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)

 

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

 

For the quarterly period ended December 31, 2023

 

or

 

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

 

For the transition period from ____________ to ________________

 

Commission file number: 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.)

 

2 Cityplace Drive, Suite 200, St. Louis, MO 63141 

(Address of principal executive offices) 

  

(323) 538-5799 

(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 ☒ No ☐

 

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 ☒ No ☐

 

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

(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 No ☒

 

As of February 2, 2024 there were 1,192,370,791 shares of the issuer’s common stock, par value $0.001, outstanding.

 

 

 

 

VERDE RESOURCES, INC.

 

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2023

TABLE OF CONTENTS

 

 

 

 

PAGE

 

 

 

 

 

 

 

PART I - FINANCIAL INFORMATION

 

 

 

 

 

 

 

 

Item 1.

Unaudited Consolidated Financial Statements.

 

F-1

 

 

 

 

 

 

Item 2.

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

 

4

 

 

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

 

10

 

 

 

 

 

 

Item 4.

Controls and Procedures.

 

10

 

 

 

 

 

 

 

PART II - OTHER INFORMATION

 

 

 

 

 

 

 

 

Item 1.

Legal Proceedings.

 

11

 

 

 

 

 

 

Item 1A.

Risk Factors.

 

11

 

 

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

 

11

 

 

 

 

 

 

Item 3.

Defaults Upon Senior Securities.

 

11

 

 

 

 

 

 

Item 4.

Mine Safety Disclosures.

 

11

 

 

 

 

 

 

Item 5.

Other Information.

 

11

 

 

 

 

 

 

Item 6.

Exhibits.

 

12

 

 

 

 

 

 

 

SIGNATURES

 

13

 

  

 

2

Table of Contents

    

CAUTIONARY NOTE CONCERNING FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical facts, included in this Form 10-Q including, without limitation, statements in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, events or developments which the Company expects or anticipates will or may occur in the future, including such things as future capital expenditures (including the amount and nature thereof); expansion and growth of the Company’s business and operations; and other such matters are forward-looking statements. These statements are based on certain assumptions and analyses made by the Company in light of its experience and its perception of historical trends, current conditions and expected future developments, as well as other factors it believes are appropriate under the circumstances. However, whether actual results or developments will conform with the Company’s expectations and predictions is subject to a number of risks and uncertainties, including general economic, market and business conditions; the business opportunities (or lack thereof) that may be presented to and pursued by the Company; changes in laws or regulation; and other factors, most of which are beyond the control of the Company.

 

These forward-looking statements can be identified by the use of predictive, future-tense or forward-looking terminology, such as “believes,” “anticipates,” “expects,” “estimates,” “plans,” “may,” “will,” or similar terms. These statements appear in a number of places in this filing and include statements regarding the intent, belief or current expectations of the Company, and its directors or its officers with respect to, among other things: (i) trends affecting the Company’s financial condition or results of operations for its limited history; (ii) the Company’s business and growth strategies; and, (iii) the Company’s financing plans. Investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve significant risks and uncertainties, and that actual results may differ materially from those projected in the forward-looking statements as a result of various factors. Such factors that could adversely affect actual results and performance include, but are not limited to, the Company’s limited operating history, potential fluctuations in quarterly operating results and expenses, government regulation, technological change and competition. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to our filings with the SEC under the Exchange Act and the Securities Act of 1933, as amended, including our Current Report on Form 10-K filed with the Securities and Exchange Commission on October 16, 2023.

 

Consequently, all of the forward-looking statements made in this Form 10-Q are qualified by these cautionary statements and there can be no assurance that the actual results or developments anticipated by the Company will be realized or, even if substantially realized, that they will have the expected consequence to or effects on the Company or its business or operations. The Company assumes no obligations to update any such forward-looking statements.

 

 

3

Table of Contents

   

 PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Item Regulation S-X, Rule 10-01(c) Interim Financial Statements, and, therefore, do not include all information and footnotes necessary for a complete presentation of financial position, results of operations, cash flows, and stockholders’ equity in conformity with generally accepted accounting principles. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature. Operating results for the six months ended December 31, 2023 are not necessarily indicative of the results that can be expected for the year ended June 30, 2024.

 

VERDE RESOURCES, INC.

 

INDEX TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

FOR THE PERIOD OF ENDED DECEMBER 31, 2023

 

 

 

Page

 

 

 

 

 

Unaudited Condensed Consolidated Balance Sheets as at December 31, 2023 and June 30, 2023 (audited)

 

F-2

 

 

 

 

 

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income for the Three and Six Months Ended December 31, 2023 and 2022)

 

F-3

 

 

 

 

 

Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months Ended December 31, 2023 and 2022

 

F-4

 

 

 

 

 

Unaudited Condensed Consolidated Statements of Changes in Equity for the Three and Six Months Ended December 31, 2023 and 2022

 

F-5

 

 

 

 

 

Notes to Unaudited Condensed Consolidated Financial Statements

 

F-7

 

 

 
F-1

Table of Contents

  

VERDE RESOURCES, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(Currency expressed in United States Dollars (“US$”), except for number of shares)

 

 

 

December 31,

2023

 

 

June 30,

2023

 

ASSETS

 

 

 

(audited)

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$928,280

 

 

$200,409

 

Accounts receivable

 

 

9,360

 

 

 

12,071

 

Inventories

 

 

230,399

 

 

 

96,036

 

Amount due from related party

 

 

100

 

 

 

100

 

Amount due from a director

 

 

5,999

 

 

 

-

 

Advance to supplier

 

 

177,200

 

 

 

177,200

 

Prepayments 

 

 

304,540

 

 

 

375,680

 

Other receivables and deposits

 

 

14,973

 

 

 

26,436

 

 

 

 

 

 

 

 

 

 

Total current assets

 

 

1,670,851

 

 

 

887,932

 

 

 

 

 

 

 

 

 

 

Non-current assets:

 

 

 

 

 

 

 

 

Property, plant and equipment, net

 

 

3,902,271

 

 

 

4,009,090

 

Right of use assets, net

 

 

571,764

 

 

 

633,109

 

Intangible assets

 

 

33,243,371

 

 

 

33,191,991

 

Security deposit

 

 

80,000

 

 

 

80,000

 

Deposit paid for acquisition of subsidiaries

 

 

-

 

 

 

21,423

 

 

 

 

 

 

 

 

 

 

Total non-current assets

 

 

37,797,406

 

 

 

37,935,613

 

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

$39,468,257

 

 

$38,823,545

 

 

 

 

 

 

 

 

 

 

LIABILTIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$95,447

 

 

$73,171

 

Accrued liabilities and other payables

 

 

767,594

 

 

 

640,769

 

Finance lease liabilities

 

 

177,699

 

 

 

172,184

 

Operating lease liability

 

 

22,732

 

 

 

20,768

 

Bank loan

 

 

161,439

 

 

 

191,000

 

Amount due to a director

 

 

-

 

 

 

9,660

 

Amounts due to related parties

 

 

444,655

 

 

 

369,729

 

 

 

 

 

 

 

 

 

 

Total current liabilities

 

 

1,669,566

 

 

 

1,477,281

 

 

 

 

 

 

 

 

 

 

Non-current liabilities:

 

 

 

 

 

 

 

 

Finance lease liabilities

 

 

605,963

 

 

 

608,455

 

Operating lease liability

 

 

17,603

 

 

 

29,483

 

Promissory notes

 

 

537,280

 

 

 

487,790

 

 

 

 

 

 

 

 

 

 

Total non-current liabilities

 

 

1,160,846

 

 

 

1,125,728

 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES

 

 

2,830,412

 

 

 

2,603,009

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

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

 

 

-

 

 

 

-

 

Common stock, $0.001 par value; 10,000,000,000 shares authorized; 1,192,370,791 and 1,176,200,278 issued and outstanding as of December 31, 2023 and June 30, 2023

 

 

1,192,371

 

 

 

1,176,200

 

Common stock, $0.001 par value; 1,555,555 and 0 shares to be issued as of December 31, 2023 and June 30, 2023

 

 

1,556

 

 

 

-

 

Common stock, $0.001 par value; 879,924 and 0 shares to be cancelled as of December 31, 2023 and June 30, 2023

 

 

(880 )

 

 

-

 

Additional paid-in capital

 

 

46,898,955

 

 

 

45,415,958

 

Accumulated other comprehensive income

 

 

(85,928 )

 

 

(79,192 )

Accumulated deficit

 

 

(11,368,229 )

 

 

(10,292,430 )

Stockholders’ equity

 

 

36,637,845

 

 

 

36,220,536

 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

 

$39,468,257

 

 

$38,823,545

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 
F-2

Table of Contents

    

VERDE RESOURCES, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME

(Currency expressed in United States Dollars (“US$”), except for number of shares)

 

 

 

Three Months ended

December 31,

 

 

Six Months ended

 December 31,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue, net

 

$23,396

 

 

$81,140

 

 

$41,874

 

 

$107,452

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenue

 

 

(68,845 )

 

 

(31,656 )

 

 

(139,361 )

 

 

(79,595 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross (loss) profit

 

 

(45,449 )

 

 

49,484

 

 

 

(97,487 )

 

 

27,857

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

 

(523,588 )

 

 

(862,080 )

 

 

(980,182 )

 

 

(1,672,522 )

Total operating expenses

 

 

(523,588 )

 

 

(862,080 )

 

 

(980,182 )

 

 

(1,672,522 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LOSS FROM OPERATION

 

 

(569,037 )

 

 

(812,596 )

 

 

(1,077,669 )

 

 

(1,644,665 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other (expense) income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(43,717 )

 

 

(1,349,548 )

 

 

(84,923 )

 

 

(1,879,660 )

Other income

 

 

86,416

 

 

 

1,878

 

 

 

86,793

 

 

 

7,653

 

Total other income (expense), net

 

 

42,699

 

 

 

(1,347,670 )

 

 

1,870

 

 

 

(1,872,007 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LOSS BEFORE INCOME TAXES

 

 

(526,338 )

 

 

(2,160,266 )

 

 

(1,075,799 )

 

 

(3,516,672 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 NET LOSS

 

$(526,338 )

 

$(2,160,266 )

 

$(1,075,799 )

 

$(3,516,672 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

– Foreign currency adjustment income (loss)

 

 

17,701

 

 

 

(91,188 )

 

 

(6,736 )

 

 

(11,368 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

COMPREHENSIVE LOSS

 

$(508,637 )

 

$(2,251,454 )

 

$(1,082,535 )

 

$(3,528,040 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

– Basic

 

$0.00

 

 

$0.00

 

 

$0.00

 

 

$0.00

 

– Diluted

 

$0.00

 

 

$0.00

 

 

$0.00

 

 

$0.00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

– Basic

 

 

1,179,634,810

 

 

 

867,178,851

 

 

 

1,179,634,810

 

 

 

867,178,851

 

– Diluted

 

 

1,180,310,441

 

 

 

867,178,851

 

 

 

1,180,310,441

 

 

 

867,178,851

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 
F-3

Table of Contents

    

VERDE RESOURCES, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Currency expressed in United States Dollars (“US$”))

 

 

 

Six Months ended

December 31,

 

 

 

2023

 

 

2022

 

 

 

 

 

 

 

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$(1,075,799 )

 

$(3,516,672 )

 

 

 

 

 

 

 

 

 

Adjustments to reconcile net loss to net cash (used in) provided by operating activities

 

 

 

 

 

 

 

 

Depreciation of property, plant and equipment

 

 

207,586

 

 

 

79,907

 

Amortization

 

 

51,429

 

 

 

65,822

 

Stock-based compensation

 

 

44,274

 

 

 

307,457

 

Finance cost interest element of promissory notes (non-cash)

 

 

49,490

 

 

 

1,870,972

 

Lease interest expense

 

 

23,925

 

 

 

8,688

 

Deposit paid for acquisition of subsidiary written off

 

 

21,512

 

 

 

-

 

Impairment on trade receivables

 

 

2,069

 

 

 

-

 

Impairment on other receivables

 

 

30,117

 

 

 

-

 

Gain on disposal of property, plant and equipment

 

 

-

 

 

 

(600 )

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

735

 

 

 

4,489

 

Other receivables, deposits and prepayments

 

 

(33,526 )

 

 

(110,088 )

Inventories

 

 

(132,718 )

 

 

(17,320 )

Accounts payables

 

 

21,218

 

 

 

30,250

 

Accrued liabilities and other payables

 

 

(39,864 )

 

 

83,991

 

Advanced from director

 

 

(15,659 )

 

 

200

 

Advanced from related parties

 

 

19,577

 

 

 

202,117

 

Net cash used in operating activities

 

 

(825,634 )

 

 

(990,787 )

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Proceeds from disposal of property, plant and equipment

 

 

-

 

 

 

23,000

 

Net cash flows on acquisition of subsidiary company

 

 

-

 

 

 

1,140

 

Purchase of property, plant and equipment

 

 

(1,403 )

 

 

(469,466 )

Net cash used in investing activities

 

 

(1,403 )

 

 

(445,326 )

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Repayments to lease liabilities

 

 

(66,635 )

 

 

(26,494 )

Drawdown of bank loan

 

 

-

 

 

 

100,000

 

Repayment of bank loan

 

 

(29,561 )

 

 

(50,000 )

Lease interest paid

 

 

(23,925 )

 

 

(8,688 )

Advanced from related parties

 

 

55,375

 

 

 

-

 

Advanced from other payables

 

 

164,359

 

 

 

-

 

Proceeds from issuance of common stock and common stock to be issued

 

 

1,541,828

 

 

 

1,376,280

 

Net cash provided by financing activities

 

 

1,641,441

 

 

 

1,391,098

 

 

 

 

 

 

 

 

 

 

Net change in cash and cash equivalent

 

 

814,404

 

 

 

(45,015 )

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

(86,533 )

 

 

(10,342 )

 

 

 

 

 

 

 

 

 

Net change in cash and cash equivalents

 

 

727,871

 

 

 

(55,357 )

 

 

 

 

 

 

 

 

 

