(The accompanying notes are an integral part of these consolidated financial statements)
(The accompanying notes are an integral part of these consolidated financial statements)
(The accompanying notes are an integral part of these consolidated financial statements)
Notes to the Consolidated Financial Statements
(Expressed in US dollars)
1.Nature of Operations and Continuance of Business
Verde Bio Holdings Inc. (formerly Appiphany Technologies Holdings Corp.) (“The Company”) was incorporated in the State of Nevada on February 24, 2010. On May 1, 2010, the Company entered into a share exchange agreement with Appiphany Technologies Corporation (“ATC”) to acquire all of the outstanding common shares of ATC in exchange for 1,500,000 common shares of the Company. As the acquisition involved companies under common control, the acquisition was accounted for in accordance with ASC 805-50, Business Combinations – Related Issues, and the consolidated financial statements reflect the accounts of the Company and ATC since inception. On November 18, 2015, ATC was dissolved. Currently, the Company is in the business of oil and gas exploration and investment.
Going Concern
These consolidated financial statements have been prepared on a going concern basis, which implies that the Company will continue to realize its assets and discharge its liabilities in the normal course of business. As at April 30, 2020, the Company has not recognized significant revenue, has a working capital deficit of $3,134,878, and has an accumulated deficit of $7,521,745. The continuation of the Company as a going concern is dependent upon the continued financial support from its management, and its ability to identify future investment opportunities and obtain the necessary debt or equity financing, and generating profitable operations from the Company’s future operations. The Company will continue to rely on equity sales of its common shares in order to continue to fund business operations. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern for a period of one year from the date these financial statements are issued. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
The recent outbreak of the novel coronavirus COVID-19, which was declared a pandemic by the World Health Organization on March 11, 2020, has led to adverse impacts on the US and global economies, disruptions of financial markets, and created uncertainty regarding potential impacts to the Company’s operations. The extent to which the COVID-19 pandemic impacts the Company’s business, results of operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to the duration, spread, severity, and impact of the COVID-19 pandemic, the effects of the COVID-19 pandemic on the Company’s suppliers and vendors and the remedial actions and stimulus measures adopted by local and federal governments, and to what extent normal economic and operating conditions can resume. The management team is closely following the progression of COVID-19 and its potential impact on the Company. Even after the COVID-19 pandemic has subsided, the Company may experience adverse impacts to its business as a result of any economic recession or depression that has occurred or may occur in the future; therefore, the Company cannot reasonably estimate the impact at this time on our business, liquidity, capital resources and financial results.
2.Summary of Significant Accounting Policies
(a)Basis of Presentation and Principles of Consolidation
The consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”) and are expressed in U.S. dollars. The consolidated financial statements are comprised of the records of the Company and its wholly owned subsidiaries, IP Risk Control Inc., a company incorporated in the State of Nevada. All intercompany transactions have been eliminated on consolidation. The Company’s fiscal year end is April 30.
F-7
VERDE BIO HOLDINGS, INC.
(FORMERLY APPIPHANY TECHNOLOGIES HOLDINGS CORP.)
Notes to the Consolidated Financial Statements
(Expressed in US dollars)
2.Summary of Significant Accounting Policies (continued)
(b)Use of Estimates
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to the fair value and estimated useful life of long-lived assets, fair value of convertible debentures, derivative liabilities, stock-based compensation, and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
(c)Cash and cash equivalents
The Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents. As at April 30, 2020 and 2019, the Company had no items representing cash equivalents.
(d)Accounts Receivable
Accounts receivable represents amounts owed from customers for services. Amounts are presented net of the allowance for doubtful accounts, which represents the Company’s best estimate of the amount of probable credit losses in the existing accounts receivable balance. The Company determines allowance for doubtful accounts based upon historical experience and current economic conditions. The Company reviews the adequacy of its allowance for doubtful accounts on a regular basis.
(e)Basic and Diluted Net Loss per Share
The Company computes net loss per share in accordance with ASC 260, Earnings per Share. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net loss available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. As of April 30, 2020, the Company had 39,994,463 (2019 –14,502,891) potentially dilutive common shares outstanding.
