was a negative cash flow effect.

 

In the investing cash flow analysis, there was no change for the nine months ended March 31, 2020.

 

In the financing analysis, there was loan principal $191 repaid to a bank for the nine months ended March 31, 2020, compared to $1,801 repaid to the bank for the nine months ended March 31, 2019. The overall cash flow effect was negative.

 

The net increase in exchange rate effect of $328,326 provided a positive cash flow effect. The cash and cash equivalents at the end of March 31, 2020, was increased by $8,547 with $19,209 as a balance.

 

The cash flow situation will not allow for operations in the coming next 12 months by self-generated cash provided from operating activities. The Company needs to increase cash flow supplies with a long term plan until the Company makes sustainable profits and has a positive cash flow. Otherwise, loans from related parties may be a temporary solution, although we have no written loan agreements. There is no guarantee that we will be able to secure adequate financing. If we fail to secure sufficient funds, our business activities may be curtailed, or we may cease to operate.

 

Off-Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material to investors.

 

 
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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

 

As a “smaller reporting company”, we are not required to provide the information required by this Item.

 

Item 4. Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

As of March 31, 2020, 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. Based on that evaluation, they concluded that, during the period covered by this report, such internal controls and procedures were not effective to detect the inappropriate application of US GAAP rules as more fully described below. This was due to deficiencies that existed in the design or operation of our internal controls over financial reporting that adversely affected our internal controls and that may be considered to be material weaknesses.

 

The matters involving internal controls and procedures that our management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board were: (1) lack of a functioning audit committee, (2) lack of a majority of outside directors on our board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; (3) inadequate segregation of duties consistent with control objectives; and (4) management is dominated by three individuals without adequate compensating controls. The aforementioned material weaknesses were identified by our Chief Executive and Financial Officers in connection with the review of our financial statements as of March 31, 2020.

 

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 in the future periods.

 

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, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 
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PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

We know of no material, existing or pending legal proceedings against our Company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered beneficial shareholder, is an adverse party or has a material interest adverse to our interest.

 

Item 1A. Risk Factors.

 

As a “smaller reporting company”, we are not required to provide the information required by this Item.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

N/A.

 

Item 3. Defaults Upon Senior Securities.

 

None.

 

Item 4. Mine Safety Disclosure.

 

Pursuant to Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“ Dodd-Frank Act “), issuers that are operators, or that have a subsidiary that is an operator, of a coal or other mine in the United States are required to disclose in their periodic and annual reports filed with the SEC information regarding specified health and safety violations, orders and citations, related assessments and legal actions, and mining-related fatalities under the regulation of the Federal Mine Safety and Health Act of 1977. The Company did not have any mines in the United States during the period ended March 31, 2020.

 

Item 5. Other Information.

 

There were changes in Directors and Executive Officers effective on February 20, 2016. For details, please refer to SC 14F1 and Form 8-K filed by the registrant to SEC on February 10, 2016 and February 22, 2016 respectively, at SEC website: www.sec.gov.

 

 
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Item 6. Exhibits.

 

The following exhibits are included as part of this report:

 

____________

* The following financial information from Verde Resources, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Balance Sheets as of March 31, 2020, and June 30, 2019, (ii) Condensed Statements of Operations for the three and nine months ended March 31, 2020 and 2019, (iii) Condensed Statements of Cash Flows for the nine months ended March 31, 2020 and 2019, 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.

 

(Registrant)

 

Dated: May 20, 2020

By:

/s/ Balakrishnan B S Muthu

 

Balakrishnan B S Muthu

 

President

 

(Principal Executive Officer)

 

 

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