BEGINNING OF PERIOD

 

 

200,409

 

 

 

418,917

 

 

 

 

 

 

 

 

 

 

END OF PERIOD

 

$928,280

 

 

$363,560

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

 

 

 

 

 

 

 

 

Cash paid for income taxes

 

$-

 

 

$-

 

Cash paid for interest

 

$-

 

 

$-

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

    

 
F-4

Table of Contents

    

VERDE RESOURCES, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE SIX MONTHS ENDED DECEMBER 31, 2023 AND 2022

(Currency expressed in United States Dollars (“US$”), except for number of shares)

 

 

 

No. of shares

 

 

Common

Shares

Amount

 

 

Shares to

be issued

Amount

 

 

Shares to be cancelled

Amount

 

 

Additional

paid-in

capital

 

 

Accumulated

other

comprehensive

(loss) income

 

 

Accumulated

losses

 

 

Total

stockholders’

equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of July 1, 2023

 

 

1,176,200,278

 

 

$1,176,200

 

 

$-

 

 

$-

 

 

$45,415,958

 

 

$(79,192 )

 

$(10,292,430 )

 

$36,220,536

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share to be issued for private placement

 

 

13,981,624

 

 

 

-

 

 

 

13,982

 

 

 

-

 

 

 

1,262,846

 

 

 

-

 

 

 

-

 

 

 

1,276,828

 

Common stock subject to forfeiture

 

 

(879,924 )

 

 

-

 

 

 

-

 

 

 

(880 )

 

 

(175,105 )

 

 

-

 

 

 

-

 

 

 

(175,985 )

Net loss for the period

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(549,461 )

 

 

(549,461 )

Foreign currency translation adjustment

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(24,437 )

 

 

-

 

 

 

(24,437 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of September 30, 2023

 

 

1,189,301,978

 

 

$1,176,200

 

 

$13,982

 

 

$(880 )

 

$46,503,699

 

 

$(103,629 )

 

$(10,841,891 )

 

$36,747,481

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share to be issued for private placement

 

 

555,555

 

 

 

-

 

 

 

556

 

 

 

-

 

 

 

49,445

 

 

 

-

 

 

 

-

 

 

 

50,001

 

Shares to be issued to service provider

 

 

 1,000,000

 

 

 

 -

 

 

 

 1,000

 

 

 

 -

 

 

 

 133,000

 

 

 

 -

 

 

 

 -

 

 

 

 134,000

 

Shares issued for previously committed private placement

 

 

-

 

 

 

13,982

 

 

 

(13,982 )

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Shares issued for private placement

 

 

2,188,889

 

 

 

2,189

 

 

 

-

 

 

 

-

 

 

 

212,811

 

 

 

-

 

 

 

-

 

 

 

215,000

 

Net loss for the period

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(526,338 )

 

 

(526,338 )

Foreign currency translation adjustment

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

17,701

 

 

 

-

 

 

 

17,701

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of December 31, 2023

 

 

1,193,046,422

 

 

$1,192,371

 

 

$1,556

 

 

$(880 )

 

$46,898,955

 

 

$(85,928 )

 

$(11,368,229 )

 

$36,637,845

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 
F-5

Table of Contents

    

VERDE RESOURCES, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE SIX MONTHS ENDED DECEMBER 31, 2023 AND 2022

(Currency expressed in United States Dollars (“US$”), except for number of shares)

 

 

 

No. of shares

 

 

Common

Shares

Amount

 

 

Shares to

be issued

Amount

 

 

Shares to be cancelled

Amount

 

 

Additional

paid-in

capital

 

 

Accumulated

other

comprehensive

income

 

 

Accumulated

losses

 

 

Total

stockholders’

equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of July 1, 2022

 

 

819,188,055

 

 

$819,188

 

 

$-

 

 

$-

 

 

$22,945,190

 

 

$742,459

 

 

$(10,357,920 )

 

$14,148,917

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued for acquisition

 

 

1,500,000

 

 

 

1,500

 

 

 

-

 

 

 

-

 

 

 

231,000

 

 

 

-

 

 

 

-

 

 

 

232,500

 

Stock based compensation

 

 

15,328,029

 

 

 

-

 

 

 

15,328

 

 

 

-

 

 

 

1,328,872

 

 

 

-

 

 

 

-

 

 

 

1,344,200

 

Net loss for the period

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,356,406 )

 

 

(1,356,406 )

Foreign currency translation adjustment

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

79,820

 

 

 

-

 

 

 

79,820

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of September 30, 2022

 

 

836,016,084

 

 

$820,688

 

 

$15,328

 

 

$-

 

 

$24,505,062

 

 

$822,279

 

 

$(11,714,326 )

 

$14,449,031

 

 

 

 

 

 

 

 

 

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued to service provider

 

 

3,815,000

 

 

 

3,815

 

 

 

-

 

 

 

-

 

 

 

639,185

 

 

 

-

 

 

 

-

 

 

 

643,000

 

Shares issued for previously committed private placement

 

 

-

 

 

 

15,328

 

 

 

(15,328 )

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Shares issued for private placement

 

 

603,181

 

 

 

603

 

 

 

-

 

 

 

-

 

 

 

52,477

 

 

 

-

 

 

 

-

 

 

 

53,080

 

Shares issued for conversion of promissory note (“PN”)

 

 

333,142,389

 

 

 

333,142

 

 

 

-

 

 

 

-

 

 

 

20,021,858

 

 

 

-

 

 

 

-

 

 

 

20,355,000

 

Net loss for the period

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,160,266 )

 

 

(2,160,266 )

Foreign currency translation adjustment

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(91,188 )

 

 

-

 

 

 

(91,188 )

Fair value adjustment on conversion of PN

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

4,064,450

 

 

 

4,064,450

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of December 31, 2022

 

 

1,173,576,654

 

 

$1,173,576

 

 

$-

 

 

$-

 

 

$45,218,582

 

 

$731,091

 

 

$(9,810,142 )

 

$37,313,107

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 
F-6

Table of Contents

    

VERDE RESOURCES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED DECEMBER 31, 2023 AND 2022

(Currency expressed in United States Dollars (“US$”), except for number of shares)

 

NOTE 1 - ORGANIZATION AND BUSINESS BACKGROUND

 

Verde Resources, Inc. (the “We” or “Company” or “VRDR”) was incorporated on April 22, 2010, in the State of Nevada, U.S.A..

 

We currently operate in the distribution of THC-free cannabinoid (CBD) products, production and distribution of renewable commodities and real property holding. However, the Company has been undergoing a restructuring exercise to shift its focus towards renewable energy and sustainability development with the world faced with challenges of climate change and environmental dehydration.

 

As of December 31, 2023, the Company has the following subsidiaries:-

 

Company name

 

 

Place of incorporation

 

Principal activities

and place of operation

 

Effective interest

held

 

 

 

 

 

 

 

Verde Resources Asia Pacific Limited (“VRAP”)

 

British Virgin Islands

 

Investment holding

 

100%

 

 

 

 

 

 

 

Verde Resources (Malaysia) Sdn Bhd (“Verde Malaysia”)

 

Malaysia

 

Provision of consultation service and distribution of renewable agricultural commodities

 

100%

 

 

 

 

 

 

 

Verde Renewables, Inc. (“VRI”)

 

State of Missouri, U.S.A.

 

Management of a processing and packaging facility

 

100%

 

 

 

 

 

 

 

Verde Life Inc. (“VLI”)

 

State of Oregon, U.S.A.

 

Distribution of THC-free cannabinoid (CBD) products

 

100%

 

 

 

 

 

 

 

The Wision Project Sdn Bhd (“Wision”)

 

Malaysia

 

Digital innovation, marketing & consulting service, PR, branding, influencer marketing, event management and media relations services

 

100%

 

 

 

 

 

 

 

Verde Estates LLC (“VEL”)

 

State of Missouri, U.S.A.

 

Holding real property

 

100%

 

 

 

 

 

 

 

Bio Resources Limited (“BRL”)

 

Labuan, Malaysia

 

Provision of proprietary pyrolysis technology and investment holding

 

100%

 

The Company and its subsidiaries are hereinafter referred to as (the “Company”).

 

 
F-7

Table of Contents

    

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

The accompanying unaudited condensed consolidated financial statements reflect the application of certain significant accounting policies as described in this note and elsewhere in the accompanying unaudited condensed consolidated financial statements and notes.

 

·

Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements have been prepared by management in accordance with both accounting principles generally accepted in the United States (“GAAP”), and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Certain information and note disclosures normally included in audited financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading.

 

In the opinion of management, the condensed consolidated balance sheet as of June 30, 2023 which has been derived from audited financial statements and these unaudited condensed consolidated financial statements reflect all normal and recurring adjustments considered necessary to state fairly the results for the periods presented. The results for the period ended December 31, 2023 are not necessarily indicative of the results to be expected for the entire fiscal year ending June 30, 2024 or for any future period.

 

These unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with the Management’s Discussion and the audited financial statements and notes thereto included in the Annual Report on Form 10-K for the year ended June 30, 2023, filed with the SEC on October 16, 2023.

 

·

Use of Estimates and Assumptions

 

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

 

In preparing these unaudited condensed consolidated financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheet and revenues and expenses during the periods reported. Actual results may differ from these estimates.

 

·

Basis of Consolidation

 

The unaudited condensed consolidated financial statements include the financial statements of Verde Resources, Inc. and its subsidiaries. All significant inter-company balances and transactions within the Company and its subsidiaries have been eliminated upon consolidation. The Company accounts for acquisitions in accordance with guidance found in ASC 805, Business Combinations. The guidance requires consideration given, including contingent consideration, assets acquired, and liabilities assumed to be valued at their fair market values at the acquisition date.

 

·

Segment Reporting

 

Accounting Standard Codification (“ASC”) Topic 280, Segment Reporting establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organization structure as well as information about geographical areas, business segments and major customers in consolidated financial statements. Currently, the Company operates in four reportable operating segments.

 

·

Concentrations of Credit Risk

 

The Company’s financial instruments that are exposed to concentrations of credit risk primarily consist of its cash and cash equivalents, accounts receivable and related party receivables, advance to suppliers and other receivables and deposits. The Company places its cash and cash equivalents with financial institutions of high credit worthiness. At times, its cash and cash equivalents with a particular financial institution may exceed any applicable government insurance limits. The Company’s management also assesses the financial strength and credit worthiness of any parties to which it extends funds or trades with, and as such, it believes that any associated credit risk exposures are limited.

 

·

Risks and Uncertainties

 

The Company is venturing into the production and distribution of renewable commodities that are subject to significant risks and uncertainties, including financial, operational, technological, and other risks associated with a production operation for renewable commodities, including the potential risk of business failure.

       

·

Cash and Cash Equivalents

 

Cash and cash equivalents are carried at cost and represent cash in banks, money market funds, and certificates of term deposits with maturities of less than three months, which are readily convertible to known amounts of cash and which, in the opinion of management, are subject to an insignificant risk of loss in value. The Company had $928,280 and $200,409 in cash and cash equivalents at December 31, 2023 and June 30, 2023.

 

At December 31, 2023 and June 30, 2023, cash and cash equivalents consisted of bank deposits and petty cash on hands.

 

 
F-8

Table of Contents

     

·

Accounts Receivable

 

Accounts receivable are recognized and carried at net realizable value. An allowance for doubtful accounts will be recorded in the period when a loss is probable based on an assessment of specific evidence indicating troubled collection, historical experience, accounts aging, ongoing business relation and other factors. Accounts are written off after exhaustive efforts at collection. If accounts receivable are to be provided for, or written off, they would be recognized in the consolidated statement of operations within operating expenses. At December 31, 2023 and June 30, 2023, the Company has no allowance for doubtful accounts, as per management’s judgment based on their best knowledge. As of December 31, 2023 and June 30, 2023, the longest credit term for certain customers are 60 days.

 

·

Expected Credit Loss

 

ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments requires entities to use a current lifetime expected credit loss methodology to measure impairments of certain financial assets. Using this methodology will result in earlier recognition of losses than under the current incurred loss approach, which requires waiting to recognize a loss until it is probable of having been incurred. There are other provisions within the standard that affect how impairments of other financial assets may be recorded and presented, and that expand disclosures. The Company adopted the new standard effective July 1, 2023, the first day of the Company’s fiscal year and applied to accounts receivable and other financial instruments. The adoption of this guidance did not materially impact the net earning and financial position and has no impact on the cash flows.

 

·

Inventories

 

Inventories are stated at the lower of cost or market value (net realizable value), cost being determined on a first-in-first-out method. Cost of raw materials include cost of materials and incidental costs in bringing the inventory to its current location.  Costs of finished goods, on the other hand include material, labor and overhead costs. The Company provides inventory allowances based on excess and obsolete inventories determined principally by customer demand.

 

As of December 31, 2023 and June 30, 2023, the Company did not record an allowance for obsolete inventories, nor have there been any write-offs.

 

·

Property, Plant and Equipment

 

Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Depreciation is calculated on the straight-line basis over the following expected useful lives from the date on which they become fully operational and after taking into account their estimated residual values:

 

 

 

Expected useful life

 

Land and buildings

 

3-27.5 years

 

Plant and machinery

 

5-10 years

 

Office equipment

 

3 years

 

Project equipment

 

5 years

 

Computer

 

5 years

 

Motor vehicles

 

5 years

 

Furniture and fittings

 

5 years

 

 

Expenditures for maintenance and repairs, which do not materially extend the useful lives of the assets, are charged to expense as incurred. Expenditures for major renewals and betterment which substantially extend the useful life of assets are capitalized. The cost and related accumulated depreciation of assets retired or sold are removed from the respective accounts, and any gain or loss is recognized in the unaudited condensed consolidated statements of income and other comprehensive income in other income or expenses.

 

Depreciation expense for the six months ended December 31, 2023 and 2022 were $207,586 and $79,907, respectively.