(f) Fair Value Measurements
The Company measures and discloses the estimated fair value of financial assets and liabilities using the fair value hierarchy prescribed by U.S. generally accepted accounting principles. The fair value hierarchy has three levels, which are based on reliable available inputs of observable data. The hierarchy requires the use of observable market data when available. The three-level hierarchy is defined as follows:
Level 1 – quoted prices for identical instruments in active markets;
F-8
VERDE BIO HOLDINGS, INC.
(FORMERLY APPIPHANY TECHNOLOGIES HOLDINGS CORP.)
Notes to the Consolidated Financial Statements
(Expressed in US dollars)
2.Summary of Significant Accounting Policies (continued)
(f) Fair Value Measurements (continued)
Level 2 – quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model derived valuations in which significant inputs and significant value drivers are observable in active markets; and
Level 3 – fair value measurements derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
Financial instruments consist principally of cash, accounts payable and accrued liabilities, notes payable, convertible debentures and amounts due to related parties. The fair value of cash is determined based on Level 1 inputs. There were no transfers into or out of “Level 3” during the years ended April 30, 2020, and 2019. The recorded values of all other financial instruments approximate their current fair values because of their nature and respective relatively short maturity dates or durations.
Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
The following table presents assets and liabilities that are measured and recognized at fair value as of April 30, 2020 and 2019 on a recurring basis:
April 30, 2020
Description
|
|
Level 1
$
|
|
Level 2
$
|
|
Level 3
$
|
|
Total Gains and (Losses)
$
|
Derivative liability
|
|
|
-
|
|
|
-
|
|
|
(1,605,568)
|
|
|
(794,930)
|
April 30, 2019
Description
|
|
Level 1
$
|
|
Level 2
$
|
|
Level 3
$
|
|
Total Gains and (Losses)
$
|
Derivative liability
|
|
|
-
|
|
|
-
|
|
|
(1,080,589)
|
|
|
(158,657)
|
(i)Stock-based Compensation
The Company records stock-based compensation in accordance with ASC 718, Compensation – Stock Compensation and ASC 505, Equity Based Payments to Non-Employees, which requires the measurement and recognition of compensation expense based on estimated fair values for all share-based awards made to employees and directors, including stock options.
ASC 718 requires company to estimate the fair value of share-based awards on the date of grant using an option-pricing model. The Company uses the Black-Scholes option pricing model as its method of determining fair value. This model is affected by the Company’s stock price as well as assumptions regarding a number of subjective variables. These subjective variables include, but are not limited to the Company’s expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviours. The value of the portion of the award that is ultimately expected to vest is recognized as an expense in the statement of operations over the requisite service period.
All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.
F-9
VERDE BIO HOLDINGS, INC.
(FORMERLY APPIPHANY TECHNOLOGIES HOLDINGS CORP.)
Notes to the Consolidated Financial Statements
(Expressed in US dollars)
2. Summary of Significant Accounting Policies (continued)
(j)Income Taxes
The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, “Income Taxes”. The asset and liability method provides that deferred income tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carryforwards. Deferred income tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred income tax assets to the amount that is believed more likely than not to be realized.
As of April 30, 2020, and 2019, the Company did not have any amounts recorded pertaining to uncertain tax positions.
The Company files federal and provincial income tax returns in Canada and federal, state and local income tax returns in the U.S., as applicable. The Company may be subject to a reassessment of federal and provincial income taxes by Canadian tax authorities for a period of three years from the date of the original notice of assessment in respect of any particular taxation year. For Canadian and U.S. income tax returns, the open taxation years range from 2016 to 2020. In certain circumstances, the U.S. federal statute of limitations can reach beyond the standard three-year period. U.S. state statutes of limitations for income tax assessment vary from state to state. Tax authorities of Canada and U.S. have not examined any of the Company’s, or its subsidiaries’, income tax returns for the open taxation years noted above.