 

·

Intangible assets

 

Intangible assets acquired from third parties are measured initially at fair value , and where they have an infinite live, are not amortized. The Company annually evaluates the recoverability of the infinite-lived intangible assets for possible impairment whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable. The recoverability of these assets is measured by a comparison of the carrying amounts to the future discounted cash flows the assets are expected to generate. If such a review indicates that the carrying amount of intangible assets is not recoverable, the carrying amount of such assets is reduced to fair value.

 

As of December 31, 2023 and June 30, 2023, the Company did not record an impairment on the intangible assets.

 

·

Impairment of Long-lived Assets

 

In accordance with the provisions of ASC Topic 360, Impairment or Disposal of Long-Lived Assets, all long-lived assets such as property and equipment and intangible assets owned and held by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is evaluated by a comparison of the carrying amount of an asset to its estimated future undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceed the fair value of the assets.

 

There has been no impairment charge for the three and six months ended December 31, 2023 and 2022.

 

·

Advance to Supplier

 

Advance to supplier is provided for the provision of goods and services and they are secured either by a security deposit or a legally enforceable right to recover.

 

 
F-9

Table of Contents

    

·

Revenue Recognition

 

Product sales and services

 

ASC Topic 606, Revenue from Contracts with Customers (“ASC Topic 606”), establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts to provide goods or services to customers.

 

The Company applies the following five steps in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements:

 

·

identify the contract with a customer;

·

identify the performance obligations in the contract;

·

determine the transaction price;

·

allocate the transaction price to performance obligations in the contract; and

·

recognize revenue as the performance obligation is satisfied.

 

Revenue is recognized when the Company satisfies its performance obligation under the contract by transferring the promised product to its customer that obtains control of the product which typically occurs at delivery date at a point in time, and collection is reasonably assured. A performance obligation is a promise in a contract to transfer a distinct product or service to a customer. Most of the Company’s contracts have a single performance obligation, as the promise to transfer products or services is not separately identifiable from other promises in the contract and, therefore, not distinct.

 

The Company considers customer order confirmations, whether formal or otherwise, to be a contract with the customer. In determining the transaction price, the Company evaluates whether the price is subject to refund or adjustment to determine the net consideration to which the Company expects to be entitled.

 

The Company also follows the guidance provided in ASC 606, Revenue from Contracts with Customers, for determining whether the Company is the principal or an agent in arrangements with customers that involve another party that contributes to the provision of goods to a customer. In these instances, the Company determines whether it has promised to provide the goods itself (as principal) or to arrange for the specified goods to be provided by another party (as an agent). This determination is a matter of judgment that depends on the facts and circumstances of each arrangement.

 

The Company derives its revenue from the sale of products and services in its role as a principal.

 

Rental income

 

Rental income is recognized on a straight line basis over the term of the respective lease agreement. 

 

·

 Cost of revenue

 

Cost of revenue consists primarily of the cost of goods sold, which are directly attributable to the sales of products.

 

·

Leases

 

The Company determines if an arrangement is a lease or contains a lease at inception. Operating lease liabilities are recognized based on the present value of the remaining lease payments, discounted using the discount rate for the lease at the commencement date. As the rate implicit in the lease is not readily determinable for the operating lease, the Company generally uses an incremental borrowing rate based on information available at the commencement date to determine the present value of future lease payments. Operating lease right-of-use (“ROU assets”) assets represent the Company’s right to control the use of an identified asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets are generally recognized based on the amount of the initial measurement of the lease liability. Lease expense is recognized on a straight-line basis over the lease term.

 

ROU assets are reviewed for impairment when indicators of impairment are present. ROU assets from operating and finance leases are subject to the impairment guidance in ASC Topic 360, Property, Plant, and Equipment, as ROU assets are long-lived nonfinancial assets.

 

ROU assets are tested for impairment individually or as part of an asset group if the cash flows related to the ROU asset are not independent from the cash flows of other assets and liabilities. An asset group is the unit of accounting for long-lived assets to be held and used, which represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities.

 

The Company recognized no impairment of ROU assets as of December 31, 2023 and June 30, 2023.

 

The operating lease is included in operating lease right-of-use assets and operating lease liabilities as current and non-current liabilities in the unaudited condensed consolidated balance sheets as of December 31, 2023 and June 30, 2023.

 

Leases that transfer substantially all the rewards and risks of ownership to the lessee, other than legal title, are accounted for as finance leases. Substantially all of the risks or benefits of ownership are deemed to have been transferred if any one of the four criteria is met: (i) transfer of ownership to the lessee at the end of the lease term, (ii) the lease containing a bargain purchase option, (iii) the lease term exceeding 75% of the estimated economic life of the leased asset, (iv) the present value of the minimum lease payments exceeding 90% of the fair value. At the inception of a finance lease, we as the lessee records an asset and an obligation at an amount equal to the present value of the minimum lease payments. The leased asset is amortized over the shorter of the lease term or its estimated useful life if title does not transfer to us, while the leased asset is depreciated in accordance with our depreciation policy if the title is to eventually transfer to us. The periodic rent payments made during the lease term are allocated between a reduction in the obligation and interest element using the effective interest method in accordance with the provisions of ASC Topic 842.

 

 
F-10

Table of Contents

    

·

Income Taxes

 

The Company adopted the ASC Topic 740, Income tax provisions of paragraph 740-10-25-13, which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the unaudited condensed consolidated financial statements. Under paragraph 740-10-25-13, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the unaudited condensed consolidated financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Paragraph 740-10-25-13 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. The Company had no material adjustments to its liabilities for unrecognized income tax benefits according to the provisions of paragraph 740-10-25-13.

 

The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying balance sheets, as well as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its balance sheets and provides valuation allowances as management deems necessary.

 

Uncertain Tax Positions

 

The Company did not take any uncertain tax positions and had no adjustments to its income tax liabilities or benefits pursuant to the ASC Topic 740 provisions of Section 740-10-25 for the three and six months ended December 31, 2023 and 2022.

 

·

Foreign Currencies Translation

 

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

 

Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the unaudited condensed consolidated statement of operations.

 

For reporting purposes, in accordance with ASC Topic 830 ”Translation of Financial Statements”, capital accounts of the unaudited condensed consolidated financial statements are translated into United States dollars from MYR at their historical exchange rates when the capital transactions occurred. Assets and liabilities are translated at the exchange rates as of balance sheet date. Income and expenditures are translated at the average exchange rate of the respective period. The gains and losses resulting from translation of financial statements subsidiaries to the reporting currency are recorded as a separate component of accumulated other comprehensive income within the statements of changes in stockholder’s equity.

 

Translation of MYR into U.S. dollars has been made at the following exchange rates for the following periods:-

 

 

 

December 31, 2023

 

 

December 31, 2022

 

Period-end MYR:US$ exchange rate

 

 

0.21790

 

 

 

0.22715

 

Average period MYR:US$ exchange rate

 

 

0.21512

 

 

 

0.22102

 

 

·

Comprehensive Income

 

ASC Topic 220, Comprehensive Income, establishes standards for reporting and display of comprehensive income, its components and accumulated balances. Comprehensive income as defined includes all changes in equity during a period from non-owner sources. Accumulated other comprehensive income, as presented in the accompanying unaudited condensed consolidated statements of changes in stockholders’ equity, consists of changes in unrealized gains and losses on foreign currency translation. This comprehensive income is not included in the computation of income tax expense or benefit.

 

·

Net Loss per Share

 

The Company calculates net loss per share in accordance with ASC Topic 260, Earnings per Share. Basic income per share is computed by dividing the net income by the weighted-average number of common shares outstanding during the period. Diluted income per share is computed similar to basic income per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common stock equivalents had been issued and if the additional common shares were dilutive.

 

 
F-11

Table of Contents

    

·

Stock Based Compensation

 

The Company accounts for stock-based compensation in accordance with ASC Topic 718-10, Compensation-Stock Compensation, which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees, directors and non employees, including employee stock options, restricted stock units, and stock appreciation rights are based on estimated fair values. Stock-based compensation expense recognized during the period is based on the value of the portion of share-based payment awards that is ultimately expected to vest during the period.

 

·

Retirement Plan Costs

 

Contributions to retirement plans (which are defined contribution plans) are charged to general and administrative expenses in the accompanying statements of operation as the related employee service are provided.

 

·

Mineral Acquisition and Exploration Costs

 

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

 

·

Related Parties

 

The Company follows the ASC 850-10, Related Party for the identification of related parties and disclosure of related party transactions.

 

Pursuant to section 850-10-20 the related parties include a) affiliates of the Company; b) entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of section 825–10–15, to be accounted for by the equity method by the investing entity; c) trusts for the benefit of employees, such as pension and Income-sharing trusts that are managed by or under the trusteeship of management; d) principal owners of the Company; e) management of the Company; f) other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.

 

The unaudited condensed consolidated financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a) the nature of the relationship(s) involved; b) a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c) the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d) amount due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.

 

·

Commitments and Contingencies

 

The Company follows the ASC 450-20, Commitments to report accounting for contingencies. Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or un-asserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or un-asserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

 

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s unaudited condensed consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.

 

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available at this time that these matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.

 

 
F-12

Table of Contents

    

·

Fair Value of Financial Instruments

 

The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and has adopted paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 of the FASB Accounting Standards Codification establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, paragraph 820-10-35-37 of the FASB Accounting Standards Codification establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by paragraph 820-10-35-37 of the FASB Accounting Standards Codification are described below:

 

Level 1

Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.

 

 

Level 2

Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.

 

 

Level 3

Pricing inputs that are generally observable inputs and not corroborated by market data.

 

Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.

 

The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

 

The carrying amounts of the Company’s financial assets and liabilities, such as cash and cash equivalents, accounts receivable, prepayments and other receivables, accounts payable, accrued liabilities and other payables, loans payable, and amounts due to related parties approximate their fair values because of the short maturity of these instruments.

 

·

Recent Accounting Pronouncements

 

During the period ended December 31, 2023, there have been no new, or existing, recently issued accounting pronouncements that are of significance, or potential significance, that impact the Company’s unaudited condensed consolidated financial statements.

 

 In June 2016, the Financial Accounting Standards Board (“FASB”) issued new accounting guidance ASU 2016-13 for recognition of credit losses on financial instruments, which is effective January 1, 2020, with early adoption permitted on January 1, 2019. The guidance introduces a new credit reserving model known as the Current Expected Credit Loss (“CECL”) model, which is based on expected losses, and differs significantly from the incurred loss approach used today. The CECL model requires measurement of expected credit losses not only based on historical experience and current conditions, but also by including reasonable and supportable forecasts incorporating forward-looking information and will likely result in earlier recognition of credit reserves. In November 2019, the FASB issued ASU No. 2019-10, which is to update the effective date of ASU No. 2016-13 for private companies, not-for-profit organizations and certain smaller reporting companies applying for credit losses standard. The new effective date for these preparers is for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company has adopted this update on July 1, 2023, and the adoption does not have material impact on Company’s consolidated financial statements and related disclosures.

 

CECL adoption will have broad impact on the financial statements of financial services firms, which will affect key profitability and solvency measures. Some of the more notable expected changes include:

 

Higher allowance on financial guarantee reserve and finance lease receivable levels and related deferred tax assets. While different asset types will be impacted differently, the expectation is that reserve levels will generally increase across the board for all financial firms.

 

 

Increased reserve levels may lead to a reduction in capital levels.

 

 

As a result of higher reserving levels, the expectation is that CECL will reduce cyclicality in financial firms’ results, as higher reserving in “good times” will mean that less dramatic reserve increases will be loan related income (which will continue to be recognized on a periodic basis based on the effective interest method) and the related credit losses (which will be recognized up front at origination). This will make periods of loan expansion seem less profitable due to the immediate recognition of expected credit losses. Periods of stable or declining loan levels will look comparatively profitable as the income trickles in for loans, where losses had been previously recognized.

 

In March 2023, the FASB issued new accounting guidance, ASU 2023-01, for leasehold improvements associated with common control leases, which is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted for both interim and annual financial statements that have not yet been made available for issuance. The new guidance introduced two issues: terms and conditions to be considered with leases between related parties under common control and accounting for leasehold improvements. The goals for the new issues are to reduce the cost associated with implementing and applying Topic 842 and to promote diversity in practice by entities within the scope when applying lease accounting requirements.

 

The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and believe the future adoption of any such pronouncements may not be expected to cause a material impact on its financial condition or the results of its operations.

 

 
F-13

Table of Contents

    

NOTE 3 - GOING CONCERN UNCERTAINTIES

 

The accompanying unaudited condensed consolidated financial statements have been prepared using the going concern basis of accounting, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

 

The Company has generated recurring losses and suffered from an accumulated deficit of $11,368,229 as of December 31, 2023.

 

The ability of the Company to survive is dependent upon, among other things, obtaining additional financing to continue operations, and development of its business plan.  In response to these, management intends to raise additional funds through public or private placement offerings, and related party loans.

 

No assurance can be given that any future financing, if needed, will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, if needed, it may contain undue restrictions on its operations, in the case of debt financing, or cause substantial dilution for its stockholders, in the case of equity financing.

 

These and other factors raise substantial doubt about the Company’s ability to continue as a going concern. These unaudited condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets and liabilities that may result in the Company not being able to continue as a going concern.

 

 
F-14

Table of Contents

    

NOTE 4 – BUSINESS SEGMENT INFORMATION

 

Currently, the Company currently has four reportable business segments, mainly operating in:

 

(i)

Distribution of THC-free cannabinoid (CBD) products;

 

 

(ii)

Production and distribution of renewable commodities;

 

 

(iii)

Holding of real property; and

 

 

(iv)

Licensor of proprietary pyrolysis technology.

 

In the period ended December 31, 2022, the business segment included the following, which has since been disposed:

 

(i)

Gold mineral mining.

 

In the following table, revenue is disaggregated by primary major product line, and timing of revenue recognition. The table also includes a reconciliation of the disaggregated revenue with the reportable segments for the three and six months ended December 31, 2023 and 2022:

 

 

 

Three Months ended December 31, 2023

 

 

 

Distribution of THC-free cannabinoid (CBD) products

 

 

Production and distribution of renewable commodities

 

 

Holding property

 

 

Licensor of proprietary pyrolysis technology

 

 

Corporate unallocated

 

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$-

 

 

$554

 

 

$18,204

 

 

$-

 

 

$4,638

 

 

$23,396

 

Cost of revenue

 

 

-

 

 

 

(64,590 )

 

 

-

 

 

 

-

 

 

 

(4,255 )

 

 

(68,845 )

Gross loss

 

 

-

 

 

 

(64,036 )

 

 

18,204

 

 

 

-

 

 

 

383

 

 

 

(45,449 )

General & administrative expenses

 

 

-

 

 

 

(388,070 )

 

 

(29,386 )

 

 

(5,031 )

 

 

(101,101 )

 

 

(523,588 )

Loss from operations

 

 

-

 

 

 

(452,106 )

 

 

(11,182 )

 

 

(5,031 )

 

 

(100,718 )

 

 

(569,037 )

Interest expense

 

 

-

 

 

 

(14,972 )

 

 

-

 

 

 

-

 

 

 

(28,745 )

 

 

(43,717 )

Other income

 

 

-

 

 

 

205

 

 

 

-

 

 

 

(171 )

 

 

86,382

 

 

 

86,416

 

Loss before income tax

 

 

-

 

 

 

(466,873 )

 

 

(11,182 )

 

 

(5,202 )

 

 

(43,081 )

 

 

(526,338 )

Income tax

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Net loss

 

$-

 

 

$(466,873 )

 

$(11,182 )

 

$(5,202 )

 

$(43,081 )

 

 

(526,338 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total assets at December 31, 2023

 

$194,009

 

 

$6,732,478

 

 

$1,216,978

 

 

$30,193,609

 

 

$1,131,183

 

 

$39,468,257

 

 

 

 

Three Months ended December 31, 2022

 

 

 

Gold

mineral

mining

 

 

Distribution

of THC-free

cannabinoid

(CBD)

products

 

 

Production

and

distribution

of renewable

commodities

 

 

Holding

property

 

 

Licensor of

proprietary

pyrolysis

technology

 

 

Corporate

unallocated

 

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$-

 

 

$-

 

 

$55,921

 

 

$21,171

 

 

$-

 

 

$4,048

 

 

$81,140

 

Cost of revenue

 

 

-

 

 

 

-

 

 

 

(31,202 )

 

 

-

 

 

 

-

 

 

 

(454 )

 

 

(31,656 )

Gross profit

 

 

-

 

 

 

-

 

 

 

24,719

 

 

 

21,171

 

 

 

-

 

 

 

3,594

 

 

 

49,484

 

Selling, general & administrative expenses

 

 

(60,396 )

 

 

(2,550 )

 

 

(503,630 )

 

 

(63,797 )

 

 

(653 )

 

 

(231,054 )

 

 

(862,080 )

Loss from operations

 

 

(60,396 )

 

 

(2,550 )

 

 

(478,911 )

 

 

(42,626 )

 

 

(653 )

 

 

(227,460 )

 

 

(812,596 )

Interest expenses

 

 

-

 

 

 

-

 

 

 

(4,803 )

 

 

-

 

 

 

-

 

 

 

(1,344,745 )

 

 

(1,349,548 )

Other income

 

 

281

 

 

 

-

 

 

 

636

 

 

 

-

 

 

 

-

 

 

 

961

 

 

 

1,878

 

Loss before income tax

 

 

(60,115 )

 

 

(2,550 )

 

 

(483,078 )

 

 

(42,626 )

 

 

(653 )

 

 

(1,571,244 )

 

 

(2,160,266 )

Income tax

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Net loss

 

$(60,115 )

 

$(2,550 )

 

$(483,078 )

 

$(42,626 )

 

$(653 )

 

$(1,571,244 )

 

$(2,160,266 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total assets as December 31, 2022

 

$29,169

 

 

$315,929

 

 

$1,685,244

 

 

$1,253,068

 

 

$30,202,975

 

 

 

6,148,975

 

 

$39,635,360

 

 

 
F-15

Table of Contents

    

 

 

Six Months ended December 31, 2023

 

 

 

Distribution of THC-free cannabinoid (CBD) products

 

 

Production and distribution of renewable commodities

 

 

Holding property

 

 

Licensor of proprietary pyrolysis technology

 

 

Corporate unallocated

 

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$-

 

 

$2,803

 

 

$34,100

 

 

$-

 

 

$4,971

 

 

$41,874

 

Cost of revenue

 

 

-

 

 

 

(135,064 )

 

 

-

 

 

 

-

 

 

 

(4,297 )

 

 

(139,361 )

Gross loss

 

 

-

 

 

 

(132,261 )

 

 

34,100

 

 

 

-

 

 

 

674

 

 

 

(97,487 )

General & administrative expenses

 

 

(120 )

 

 

(722,395 )

 

 

(43,949 )

 

 

(5,231 )

 

 

(208,487 )

 

 

(980,182 )

Loss from operations

 

 

(120 )

 

 

(854,656 )

 

 

(9,849 )

 

 

(5,231 )

 

 

(207,813 )

 

 

(1,077,669 )

Interest expense

 

 

-

 

 

 

(28,628 )

 

 

-

 

 

 

-

 

 

 

(56,295 )

 

 

(84,923 )

Other income

 

 

-

 

 

 

411

 

 

 

-

 

 

 

-

 

 

 

86,382

 

 

 

86,793

 

Loss before income tax

 

 

(120 )

 

 

(882,873 )

 

 

(9,849 )

 

 

(5,231 )

 

 

(177,726 )

 

 

(1,075,799 )

Income tax

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Net loss

 

$(120 )

 

$(882,873 )

 

$(9,849 )

 

$(5,231 )

 

$(177,726 )

 

 

(1,075,799 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total assets at December 31, 2023

 

$194,009

 

 

$6,732,478

 

 

$1,216,978

 

 

$30,193,609

 

 

$1,131,183

 

 

$39,468,257

 

 

 

 

Six Months ended December 31, 2022

 

 

 

Gold

mineral

mining

 

 

Distribution

of THC-free

cannabinoid

(CBD)

products

 

 

Production

and

distribution

of renewable

commodities

 

 

Holding

property

 

 

Licensor of

proprietary

pyrolysis

technology

 

 

Corporate

unallocated

 

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$-

 

 

$-

 

 

$79,265

 

 

$23,221

 

 

$-

 

 

$4,966

 

 

$107,452

 

Cost of revenue

 

 

-

 

 

 

-

 

 

 

(78,629 )

 

 

-

 

 

 

-

 

 

 

(966 )

 

 

(79,595 )

Gross profit

 

 

-

 

 

 

-

 

 

 

636

 

 

 

23,221

 

 

 

-

 

 

 

4,000

 

 

 

27,857

 

Selling, general & administrative expenses

 

 

(107,456 )

 

 

(2,575 )

 

 

(1,002,409 )

 

 

(87,250 )

 

 

(653 )

 

 

(472,179 )

 

 

(1,672,522 )

Loss from operations

 

 

(107,456 )

 

 

(2,575 )

 

 

(1,001,773 )

 

 

(64,029 )

 

 

(653 )

 

 

(468,179 )

 

 

(1,644,665 )

Interest expenses

 

 

-

 

 

 

-

 

 

 

(8,688 )

 

 

-

 

 

 

-

 

 

 

(1,870,972 )

 

 

(1,879,660 )

Other income

 

 

6,056

 

 

 

-

 

 

 

636

 

 

 

-

 

 

 

-

 

 

 

961

 

 

 

7,653

 

Loss before income tax

 

 

(101,400 )

 

 

(2,575 )

 

 

(1,009,825 )

 

 

(64,029 )

 

 

(653 )

 

 

(2,338,190 )

 

 

(3,516,672 )

Income tax

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Net loss

 

$(101,400 )

 

$(2,575 )

 

$(1,009,825 )

 

$(64,029 )

 

$(653 )

 

$(2,338,190 )

 

$(3,516,672 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total assets as December 31, 2022

 

$29,169

 

 

$315,929

 

 

$1,685,244

 

 

$1,253,068

 

 

$30,202,975

 

 

 

6,148,975

 

 

$39,635,360

 

 

The below revenues are based on the countries in which the customer is located. Summarized financial information concerning the geographic segments is shown in the following tables: 

 

 

 

Three Months ended

December 31,

 

 

Six Months ended

December 31,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Malaysia

 

$5,192

 

 

$10,621

 

 

$7,774

 

 

$22,233

 

United States

 

 

18,204

 

 

 

70,519

 

 

 

34,100

 

 

 

85,219

 

 

 

$23,396

 

 

$81,140

 

 

$41,874

 

 

$107,452

 

 

 
F-16

Table of Contents

    

NOTE 5 – INVENTORIES

 

 Inventories as of December 31, 2023 and June 30, 2023 consisted of the following:

 

 

 

December 31,

2023

 

 

June 30,

2023

 

 

 

 

 

 

 

 

Finished goods

 

$227,922

 

 

$93,583

 

Raw materials

 

 

2,477

 

 

 

2,453

 

 

 

$230,399

 

 

$96,036

 

 

NOTE 6 – OTHER RECEIVABLES, DEPOSITS AND PREPAYMENTS

 

Other receivable, deposits and prepayments as of December 31, 2023 and June 30, 2023 consisted of the following:

 

 

 

December 31,

2023

 

 

June 30,

2023

 

 

 

 

 

 

 

 

Deposits

 

$13,764

 

 

$16,795

 

Other receivables

 

 

31,326

 

 

 

9,641

 

 

 

$45,090

 

 

$26,436

 

Less: impairment on other receivables

 

 

(30,117 )

 

 

-

 

Other receivables and deposits, net

 

$14,973

 

 

$26,436

 

Prepayments

 

 

304,540

 

 

 

375,680

 

 

 

$319,513

 

 

$402,116

 

 

NOTE 7 – PROPERTY, PLANT AND EQUIPMENT

 

A summary of property, plant and equipment as of December 31, 2023 and June 30, 2023 is as follows:

 

 

 

December 31,

2023

 

 

June 30,

2023

 

 

 

 

 

 

 

 

Land and buildings

 

$1,258,360

 

 

$1,264,117

 

Plant and machinery

 

 

2,289,794

 

 

 

2,291,823

 

Office equipment

 

 

6,168

 

 

 

6,283

 

Project equipment

 

 

-

 

 

 

3,971

 

Computers

 

 

6,576

 

 

 

5,483

 

Motor vehicles

 

 

777,457

 

 

 

708,267

 

Furniture and fittings

 

 

12,879

 

 

 

12,935

 

 

 

 

4,351,234

 

 

 

4,292,879

 

Less: accumulated depreciation

 

 

(483,711 )

 

 

(258,187 )

Foreign exchange adjustment

 

 

34,748

 

 

 

(25,602 )

 

 

$3,902,271

 

 

$4,009,090

 

 

Depreciation expense for the three months ended December 31, 2023 and 2022 totaled $104,988 and $51,955, respectively.

 

Depreciation expense for the six months ended December 31, 2023 and 2022 totaled $207,586 and $79,907, respectively.

 

Land and building with the net carrying value of $712,899 at December 31, 2023 and $723,981 at June 30, 2023 were pledged to a financial institution for facilities granted.

 

Plant and machinery and motor vehicles with carrying values of $268,275 and $575,138 at December 31, 2023 ($295,701 and $553,674 at June 30, 2023) are acquired under financing arrangements.

 

 
F-17

Table of Contents

    

NOTE 8 –INTANGIBLE ASSETS

 

The intangible assets comprise (i) a global intellectual property (“IP”) of $30,192,771 known as “Catalytic Biofraction Process”, whereby, subsidiary Bio Resources Limited (“BRL”) is the beneficial and/or registered proprietor and (ii) an exclusive licence assigned to Verde Malaysia for the operation of the IP in the state of Sabah, Malaysia of MYR 14,000,000 ($3,050,600).

 

The “Catalytic Biofraction Process” is a slow pyrolysis process using a proprietary catalyst to depolymerize palm biomass wastes (empty fruit bunches or palm kernel shells) in temperature range of 350 degrees Celsius to 500 degrees Celsius to yield commercially valuable bio products: bio-oil, wood vinegar (pyroligneous acid), biochar and bio-syngas. The intellectual property is a second-generation pyrolysis process where non-food feedstock like palm biomass wastes is used as feedstock. Upon fulfilling UN’s (United Nations) ACM 22 protocol as well as LCA (Life Cycle Assessment) requirements, it is anticipated that the by-products from this IP would lead to certification and issuance of Carbon Avoidance Credits as well as Carbon Removal Credits to generate carbon revenue for the Company.

 

NOTE 9 – DEPOSITS PAID

 

At December 31, 2023 and June 30, 2023, deposits consist of the following:

 

 

 

December 31,

2023

 

 

June 30,

2023

 

Deposits paid for acquisition of subsidiaries

 

 

 

 

 

 

 - Vata VM Synergy (M) Sdn Bhd (“VATA”) (#1)

 

$-

 

 

$21,423

 

 

 

 

 

 

 

 

 

 

Security deposit

 

 

 

 

 

 

 

 

 - Factory site (#2)

 

$80,000

 

 

$80,000

 

 

(#1) On March 23, 2023, the Company, through its wholly-owned subsidiary Verde Resources (Malaysia) Sdn. Bhd. (“Verde Malaysia”), entered into a Shares Sale Agreement (the “SSA Agreement”) with Murugesu A/L M. Narasimha and Deivamalar A/P Kandiah (“Vendors”), the legal and beneficial owners of Vata VM Synergy (M) Sdn. Bhd. (“VATA”), a company incorporated under the laws of Malaysia, to acquire 60% of the issued and paid-up share capital of VATA, a company engaged in the business of providing green technology to government and private sectors and in creating high quality compost using agricultural waste and biomass products in Malaysia. In relation to the SSA Agreement, the Company through Verde Malaysia also entered into a Shareholders Agreement with Murugesu A/L M. Narasimha and VATA. Under the terms of the SSA Agreement, the consideration for the acquisition of 60% of the issued and paid-up share capital of VATA shall be satisfied by the total purchase consideration of MYR 2,250,000, which includes a first payment of MYR100,000 upon the execution of the SSA Agreement, a second payment of MYR 150,000 within thirty (30) days from the date of fulfilment or waiver of all the conditions set out in the SSA Agreement, and the issuance of shares of the Company’s restricted Common Stock for the balance consideration of MYR 2,000,000 at a price per share of not more than ten percent (10%) discount from the immediate preceding five trading days volume weighted average price (“VWAP”) from the issuance date pursuant to the terms of the SSA Agreement. As of June 30, 2023, the first payment of MYR100,000 has been made.