(k)Recent Accounting Pronouncements
In February 2016, Topic 842, Leases was issued to replace the leases requirements in Topic 840, Leases. The main difference between previous GAAP and Topic 842 is the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous GAAP. A lessee should recognize in the balance sheet a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. If a lessee makes this election, it should recognize lease expense for such leases generally on a straight-line basis over the lease term.
The accounting applied by a lessor is largely unchanged from that applied under previous GAAP. Topic 842 will be effective for annual reporting periods beginning after December 15, 2018, including interim periods within those annual periods and is to be retrospectively applied. Earlier application is permitted. The Company adopted the standard on May 1, 2019. The adoption of this standard did not have a material impact on the Company´s consolidated financial statements.
The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
3.Related Party Transactions
During the year ended April 30, 2020, the Company incurred $33,000 (2019 - $nil) in management fees to the former President and Director of the Company, which was paid in Convertible Preferred Series B shares (see Note 7).
As at April 30, 2020, the Company owed the President and Director of the Company $19,056 (2019 - $nil). The amount is non-interest bearing and due on demand.
F-10
VERDE BIO HOLDINGS, INC.
(FORMERLY APPIPHANY TECHNOLOGIES HOLDINGS CORP.)
Notes to the Consolidated Financial Statements
(Expressed in US dollars)
4. Notes Payable
(a) As at April 30, 2020, the Company owed $3,626 (2019 - $4,616) in notes payable to non-related parties. Under the terms of the notes, the amounts are unsecured, bear interest at 6% per annum, and were due on July 31, 2016. The notes bear a default interest rate of 18% per annum.
(b)As at April 30, 2020, the Company owed $10,000 (2019 –$10,000) in a note payable to a non-related party. Under the terms of the note, the amount is unsecured, bears interest at 5% per annum, and was due on June 6, 2017. The note bears a default interest rate of 12% per annum.
(c)As at April 30, 2020, the Company owed $2,500 (2019 –$2,500) in a note payable to a non-related party. Under the terms of the note, the amount is unsecured, bears interest at 5% per annum, and was due on February 1, 2018. The note bears a default interest rate of 12% per annum.
(d)As at April 30, 2020, the Company owed $15,000 (2019 –$15,000) in a note payable to a non-related party. The note payable was issued as a commitment fee and was recorded to additional paid-in capital during the year ended April 30, 2017. Under the terms of the note, the amount is unsecured, bears interest at 8% per annum, and was due on September 15, 2017. The note bears a default interest rate of 20% per annum.
5.Convertible Debentures
(a)On February 13, 2017, the Company issued a convertible debenture, to a non-related party, for proceeds of $105,000. Pursuant to the agreement, the note was issued with an original issue discount and as such the purchase price was $94,500. Under the terms of the debenture, the amount is unsecured, bears interest at 10% per annum, and was due on November 13, 2017. The debenture is convertible into common shares of the Company at a conversion price equal to 60% of the lowest trading price of the Company’s common stock of the ten prior trading days immediately preceding the issuance of the note. In the event of default, the conversion price decreases to 50% of the lowest trading price of the Company’s common stock of the ten prior trading days immediately preceding the issuance of the note and the interest rate increases to 20%. During the year ended April 30, 2020, the Company incurred $nil (2019 - $1,020) in penalties that were added to the principal balance of the note.
Due to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and Hedging”. The fair value of the derivative liability resulted in a discount to the note payable of $105,000, of which $20,000 of the discount resulted from debt issuance costs. The carrying value of the convertible note will be accreted over the term of the convertible note up to the face value of $105,000. As at April 30, 2020, the loan was in default, the carrying value of the note was $8,990 (2019 - $8,990), and the unamortized total discount was $nil (2018 - $nil).
(b)On February 24, 2017, the Company issued a convertible debenture, to a non-related party, for proceeds of $33,000. Under the terms of the debenture, the amount is unsecured, bears interest at 12% per annum pre-default and 20% per annum thereafter, and was due on November 30, 2017. The debenture is convertible into common shares of the Company at a conversion price equal to 58% of the average of the lowest two trading prices of the Company’s common stock of the fifteen prior trading days immediately preceding the issuance of the note. During the year ended April 30, 2020, the Company incurred a $nil (2019 - $38,965) default fee on the note.