 

As of December 31, 2023, the deposits of MYR100,000 has been written off as the Company has initiated the termination of the agreement on the grounds of non-disclosure of material information by VATA.

 

(#2) On March 2, 2022, the Company, through VRAP, entered into a Commercial Lease Agreement and Option to Purchase (“Segama Lease Agreement”) the factory site from Segama Ventures for a lease term of seven (7) years (“Lease Term”) at a monthly rental of MYR 36,000 ($8,571). The rental for the entire Lease Term amounts to the sum of MYR 3,024,000 ($720,000) (the “Lease Payment”) which shall be paid in advance upon commencement of the Segama Lease Agreement together with a payment of security deposit for the sum of MYR 336,000 ($80,000) (the “Security Payment”).

 

NOTE 10 - MINING RIGHT

 

A lump sum payment of MYR260,500 ($62,260) had been made for a mining right over a period of 2 years up to June 13, 2023. The mining right was amortized on a straight-line basis over the term of the right. Nevertheless, on April 20, 2023, the subsidiary, CSB, to whom the right belongs, was disposed.  

 

The table below presents the movement of the right as recorded on the balance sheets.

 

 

 

Six months ended December 31,

2023

 

 

Year Ended

June 30,

2023

 

Balance as at July 1, 2023 and July 1, 2022

 

$-

 

 

$27,088

 

Amortization charge for the period / year

 

 

-

 

 

 

(21,832 )

Foreign exchange adjustment

 

 

-

 

 

 

(363 )

Disposal of subsidiary

 

 

-

 

 

 

(4,893 )

Balance as of December 31, 2023 and June 30, 2023

 

$-

 

 

$-

 

 

Amortization charge of mining right was $0 and $7,188 for the three months ended December 31, 2023 and 2022, respectively.

 

Amortization charge of mining right was $0 and $14,394 for the six months ended December 31, 2023 and 2022, respectively.

 

 
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NOTE 11 – AMOUNTS DUE TO RELATED PARTIES

 

The following breakdown of the balances due to related parties and director, consisted of:-

 

 

 

December 31,

2023

 

 

June 30,

2023

 

 

 

 

 

 

 

 

Amount due to related parties

 

 

 

 

 

 

Borneo Oil Corporation Sdn (“BOC”) (#1)

 

$123,904

 

 

$117,125

 

Borneo Oil Berhad (“BOB”) (#1)

 

 

70,556

 

 

 

10,711

 

Taipan International Limited (#2)

 

 

119,153

 

 

 

119,153

 

Borneo Energy Sdn Bhd (#1)

 

 

15,010

 

 

 

14,770

 

Victoria Capital Sdn Bhd (#3)

 

 

116,032

 

 

 

107,970

 

 

 

$444,655

 

 

$369,729

 

 

 

 

 

 

 

 

 

 

Amount due from/(to) director

 

 

 

 

 

 

 

 

 Mr. Jack Wong (#4)

 

$5,999

 

 

$(9,660 )

 

(#1) Borneo Energy Sdn Bhd is a wholly owned subsidiary of Borneo Oil Corporation Sdn Bhd (“BOC”) and BOC is a wholly owned subsidiary of Borneo Oil Berhad (“BOB”) (holding 13.2% of the Company’s issued and outstanding common stock as of December 31, 2023). The advances are related to ordinary business transactions and bear no interest or collateral, and are repayable on demand.

 

(#2) Taipan International Limited who, pursuant to the disposal of BRL to the Company, became one of the shareholders of the Company and held 32.9% of the Company’s issued and outstanding Common Stock as of December 31, 2023. The advances are related to ordinary business transactions and bear no interest or collateral, and are repayable on demand.

 

(#3) Victoria Capital Sdn. Bhd. is one of the shareholders of the Company, and held 0.2% of the Company’s issued and outstanding Common Stock as of December 31, 2023. The advances are related to ordinary business transactions and bear no interest or collateral, and are repayable on demand.

 

(#4) Mr. Jack Wong is the Chief Executive of the Company effective October 1, 2022. Further, effective March 30, 2023, Mr. Jack Wong was appointed Director of the Company for a one (1) year term.

 

NOTE 12 – PROMISSORY NOTES

 

 

 

December 31,

2023

 

 

June 30,

2023

 

 

 

 

 

 

 

 

Promissory Notes (#1)

 

$-

 

 

$-

 

Promissory Notes (#2) – related party

 

 

537,280

 

 

 

487,790

 

 

 

$537,280

 

 

$487,790

 

 

The following is a reconciliation of the beginning and ending balances of promissory notes payable using Level 3 inputs:

 

 

 

December 31,

 

 

June 30,

 

 

 

2023

 

 

2023

 

Balance at the beginning of period or year

 

$487,790

 

 

$18,484,028

 

Promissory notes issued to related party at fair value (#2)

 

 

-

 

 

 

481,023

 

Interest expense #1

 

 

-

 

 

 

1,870,972

 

Interest expense #2

 

 

49,490

 

 

 

6,767

 

Converted to Company’s restricted Common Stock (#1)

 

 

-

 

 

 

(20,355,000 )

Balance at the end of period or year

 

$537,280

 

 

$487,790

 

 

 
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Table of Contents

    

(#1) Promissory notes with a principal amount of $20,355,000 and a two-year term period were issued on May 12, 2021 pursuant to the acquisition of subsidiary, BRL. The face value (principal) amount of $20,355,000 was repayable by May 12, 2023, and bore zero coupon interest. On January 20, 2022, the Company had reached a mutual agreement with the Lenders of the Notes to enter into a Supplement to Promissory Note, with each Lender, to convert the total principal loan amount of $20,355,000 into shares of the Company’s restricted Common Stock priced at $0.0611 per share, which represents the last ninety (90) days’ volume weighted average price (VWAP) as of the market closing of January 19, 2022. With the consummation of the acquisition of BRL on October 12, 2022, on December 9, 2022 the conversion of Promissory Notes was completed pursuant to a Supplementary Agreement dated December 7, 2022, with the issuance of 333,142,389 shares of the Company’s restricted Common Stock, at the price of $0.0611 per share, to the 17 Lenders, including the Company’s CEO, Jack Wong.

 

(#2) On March 13, 2023, the Company and its indirect wholly-owned subsidiary CSB entered into a Settlement of Debts Agreement (the “SDA Agreement”) for the settlement in full of CSB’s account payable to a related party, Borneo Oil Corporation Sdn Bhd (“BOC”) by way of the issuance on March 13, 2023 of a two year term Promissory Notes with the face value (principal) amount of $675,888, and bearing 2% coupon interest. The Notes are repayable by May 12, 2025, either in cash or by the issuance of the Company’s restricted Common Stock priced at $0.07 per share at the discretion of the holder of the Promissory Note. The fair value of the Promissory Notes of $ 481,023 was calculated using the net present value of estimated future cash flows with the assumptions of risk free rate at 4.03%, credit spread of 11.6% and liquidity risk premium of 5.6%.

 

The Company recorded $25,343 and $1,344,745 interest expense on promissory notes for the three months ended December 31, 2023 and 2022, respectively. Interest payable attributable to promissory notes (#2) was $3,402 for the three months ended December 31, 2023.

 

The Company recorded $49,490 and $1,879,660 interest expense on promissory notes for the six months ended December 31, 2023 and 2022, respectively. Interest payable attributable to promissory notes (#2) was $6,805 for the six months ended December 31, 2023.

 

NOTE 13 - LEASES

 

The Company adopted ASU No. 2016-02, Leases and determines whether an arrangement is a lease at inception. This determination generally depends on whether the arrangement conveys the right to control the use of an identified fixed asset explicitly or implicitly for a period of time in exchange for consideration. Control of an underlying asset is conveyed if we obtain the rights to direct the use of and to obtain substantially all of the economic benefit from the use of the underlying asset. Some of our leases include both lease and non-lease components which are accounted for as a single lease component as the Company has elected the practical expedient. Some of the operating lease agreements include variable lease costs, primarily taxes, insurance, common area maintenance or increases in rental costs related to inflation. Substantially all of our equipment leases and some of our real estate leases have terms of less than one year and, as such, are accounted for as short-term leases as we have elected the practical expedient.

 

Operating leases are included in the right-of-use lease assets, and current and non-current lease liabilities on the Unaudited Condensed Consolidated Balance Sheet. Right-of-use assets and lease liabilities are recognized at each lease’s commencement date based on the present values of its lease payments over its respective lease term. When a borrowing rate is not explicitly available for a lease, the incremental borrowing rate is used based on information available at the lease’s commencement date to determine the present value of its lease payments. Operating lease payments are recognized on a straight-line basis over the lease term.

 

The Company adopts a 5% as weighted average incremental borrowing rate to determine the present value of the lease payments. The weighted average remaining life of the lease was 3 years ending September 30, 2025.

 

 
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Table of Contents

    

The table below presents the lease-related assets and liabilities recorded on the balance sheet.

 

 

 

December 31,

2023

 

 

June 30,

2023

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

Right-of-use asset (#1)

 

$720,000

 

 

$720,000

 

Right-of-use asset (#2)

 

 

64,910

 

 

 

64,910

 

Total RoU assets

 

$784,910

 

 

$784,910

 

Less: Amortisation

 

 

(213,146 )

 

 

(151,801 )

 

 

$571,764

 

 

$633,109

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

Current:

 

 

 

 

 

 

 

 

Operating lease liabilities

 

$22,732

 

 

$20,768

 

Finance lease liabilities

 

 

177,699

 

 

 

172,184

 

 

 

 

200,431

 

 

 

192,952

 

 

 

 

 

 

 

 

 

 

Non-current:

 

 

 

 

 

 

 

 

Operating lease liabilities

 

 

17,603

 

 

 

29,483

 

Finance lease liabilities

 

 

605,963

 

 

 

608,455

 

 

 

 

623,566

 

 

 

637,938

 

 

 

 

 

 

 

 

 

 

Total lease liabilities

 

$823,997

 

 

$830,890

 

 

As of December 31, 2023, right-of-use assets were $571,764 and lease liabilities were $823,997.

 

As of June 30, 2023, right-of-use assets were $633,109 and lease liabilities were $830,890.

 

For the three months ended December 31, 2023 and 2022, the amortization charge on right-of use assets was $32,775 and $25,714, respectively.

 

For the six months ended December 31, 2023 and 2022, the amortization charge on right-of-use was $61,345 and $57,028, respectively.

 

(#1) This leasing arrangement for the lease of the Segama factory amounting to $720,000 is for a lease term of seven (7) years and includes an exclusive right and option to purchase the factory site, together with all its right title and interest, for a consideration to be mutually agreed between the parties at any time during the period of two years from the date of the Lease Agreement ending March 1, 2024. The Lease Payment and Security Payment shall be applied toward the Purchase Price upon VRAP exercising the option to purchase. The Company’s lease agreements do not contain any material restrictive covenants.

 

There are no corresponding lease liabilities recorded as the lease payments for the entire lease period has been paid upfront upon inception of the agreement.

 

(#2) This leasing arrangement for the lease of the executive vehicle amounting to $84,718 is for a lease term of three (3) years and includes option to purchase the said vehicle at an agreed consideration of $57,087 (“Purchase Price”) as stated in the Lease Agreement. The Company’s lease agreements do not contain any material restrictive covenants.

 

The accretion of lease liability for the three and six months ending December 31, 2023, were $1,990 and $4,204, respectively and for the three and six months ended December 31, 2022 were $2,828 and $3,813, respectively.

 

The Company excludes short-term leases (those with lease terms of less than one year at inception) from the measurement of lease liabilities or right-of-use assets. The following tables summarize the lease expense for the periods.

 

 

 

Six Months ended

December 31,

 

 

 

2023

 

 

2022

 

 

 

 

 

 

 

 

Finance lease cost:

 

 

 

 

 

 

Interest on lease liabilities (per ASC 842)

 

$23,925

 

 

$8,688

 

 

 

 

 

 

 

 

 

 

Operating lease cost:

 

 

 

 

 

 

 

 

Operating lease expense (per ASC 842)

 

 

65,549

 

 

 

65,867

 

 

 

 

 

 

 

 

 

 

Total lease expense

 

$89,474

 

 

$74,555

 

 

Components of Lease Expense

 

The operating lease expense comprises two components, being, (i) interest expense determined using the effective interest method, and (ii) amortization of the right-of-use asset on a straight line basis over the term of the operating lease, as reported within “general and administrative” expense on the accompanying unaudited condensed consolidated statement of operations.

 

Finance lease expense comprise of interest expenses determined using the effective interest method.

 

 
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Table of Contents

    

Future Contractual Lease Payments as of December 31, 2023

 

The below table summarizes our (i) minimum lease payments over the next five years, (ii) lease arrangement implied interest, and (iii) present value of future lease payments for the next five years and thereafter ending December 31:

 

Years ending December 31,

 

Operating and finance lease

amount

 

 

 

 

 

2024

 

$211,294

 

2025

 

 

207,686

 

2026

 

 

188,860

 

2027

 

 

158,289

 

2028

 

 

102,048

 

Thereafter

 

 

100,434

 

 

 

 

 

 

Total minimum finance lease liabilities payment

 

 

968,611

 

Less: interest

 

 

(144,614 )

Present value of lease liabilities

 

$823,997

 

 

 

 

 

 

Representing:-

 

 

 

 

Current liabilities

 

$200,431

 

Non-current liabilities

 

 

623,566

 

 

 

$823,997

 

 

NOTE 14 - STOCKHOLDERS’ EQUITY

 

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.

 

Preferred stock outstanding

 

There are no preferred shares outstanding as of December 31, 2023 and June 30, 2023.

 

The Company has no stock option plan, warrants, or other dilutive securities.

 

Common stock outstanding

 

During the period ended December 31, 2023, 555,555 restricted Common Shares were committed to be issued pursuant to private placement at US$0.09 per share to one US shareholder.

 

On September 8, 2023, the Company, through its wholly-owned subsidiary Verde Renewables, Inc. (“VRI”) entered into a Service and Stock Cancellation Agreement with Steven Sorhus to cancel the Services Agreement dated December 1, 2022, including the cancellation of 171,591 restricted common shares issued at $0.20 on December 31, 2022 totalling $34,318 as consideration for certain services.  The cancellation is still in process.

 

On September 8, 2023, the Company, through its wholly-owned subsidiary Verde Renewables, Inc. (“VRI”) entered into a Service and Stock Cancellation Agreement with EMGTA LLC to cancel the Services Agreement dated December 1, 2022, including the cancellation of 375,000 restricted common shares issued at $0.20 on December 31, 2022 totalling $75,000 as consideration for certain services.  The cancellation is still in process.

 

On September 12, 2023, the Company, through its wholly-owned subsidiary Verde Renewables, Inc. (“VRI”) entered into a Service and Stock Cancellation Agreement with YM Tengku Chanela Jamidah YAM Tengku Ibrahim to cancel the Services Agreement dated November 30, 2022, including the cancellation of 333,333 restricted common shares issued at $0.20 on December 31, 2022 totalling $66,667 as consideration for certain services.  The cancellation is still in process.

 

On October 23, 2023, the Company, through its wholly-owned subsidiary VRI, entered into a Services Agreement (the “Agreement”) with Donald R. Fosnacht to engage him as National Certification and Extensive BCR (Biochar Carbon Removal) Implementation Specialist to develop and implement a comprehensive strategy to obtain national and regional certification and endorsement for carbon net-negative construction products with high biochar content, encompassing asphalt, concrete, and soil stabilization as designated in the Agreement. Under the Agreement, the Company will pay Donald R. Fosnacht by the issuance of 1,000,000 shares of the Company’s restricted common stock, par value $0.001 per share (the “Common Stock”) on or before January 31, 2024. The term of the Agreement will remain effective until December 31, 2025 and both parties may renew the agreement or enter into a new agreement as may be mutually agreed on terms to be separately negotiated. To date, the shares remain to be issued.

 

 
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Table of Contents

    

On November 22, 2023, the Company issued a total of 14,931,624 restricted Common Shares comprising 11,538,461 restricted Common Shares for $1,050,000 at $0.091 per share to five non-US shareholders, 100,000 restricted Common Shares for $10,000 at $0.10 per share to one non-US shareholder, 1,943,163 restricted Common Shares for $176,828 at $0.091 per share to ten US shareholders and 1,350,000 restricted Common Shares for $135,000 at $0.10 per share to nine US shareholders.

 

On December 4, 2023, the Company issued a total of 1,238,889 restricted Common Shares comprising of 850,000 restricted Common Shares for $85,000 at $0.10 per share to four US shareholders and 388,889 restricted Common Shares for $35,000 at $0.09 per share to one US shareholders.

 

Not considering the commitment to issue and cancel shares as above, there were 1,192,370,791 and 1,176,200,278 shares of common stock issued and outstanding as of December 31, 2023 and June 30, 2023 respectively.

 

The Company has no stock option plan, warrants, or other dilutive securities issued during the period.

 

NOTE 15 - INCOME TAX

 

For the six months ended December 31, 2023 and 2022, the local (“United States of America”) and foreign components incurred loss before income taxes as follows:

 

 

 

Six Months ended

December 31,

 

 

 

2023

 

 

2022

 

 

 

 

 

 

 

 

Tax jurisdiction from:

 

 

 

 

 

 

- Local (US regime)

 

$(794,892 )

 

$(3,023,344 )

- Foreign, including

 

 

 

 

 

 

 

 

British Virgin Island

 

 

30,132

 

 

 

(141,258 )

Malaysia

 

 

(305,808 )

 

 

(351,417 )

Labuan, Malaysia

 

 

(5,231 )

 

 

(653 )

 

 

 

 

 

 

 

 

 

Loss before income taxes

 

$(1,075,799 )

 

$(3,516,672 )

 

The provision for income taxes consisted of the following:

 

 

 

Six Months ended

December 31,

 

 

 

2023

 

 

2022

 

 

 

 

 

 

 

 

Current tax:

 

 

 

 

 

 

- Local

 

$-

 

 

$-

 

- Foreign

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Deferred tax

 

 

 

 

 

 

 

 

- Local

 

 

-

 

 

 

-

 

- Foreign

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Income tax expense (benefit)

 

$-

 

 

$-

 

 

The effective tax rate in the periods presented is the result of the mix of income earned in various tax jurisdictions that apply a broad range of income tax rates. The Company mainly operates in U.S.A. and Malaysia and are subject to taxes in the jurisdictions in which they operate, as follows:

 

United States of America

 

VRDR, VRI and VLI are subject to the tax laws of United States of America. The U.S. corporate income tax rate is 21% effective January 1, 2018. The Company’s policy is to recognize accrued interest and penalties related to unrecognized tax benefits in its income tax provision. The Company has not accrued or paid interest or penalties which were not material to its results of operations for the periods presented.

 

The Company has provided for a full valuation allowance against the deferred tax assets of $1,202,226 on the expected future tax benefits from the net operating loss (“NOL”) carry forwards of $5,724,886 as the management believes it is more likely than not that these assets will not be realized in the future.

 

Net Operating Losses (NOLs) generated prior to January 1, 2018 are able to be carried forward up to twenty subsequent years. Any NOLs created for tax years subsequent to that may be carried forward indefinitely.  However, any NOLs arising from tax years ending after December 31, 2020, can only be used to offset up to 80% of taxable income.

 

For the six months ended December 31, 2023 and 2022, there were no operating income under US tax regime.

 

 
F-23

Table of Contents

    

BVI

 

Under the current BVI law, VRAP is not subject to tax on income.

 

Labuan

 

Under the current laws of the Labuan applicable to BRL, income derived from an intellectual property right is subject to tax under the Malaysian Income Tax Act 1967 (ITA) at 24% of its chargeable income. However, BRL is not subject to income tax, given that it was a net loss position during the current period presented.  The losses are presently not able to be carried forward to offset against its future operation income as income generating activities have not yet been undertaken.

 

Malaysia

 

The Company’s subsidiaries, Verde Malaysia and Wision are registered in Malaysia and are subject to the Malaysia corporate income tax at a standard income tax rate of 24% on chargeable income.

 

The operation in Malaysia incurred $679,862 of cumulative net operating losses as of December 31, 2023, which can be carried forward to offset future taxable income. The net operating loss are allowed to be carried forward up to a maximum of ten (10) years of assessments under the current tax legislation in Malaysia. The Company has provided for a full valuation allowance against the deferred tax assets of $163,167 on the expected future tax benefits from the net operating loss (“NOL”) carryforwards as the management believes it is more likely than not that these assets will not be realized in the future.

 

 

 

Six Months ended

December 31,

 

 

 

2023

 

 

2022

 

 

 

 

 

 

 

 

Loss before income taxes

 

$(305,808 )

 

$(351,417 )

Statutory income tax rate

 

 

24%

 

 

24%

Income tax expense at statutory rate

 

 

(73,394 )

 

 

(84,340 )

Non-deductible items

 

 

26,122

 

 

 

6,178

 

Operating losses unable to carried forward

 

 

1,255

 

 

 

157

 

Valuation allowance

 

 

46,017

 

 

 

78,005

 

Income tax expense

 

$-

 

 

$-

 

 

The following table sets forth the significant components of the deferred tax assets of the Company:

 

 

 

 December 31,

2023

 

 

June 30,

2023

 

 

 

 

 

 

 

 

Deferred tax assets:

 

 

 

 

 

 

Net operating loss carryforwards, from

 

 

 

 

 

 

US tax regime

 

$1,202,226

 

 

$1,079,890

 

Malaysia tax regime

 

 

163,167

 

 

 

113,516

 

Less: valuation allowance

 

 

(1,365,393 )

 

 

(1,193,406 )

Deferred tax assets, net

 

$-

 

 

$-

 

 

The Company has recorded valuation allowances for certain tax attribute carry forwards and other deferred tax assets due to uncertainty that exists regarding future realizability. If in the future the Company believes that it is more likely than not that these deferred tax benefits will be realized, the majority of the valuation allowances will be reversed in the unaudited condensed consolidated statement of operations. The Company did not have uncertainty tax positions or events leading to uncertainty tax position within the next 12 months.

 

 
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NOTE 16 - RELATED PARTY TRANSACTIONS

 

 

 

Six Months ended

 

 

 

December 31,

 

 

 

2023

 

 

2022

 

Related party transactions:

 

 

 

 

 

 

Sales to:

 

 

 

 

 

 

Borneo Eco Food Sdn Bhd (#1)

 

$-

 

 

$12,181

 

Rental income:

 

 

 

 

 

 

 

 

Mr. Jack Wong (#3)

 

$30,000

 

 

$19,121

 

Site expenses:

 

 

 

 

 

 

 

 

Warisan Khidmat Sdn Bhd (#4)

 

$-

 

 

$7,963

 

Professional services provided by:

 

 

 

 

 

 

 

 

Warisan Khidmat Sdn Bhd (#4)

 

$9,035

 

 

$9,283

 

Interest expense payable to:

 

 

 

 

 

 

 

 

BOC (#2)

 

$6,805

 

 

$-

 

 

Related party balances:

 

 

 

 

As of

 

 

 

December 31,

2023

 

 

June 30,

2023

 

Advanced from related parties

 

 

 

 

 

 

BOC (#2)

 

$123,904

 

 

$117,125

 

Borneo Oil Berhad (“BOB”) (#1)

 

$70,556

 

 

$10,711

 

Borneo Energy Sdn Bhd (#1)

 

$15,010

 

 

$14,770

 

Taipan International Limited (#5)

 

$119,153

 

 

$119,153

 

Victoria Capital Sdn Bhd (#6)

 

$116,032

 

 

$107,970

 

 

 

 

 

 

 

 

 

 

Trade payables

 

 

 

 

 

 

 

 

Warisan Khidmat Sdn Bhd (#4)

 

$4,576

 

 

$-

 

BOC (#2)

 

$475

 

 

$467

 

J. Ambrose & Partners (#7)

 

$736

 

 

$724

 

 

 

 

 

 

 

 

 

 

Advanced to related party

 

 

 

 

 

 

 

 

Vetrolysis Limited (#8)

 

$100

 

 

$100

 

 

 

 

 

 

 

 

 

 

Trade receivable

 

 

 

 

 

 

 

 

J. Ambrose & Partners (#7)

 

$257

 

 

$253

 

 

 

 

 

 

 

 

 

 

Other payables

 

 

 

 

 

 

 

 

J. Ambrose & Partners (#7)

 

$49,426

 

 

$48,650

 

SB Supplies & Logistic Sdn Bhd (#1)

 

$5,230

 

 

$5,998

 

 

 

 

 

 

 

 

 

 

Promissory notes issued to related party

 

 

 

 

 

 

 

 

BOC (#2)

 

$

 537,280

 

 

$

 487,790

 

 

(#1) Borneo Oil Berhad (“BOB”) is ultimate holding company of Borneo Eco Food Sdn. Bhd., Borneo Energy Sdn Bhd and SB Supplies & Logistic Sdn Bhd, and held 13.2% of the Company’s issued and outstanding common stock as of December 31, 2023.

(#2) Borneo Oil Corporation Sdn Bhd (“BOC”) is a wholly owned subsidiary of Borneo Oil Berhad (“BOB”) (holding 13.2% of the Company’s issued and outstanding common stock as of December 31, 2023). The advances are related to ordinary business transactions and bear no interest or collateral, repayable and renewable under normal business advancement terms.

(#3) Mr. Jack Wong is the Chief Executive of the Company effective October 1, 2022. By resolution of the Board of Directors, Mr. Jack Wong was appointed Director of the Company for a one (1) year term, effective March 30, 2023.

(#4) Warisan Khidmat Sdn. Bhd. is a company whose shareholdings is entirely held by a Director of Verde Malaysia.

(#5) Taipan International Limited is one of the shareholders of the Company, and held 32.9% of the Company’s issued and outstanding Common Stock as of December 31, 2023.

(#6) Victoria Capital Sdn. Bhd. is one of the shareholders of the Company and held 0.2% of the Company’s issued and outstanding Common Stock as of December 31, 2023.

(#7) Datuk Joseph Lee Yok Min, an indirect significant shareholder, is a partner of J. Ambrose & Partners. The advances received are related to ordinary business transactions and bear no interest or collateral, repayable and renewable under normal business advancement terms.  Mr. Joseph Ambrose Lee who was also appointed as a Director and Chairman of the Board of Directors of the Company effective January 23, 2024, is also the Managing Director of BOB.

(#8) Encik Anuar bin Ismail, an indirect significant shareholder, is a director of Vetrolysis Limited.

 

Apart from the transactions and balances detailed elsewhere in these accompanying unaudited condensed consolidated financial statements, the Company has no other significant or material related party transactions during the periods presented.

 

 
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NOTE 17 - CONCENTRATIONS OF RISK

 

The Company is exposed to the following concentrations of risk:

 

(a) Major customers

 

For the three and six months ended December 31, 2023 and 2022, there was no single customer whose revenue exceeded 10% of the revenue.

 

(b) Economic and political risk

 

The Company’s major operations are conducted in U.S.A. and Malaysia. Accordingly, the political, economic, and legal environments in U.S.A. and Malaysia, as well as the general state of U.S.A. and Malaysia’s economy, as well as globally, may influence the Company’s business, financial condition, and results of operations.

 

(c) Exchange rate risk

 

The Company cannot guarantee that the current exchange rate will remain steady; therefore there is a possibility that the Company could post the same amount of profit for two comparable periods and because of the fluctuating exchange rate actually post higher or lower profit depending on exchange rate of HKD converted to US$ on that date. The exchange rate could fluctuate depending on changes in political and economic environments without notice.

 

(d)Liquidity risk

 

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company’s policy is to ensure that it has sufficient cash to meet its liabilities when they become due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation. A key risk in managing liquidity is the degree of uncertainty in the cash flow projections. If future cash flows are fairly uncertain, the liquidity risk increases.

 

NOTE 18 - PENSION COSTS

 

The Company is required to make contribution to their employees under a government-mandated defined contribution pension scheme for its eligible full-times employees in Malaysia. The Company is required to contribute a specified percentage of the participants’ relevant income based on their ages and wages level. During the six months ended December 31, 2023, and 2022, $8,869 and $14,909 contributions were made accordingly.

 

NOTE 19 - COMMITMENTS AND CONTINGENCIES

 

Future commitments with regards to repayment of Promissory Note and lease liabilities are disclosed in Notes 12 and 13 respectively.

 

Apart from the above, as of December 31, 2023, the Company had the following capital commitment:

 

a) commitment to issue restricted Common Shares to the following service provider on or before January 31, 2024 for services to be performed pursuant to the Service Agreements signed as disclosed in Note 14:

 

 

 

Number of shares

to be issued

 

 

 

 

 

Donald R. Fosnacht

 

 

1,000,000

 

 

 

 

1,000,000

 

 

b) commitment to repay Promissory Notes with the face value (principal) amount of $675,888, bearing 2% coupon interest by May 12, 2025 in cash or by issuance of the Company’s restricted Common Shares priced at $0.07 per share as disclosed in Note 12.

 

c) commitment to repay lease liabilities amounting to $823,997 as disclosed in Note 13.

 

d) commitment to cancel 879,924 restricted common shares as disclosed in Note 14.

 

e) commitment to issue 555,555 restricted common shares pursuant to private placement at US$0.090 per share to one US shareholder as disclosed in Note 14.

 

As of December 31, 2023, the Company has no material contingencies.

 

NOTE 20 - SUBSEQUENT EVENTS

 

In accordance with ASC Topic 855, “Subsequent Events”, which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before unaudited condensed consolidated financial statements are issued, the Company has evaluated all events or transactions that occurred after December 31, 2023, up through the date the Company issued the audited unaudited condensed consolidated financial statements.

 

On January 23, 2024, Jack Wong, CEO and Director of the Company, stepped down from his position as Chairman of the Board of Directors (the “Board”) of the Company.

 

On January 23, 2024, by resolution of the Board of the Company, Joseph Ambrose Lee was appointed Director and Chairman of the Board for a one (1) year term, and Tay Hong Choon was appointed Special Advisor to the Board for a one (1) year term.

 

On January 23, 2024, by resolution of the Board of the Company, approved an amendment to the Bylaws of the Company (the "Amendment"). The Amendment, which was adopted effective as of January 23, 2024, increases the number of members of the Board from three (3) to seven (7).

 

On February 6, 2024, by resolution of the Board of the Company, Joseph Ambrose Lee, Jack Wong, Balakrishnan B.S. Muthu, Soo Yau Cho and Tay Hong Choon were appointed as members of the newly formed Management Committee of the Board, to oversee and manage the operations of the Company. The Management Committee shall be responsible for making decisions pertaining to the overall operations of the Company and shall report directly to the Board.

 

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

 

Forward-Looking Statements

 

Except for historical information, this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements involve risks and uncertainties, including, among other things, statements regarding our business strategy, future revenues and anticipated costs and expenses. Such forward-looking statements include, among others, those statements including the words “expects,” “anticipates,” “intends,” “believes” and similar language. Our actual results may differ significantly from those projected in the forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those discussed herein as well as in the “Description of Business – Risk Factors” section in our Annual Report on Form 10-K, as filed on October 16, 2023. You should carefully review the risks described in our Annual Report and in other documents we file from time to time with the Securities and Exchange Commission. You are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this report. We undertake no obligation to publicly release any revisions to the forward-looking statements or reflect events or circumstances after the date of this document.

 

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

 

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

 

Overview

 

Verde Resources, Inc. (the “Company” or “VRDR”) was incorporated in the State of Nevada on April 22, 2010.

 

The Company currently is engaged in the production and distribution of renewable commodities, distribution of THC-free cannabinoid (CBD) products, and real property holding. However, the Company has been undergoing a restructuring exercise to shift its focus towards renewable energy and sustainable development with the world faced with challenges of climate change and environmental dehydration. The Company had announced the disposition of the mining business through the sale of the entire issued and paid-up share capital of CSB on March 13, 2023. The disposition of CSB was completed on April 20, 2023.

 

The Company conducts business operations in La Belle, Missouri, U.S.A., through Verde Renewables, Inc. (“VRI”), a company incorporated in the State of Missouri, U.S.A., and an indirect wholly-owned subsidiary Verde Estates, LLC (“VEL”), a Missouri limited liability company. We currently operate in the production and distribution of renewable commodities through Verde Resources (Malaysia) Sdn. Bhd., a Malaysian corporation. We intend to develop operations in the distribution of THC-free cannabinoid products through Verde Life Inc., an Oregon corporation. The Company is also considering investment opportunities in other non-mining areas including the bioenergy industry and the food & beverage sector.

 

The Company took a significant strategic shift by divesting its mining operations in Malaysia to concentrate exclusively on advancing its green and climate focused initiatives. Our overarching ambition is to emerge as a prominent leader in delivering net-zero solutions while pioneering efforts in decarbonization and regenerative environmental projects. The Company has since undergone a restructuring exercise to focus on renewable energy and sustainability development with the world faced with challenges of climate change and environmental dehydration. The Company is working alongside lawmakers that will assist in shaping future climate bills, where increased standards and beneficial solutions in agriculture can be implemented to help aid with further political legislation towards climate mitigation and adaptation. We will engage key stakeholders to develop licensed and accountable measures that will assist in shaping and defining a sustainable credit exchange for the commercial market.

 

The Company announced a momentous partnership with Green Carbon Industries (“GCI”), securing exclusive access to their invaluable intellectual property (IP) rights. This collaboration lays the foundation for revolutionary infrastructure development, marked by innovative biochar asphalt showcase projects within the United States. Biochar-asphalt, an innovative, eco-friendly, high performance, and cost-saving alternative to conventional high CO2 footprint asphalt production and installation, holds immense promise in addressing environmental concerns. Through the integration and extensive utilization of biochar – a carbon-rich material derived from organic waste, the Company aims to reduce carbon emissions and the carbon footprint of infrastructure projects. The American showcase projects will serve as compelling evidence of the technology’s capability in carbon sequestration, efficiently mitigating greenhouse gas, enhancing durability and cost efficiencies, all while simultaneously addressing pressing environmental challenges.

 

Puro.earth, the crediting platform for durable carbon removal, has officially registered the Company as a Carbon Removal Credit supplier as part of its Accelerate program. This partnership was formalized through a platform agreement signed in April 2023. The Company’s endeavors are poised to unlock revenue opportunities by generating Carbon Removal Credits (CORCs). This critical step incentivizes the broader adoption of climate technologies and enables the Company to supply these credits to companies seeking to offset their carbon footprint in pursuit of net-zero objectives. Simultaneously, this approach creates an additional and substantial revenue stream for the Company.

 

 
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Table of Contents

   

The following diagram illustrates our current corporate structure:

 

vrdr_10qimg3.jpg

 

 

On August 7, 2023, the Company entered into a Memorandum of Understanding (the “MOU”) with Andre van Zyl (“AvZ”) and Green Carbon Industries Group of Companies (“GCI”), headquartered in Western Australia, to actively pursue and put in place a mutually agreeable and fully funded project venture in North America, through the Company to securely ring-fence, support, preserve and implement the existing and related Intellectual Property of both parties and their respective subsidiaries/representatives, as well as to fund and support ongoing and future Research and Developments. The intended project venture will also be responsible to establish a phased implementation plan for modified, scaled Biochar and Construction Char operations, that will be paired with new Cold Bio Emulsion and Cold Bio Mix technology plant production operations to be established for the production of low CO2 footprint construction material in the territory of North America. Upon successful implementation of the project venture, there will be further option to expand operations throughout the continents of South America’s, APAC, Europe, and Africa. This technology makes possible high duty road base and road wearing course installations with superior performance, utilizing more cost-effective local soils and gravels with extended life of road performance, and substantially lower maintenance activities and cost.

 

On September 12, 2023, Jack Wong stepped down from his position as President of the Company, but remains as Chief Executive Office of the Company.

 

On September 12, 2023, the Board of Directors of the Company appointed Jack Wong, CEO and Director of the Company, as Chairman of the Board of Directors. Subsequently, on January 23, 2024, Jack Wong stepped down from his position as Chairman of the Board of Directors of the Company, and Joseph Ambrose Lee was appointed Director and Chairman of the Board for a one year term, and Tay Hong Choon was appointed Special Advisor to the Board for a one year term.

 

On October 1, 2023, the Company appointed Eric Bava and Andre van Zyl as Chief Operating Officer and Chief Technology Officer respectively to drive the Company’s climate-tech innovation.

 

On October 23, 2023, the Company, through its wholly-owned subsidiary VRI, entered into a Services Agreement (the “Agreement”) with Donald R. Fosnacht to engage him as National Certification and Extensive BCR (Biochar Carbon Removal) Implementation Specialist to develop and implement a comprehensive strategy to obtain national and regional certification and endorsement for carbon net-negative construction products with high biochar content, encompassing asphalt, concrete, and soil stabilization as designated in the Agreement. Under the Agreement, the Company will pay Donald R. Fosnacht by the issuance of 1,000,000 shares of the Company’s restricted common stock, par value $0.001 per share (the “Common Stock”) on or before January 31, 2024. The term of the Agreement will remain effective until December 31, 2025 and both parties may renew the agreement or enter into a new agreement as may be mutually agreed on terms to be separately negotiated.  The shares remain to be issued to date.

 

 
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Table of Contents

   

Stage of Operation

 

The Company took a significant strategic shift by divesting its mining operations in Malaysia to concentrate exclusively on advancing its green and climate-focused initiatives. Our overarching ambition is to emerge as a prominent leader in delivering net-zero solutions while pioneering efforts in decarbonization and regenerative environmental projects. The Company has since undergone a restructuring exercise to focus on renewable energy and sustainability development with the world faced with challenges of climate change and environmental dehydration. The Company has completed the disposition of the mining business via the sale of the entire issued and paid-up share capital of CSB on April 20, 2023.

 

The Company has diversified into the green industry with its acquisition of Bio Resources Ltd (“BRL”), the beneficial and/or registered proprietor of the intellectual property known as “Catalytic Biofraction Process”, which is a slow pyrolysis process using a proprietary catalyst to depolymerise palm biomass wastes (empty fruit bunches or palm kernel shells) in temperature range of 350 degree Celsius to 500 degree Celsius to yield commercially valuable bio products: bio-oil, wood vinegar (pyroligneous acid), biochar and bio-syngas. The intellectual property is a second-generation pyrolysis process where non-food feedstock like the palm biomass wastes is used as feedstock.

 

The Company’s BioFraction technology produces high-quality raw biochar using recycled organic biomass from the dairy, palm, and other natural resource industries. The Company also produces activated biochar, which undergoes further processing combined with natural enzymes, minerals, and microbial additives.

 

Biochar can be the key component towards rebuilding and enhancing coral life and marine ecosystems throughout coastal regions. The Company will explore developing blue carbon technologies using biochar as an additive within carbon-negative cement mixtures that can be molded into a variety of useful marine structures and environments. We have begun research and development of various biochar cement compound mixtures, such as raw atmospheric injected CO2, precast eco-friendly cement. We will engage international and regional industry experts, institutes and educational communities, focused towards developing a unique line of blue carbon capturing products for coastal aquatic and marine environments.

 

The Company is working alongside lawmakers that will assist in shaping future climate bills, where increased standards and beneficial solutions in agriculture can be implemented to help aid with further political legislation towards climate mitigation and adaptation. We will engage key stakeholders to develop licensed and accountable measures that will assist in shaping and defining a sustainable credit exchange for the commercial market.

 

On August 7, 2023, the Company announced a momentous partnership with Green Carbon Industries (“GCI”), securing exclusive access to their invaluable intellectual property (IP) rights. This groundbreaking collaboration lays the foundation for revolutionary infrastructure development, marked by innovative biochar asphalt showcase projects within the United States. These projects complement GCI’s established successes in the Asia Pacific (APAC), Middle East, and Africa regions. Our shared commitment revolves around validating the concept’s feasibility and scalability for carbon sequestration, thereby transforming global infrastructure development, and proactively addressing pressing environmental challenges.

 

Biochar-asphalt, an innovative, eco-friendly, high performance, and cost-saving alternative to conventional high CO2 footprint asphalt production and installation, holds immense promise in addressing environmental concerns. Through the integration and extensive utilization of biochar – a carbon-rich material derived from organic waste, the Company aims to reduce carbon emissions and the carbon footprint of infrastructure projects. The American showcase projects will serve as compelling evidence of the technology’s capability in carbon sequestration, efficiently mitigating greenhouse gas, enhancing durability and cost efficiencies, all while simultaneously addressing pressing environmental challenges.

 

In early 2023, Puro.earth, the world’s foremost crediting platform for durable carbon removal, officially registered the Company as a Carbon Removal Credit supplier as part of its Accelerate program. This partnership was formalized through a platform agreement signed in April 2023. It is worth noting that Puro.earth was acquired by Nasdaq in June 2021.

 

Furthermore, the Company’s endeavors are poised to unlock revenue opportunities by generating Carbon Removal Credits (CORCs). This critical step incentivizes the broader adoption of climate technologies and enables the Company to supply these credits to companies seeking to offset their carbon footprint in pursuit of net-zero objectives. Simultaneously, this approach creates an additional and substantial revenue stream for the Company.

 

On August 30, 2023, the Company achieved a significant milestone by conducting the first-ever biochar-asphalt installation in the United States, just outside of Chicago, Illinois. Subsequently, we replicated this success at our own facility in La Belle, Missouri. On September 25, 2023, upon the invitation of the City of Gramercy, located near New Orleans, Louisiana, the Company executed another biochar-asphalt installation. As a testament to our efforts, we have already received several Letters of Intent (LOIs), and we are confident that our transition from mining to climate-tech and the green economy will yield tremendous results for the company in the years ahead.

 

Apart from the green industry, the Company is also working on a partnership with MRX Technologies, a market leader in commercial extraction systems for cannabis and hemp. The partnership includes an agreement for VRAP to white-label THC-free CBD products from MRX Technologies.

 

 
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Table of Contents

    

Results of Operations

 

For the three months ended December 31, 2023 and 2022:

 

The following table sets forth selected financial information from our statements of comprehensive loss for the three months ended December 31, 2023 and 2022:

 

 

 

December 31, 2023

 

 

 December 31, 2022

 

 

Change

 

 

 

Amount

 

 

Amount

 

 

%

 

 

 

(Unaudited)

 

 

(Unaudited)

 

 

 

Revenue

 

$23,396

 

 

$81,140

 

 

 

(71.2)%

Cost of revenue

 

$(68,845 )

 

$(31,656 )

 

 

117.5%

Gross (loss) profit

 

$(45,449 )

 

$49,484

 

 

 

(191.8)%

Operating expenses

 

$(523,588

)

 

$(862,080

)

 

 

(39.3)%

Interest expense

 

$(43,717

)

 

$(1,349,548

)

 

 

(96.8)%

Other income, net

 

$86,416

 

 

$1,878

 

 

 

4,501.5%

NET LOSS

 

$(526,338 )

 

 

(2,160,266 )

 

 

(75.6)%

 

The average rate of MYR : USD for three months ended December 31, 2023 and December 31, 2022 was 0.2141 and 0.2207 respectively.

 

Revenue

 

The revenue is derived from the rental income for the current three months period. We have generated $23,396 and $81,140 revenue for the three months ended December 31, 2023, and 2022, respectively. Revenue decreased primarily due to the non-generation of revenue from compost spreading and distribution of renewable commodities, which earned a higher margin in the current period,  Accordingly, a gross loss of $45,449 compared to a gross profit $49,484 was recorded for the three months ended December 31, 2023, and 2022 respectively.

 

Cost of revenue

 

We incurred cost of revenue of $68,845 and $31,656 in the production and distribution of renewable commodities during the three months ended December 31, 2023, and 2022, respectively.

 

Operating expense

 

Operating expenses comprised mainly of salaries, office costs, legal and professional fees, consultancy fee and travelling expenses. We have incurred $523,588 and $862,080 in operating expenses through December 31, 2023, and 2022. Operating expenses decreased by 39.3%, or $338,492, primarily due to decrease of consultancy fee for the three months ended December 31, 2023 and operating expense contributed by CSB which was disposed on April 20, 2023.

 

Interest expense

 

The Company recorded interest expense of $28,745 and $1,344,745 on the promissory notes for the three months ended December 31, 2023, and 2022, respectively. Lease interest expenses amounted to $12,490 and $4,803 for the three months ended December 31, 2023, and 2022, respectively. Bank loan interest amounted to $2,482 and $0 for the three months ended December 31, 2023, and 2022, respectively.

 

The decrease in interest expenses is mainly due to conversion of promissory notes (“PN”) with a principal amount of $20,355,000 on December 9, 2022, and accordingly no further interest charges recorded with regards to the PN thereafter.  The charge in the current period is in respect of a new PN issued of $675,888.

 

Other income (expense), net

 

We have other income of $86,416 and $1,878 for the three months ended December 31, 2023, and 2022. The increase in other income mainly due to unrealized foreign exchange gain of $81,864.

 

Net loss

 

As a result of the above factors, the Company incurred a net loss of $526,338 and $2,160,266 for the three months ended December 31, 2023 and 2022, respectively.

 

 
7

Table of Contents

  

For the six months ended December 31, 2023 and 2022.

 

The following table sets forth selected financial information from our statements of comprehensive loss for the six months ended December 31, 2023 and 2022:

 

 

 

December 31, 2023

 

 

 December 31, 2022

 

 

Change

 

 

 

Amount

 

 

Amount

 

 

%

 

 

 

(Unaudited)

 

 

(Unaudited)

 

 

 

Revenue

 

$41,874

 

 

$107,452

 

 

 

(61.0)%

Cost of revenue

 

$(139,361 )

 

$(79,595 )

 

 

75.1%

Gross (loss) profit

 

$(97,487 )

 

$27,857

 

 

 

(450.0)%

Operating expenses

 

$(980,182

)

 

$(1,672,522

)

 

 

(41.4)%

Interest expense

 

$(84,923

)

 

$(1,879,660

)

 

 

(95.5)%

Other income, net

 

$86,793

 

 

$7,653

 

 

 

1,034.1%

NET LOSS

 

$(1,075,799 )

 

 

(3,516,672 )

 

 

(69.4)%

 

The average rate of MYR : USD for six months ended December 31, 2023 and December 31, 2022 was 0.2151 and 0.2210 respectively.

 

Revenue

 

The revenue is derived from the rental income, compost spreading and distribution of renewable commodities. We have generated $41,874 and $107,452 revenue for the six months ended December 31, 2023, and 2022, respectively. Revenue decreased primarily due to the non-generation of revenue from compost spreading and distribution of renewable commodities, which earned higher margins. Accordingly, a gross loss of $97,487 compared to a gross profit of $27,857 was recorded for the six months ended December 31, 2023, and 2022.

 

Cost of revenue

 

We incurred cost of revenue of $139,361 and $79,595 in the production and distribution of renewable commodities during the six months ended December 31, 2023, and 2022, respectively.

 

Operating expense

 

Operating expenses comprised mainly of salaries, office costs, legal and professional fees, consultancy fee and travelling expenses. We have incurred $980,182 and $1,672,522 in operating expenses through December 31, 2023, and 2022. Operating expenses decreased by 41.4%, or $692,340, primarily due to decrease of consultancy fee for the six months ended December 31, 2023 and operating expense contributed by CSB which was disposed on April 20, 2023.

 

Interest expense

 

The Company recorded interest expense of $56,295 and $1,870,972 on the promissory notes for the six months ended December 31, 2023, and 2022, respectively. Lease interest expenses amounted to $23,925 and $8,688 for the six months ended December 31, 2023, and 2022, respectively. Bank loan interest amounted to $4,703 and $0 for the six months ended December 31, 2023, and 2022, respectively.

 

The decrease in interest expense is mainly due to conversion of promissory notes with a principal amount of $20,355,000 on December 9, 2022 and accordingly no further interest charges recorded with regards to the PN thereafter.  The charge in the current period is in respect of a new PN issued of $675,888.

 

Other income (expense), net

 

We have other income of $86,793 and $7,653 for the six months ended December 31, 2023, and 2022. The increase in other income mainly due to unrealized foreign exchange gain of $81,864.

 

Net loss

 

As a result of the above factors, the Company incurred a net loss of $1,075,799 and $3,516,672 for the six months ended December 31, 2023 and 2022, respectively.

 

 
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Table of Contents

    

Liquidity and Capital Resources

 

The following summarizes the key component of our cash flows for the six months ended December 31, 2023 and 2022.

 

Cash Flow Date

 

December 31,

2023

 

 

December 31,

2022

 

 

 

 

 

 

 

 

Net Cash (Used in) operating activities

 

$(825,634 )

 

$(990,787 )

Net Cash (Used in) investing activities

 

 

(1,403 )

 

 

(445,326 )

Net Cash Provided by financing activities

 

 

1,641,441

 

 

 

1,391,098

 

Effect of exchange rate fluctuation on cash and cash equivalents

 

 

(86,533 )

 

 

(10,342 )

Net increase (decrease) in cash and cash equivalents

 

 

727,871

 

 

 

(55,357)

Cash and cash equivalents, beginning of period

 

 

200,409

 

 

 

418,917

 

Cash and cash equivalents, ending of period

 

$928,280

 

 

$363,560

 

 

Net Cash (Used in) Operating Activities

 

Cash used in operating activities reflects net loss adjusted for certain non-cash items, including depreciation expense, amortization of right of use assets and stock-based compensation, impairment on receivables and the effects of changes in operating assets and liabilities. The decrease in cash used in operating activities for the six months ended December 31, 2023, as compared to 2022 was primarily due to lower net loss adjusted for depreciation expenses and the increase of inventories.

 

In the operation analysis, the net cash used in operating activities decreased from $990,787 to $825,634.  The operation loss of $1,075,799 was partially offset by the noncash expenses such as $207,586 in depreciation, $51,429 in amortization, $44,274 in share-based compensation, $49,490 in interest expenses on promissory notes, $23,925 in lease interest expense, $32,186 in impairment of receivables and $21,512 from deposit on acquisition of subsidiary written off. In the operating assets and liabilities, the net increase in current assets resulted from an increase of other receivables, deposits and prepayments of $33,526, an increase in inventories held of $132,718 and a decrease in accounts receivables of $735.  The net increase in current liabilities resulted from $19,577 increase in advances from related parties, $39,864 decrease in accrued liabilities and other payables and $21,218 increase in accounts payable. The final result of the cash flow used in operating activities was $825,634.

 

Net Cash (Used in) Investing Activities

 

The net cash used in investing activities resulted from purchase of property, plant and equipment of $1,403 for the six months ended December 31, 2023.

 

Net Cash Provided by Financing Activities

 

The net cash provided by financing activities of $1,641,441 resulted from proceeds from shares issued of $1,541,828, advances from related parties of $55,375 and advances from other payables of $164,359 set off partially by repayment of bank loan of $29,561, repayments to lease liabilities and related interests for the six months ended December 31, 2023, of $66,635 and $23,925 respectively.

 

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

 

Working Capital

 

As of December 31, 2023 and June 30, 2023, we had cash and cash equivalent of $928,280 and $200,409, respectively. As of December 31, 2023 and June 30, 2023, we have incurred accumulated operating losses of $11,368,229 and $10,292,430, respectively.

 

Off-Balance Sheet Arrangements

 

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

 

 
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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

 

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

 

Item 4. Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

Under the supervision and with the participation of our senior management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this Quarterly Report on Form 10-Q (the “Evaluation Date”). During the 2023, the Company has been undertaking tremendous changes and expansion which rendered the management to re-consider the availability of more management talents and professional staff to meet the enlargement in operation under the coming acquisition and expansion move. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded as of the Evaluation Date that our disclosure controls and procedures were not effective such that the information relating to us required to be disclosed in our Securities and Exchange Commission (“SEC”) reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure. In the meantime, management has appointed external consultants to minimize the risk and ascertain compliance with requirements.

 

As of December 31, 2023 management assessed the effectiveness of our internal control over financial reporting based on the criteria for effective internal control over financial reporting established in Internal Control--Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and SEC guidance on conducting such assessments. During the 2023, the Company has been undertaking tremendous enlargement and expansion which rendered the management to re-consider the available of more management talents and professional staff to meet the enlargement in operation during and after the coming acquisition and expansion move. Based on this consideration and that evaluation, the current management concluded that, during the period covered by this report, such internal controls and procedures were not effective to detect the inappropriate application of US GAAP rules as more fully described below. This was due to deficiencies that existed in the design or operation of our internal controls over financial reporting that adversely affected our internal controls and that may be considered to be material weaknesses. In the meantime, management has appointed external consultants to minimize the risk and ascertain compliance with requirements.

 

The matters involving internal controls and procedures that our management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board were: (1) lack of a functioning audit committee, (2) lack of a majority of outside directors on our board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; (3) inadequate segregation of duties consistent with control objectives; and (4) management is dominated by four individuals without adequate compensating controls. The aforementioned material weaknesses were identified by our Chief Executive and Financial Officers in connection with the review of our financial statements as of December 31, 2023.

 

Management believes that the material weaknesses set forth above did not have an immediate negative effect on our financial results because of our small size of operation. However, management believes that the lack of a functioning audit committee and the lack of a majority of outside directors on our board of directors results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements if the Company were growing substantially after the expansion move was materialized.

 

The senior management understands the need to ensure proper documentation of any material contracts and business operations through timely transmission of information and communications within the organization. The management also conducts regular consultation with our legal counsel to ensure compliance with SEC’s disclosure requirements.

 

Changes in Internal Controls

 

There have been no changes in our internal controls over financial reporting identified in connection with the evaluation required by paragraph (d) of Securities Exchange Act Rule 13a-15 or Rule 15d-15 that occurred in the six months ended December 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 
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PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

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

 

Item 1A. Risk Factors.

 

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

 

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

 

N/A.

 

Item 3. Defaults Upon Senior Securities.

 

None.

 

Item 4. Mine Safety Disclosure.

 

N/A.

 

Item 5. Other Information.

 

None.

 

 
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Item 6. Exhibits.

 

The following exhibits are included as part of this report:

 

Exhibit No.

 

Description

31.1

 

Rule 13a-14(a) / 15d-14(a) Certification of Chief Executive Officer.

31.2

 

Rule 13a-14(a) / 15d-14(a) Certification of Chief Financial Officer.

32.1

 

Rule 1350 Certifications of Chief Executive Officer and Chief Financial Officer.

______________ 

101*

 

* The following financial information from Verde Resources, Inc.’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2023, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Balance Sheets as of December 31, 2023, and June 30, 2023, (ii) Condensed Statements of Operations for the three and six months ended December 31, 2023 and 2022, (iii) Condensed Statements of Cash Flows for the six months ended December 31, 2023 and 2022, 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: February 21, 2024

By:

/s/ Jack Wong

 

 

 

Jack Wong

 

 

 

Chief Executive Officer

 

 

 

(Principal Executive Officer)

 

 

 
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