Due to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and Hedging. As at April 30, 2020, the loan was in default, the carrying value of the note was $93,965 (2019 - $93,965).
F-11
VERDE BIO HOLDINGS, INC.
(FORMERLY APPIPHANY TECHNOLOGIES HOLDINGS CORP.)
Notes to the Consolidated Financial Statements
(Expressed in US dollars)
5.Convertible Debentures (continued)
(c)On May 9, 2017, the Company issued a convertible debenture, to a non-related party, totaling $36,450. Pursuant to the agreement, the note was issued with an original issue discount and as such the purchase price was $30,000. Under the terms of the debenture, the amount is unsecured, bears interest at 10% per annum, and was due on February 9, 2018. The debenture is convertible into common shares of the Company at a conversion price equal to 60% of the lowest trading price of the Company’s common stock of the past ten trading days prior to notice of conversion. In the event of default the conversion price decreases to 50% of the lowest trading price of the Company’s common stock of the ten prior trading days immediately preceding the issuance of the note and the interest rate increases to 20%. During the year ended April 30, 2020, the Company incurred $nil (2019 - $27,902) in penalties that were added to the principal balance of the note.
Due to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and Hedging”. The fair value of the derivative liability resulted in a discount to the note payable of $36,450, of which $6,450 of the discount resulted from debt issuance costs. The carrying value of the convertible note will be accreted over the term of the convertible note up to the face value of $36,450. As at April 30, 2020, the loan was in default and the carrying value of the note was $64,352 (2019 - $64,352).
(d)On June 28, 2017, the Company issued a convertible debenture, to a non-related party, totaling $57,250. Pursuant to the agreement, the note was issued with an original issue discount and as such the purchase price and proceeds received was $49,500. Under the terms of the debenture, the amount is unsecured, bears interest at 12% per annum, and was due on March 28, 2018. The debenture is convertible into common shares of the Company at a conversion price equal to the lesser of the 50% of the lowest trading price of the Company’s common stock of the past twenty-five trading days prior to notice of conversion or the issuance of the note. In the event of default the interest rate increases to 24%.
Due to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and Hedging”. The fair value of the derivative liability resulted in a discount to the note payable of $57,250, of which $7,750 of the discount resulted from debt issuance costs. The carrying value of the convertible note will be accreted over the term of the convertible note up to the face value of $57,250. During the year ended April 30, 2020, the Company issued 417,948 shares of common stock for the conversion of $18,044 of accrued interest and $3,000 of conversion fees and finance costs. During the year ended April 30, 2019, the Company issued 167,930 shares of common stock for the conversion of $1,569 of the note and $2,712 of accrued interest and $2,500 of conversion fees and finance costs. As at April 30, 2020, the loan was in default and the carrying value of the note was $55,341 (2019 - $55,341).
(e)On July 19, 2017, the Company issued a convertible debenture, to a non-related party, for proceeds of $33,333. Pursuant to the agreement, the note was issued with an original issue discount and as such the purchase price was $28,000. Under the terms of the debenture, the amount is unsecured, bears interest at 12% per annum, and was due on July 19, 2018. The debenture is convertible into common shares of the Company at a conversion price equal to 50% of the lowest trading price of the Company’s common stock of the past twenty-five trading days prior to notice of conversion or the issuance of the note. In the event of default the interest rate increases to 24%. During the year ended April 30, 2020, the Company incurred $nil (2019 - $854) in penalties that were added to the principal balance of the note.
F-12
VERDE BIO HOLDINGS, INC.
(FORMERLY APPIPHANY TECHNOLOGIES HOLDINGS CORP.)
Notes to the Consolidated Financial Statements
(Expressed in US dollars)
5. Convertible Debentures (continued)
Due to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and Hedging”. The fair value of the derivative liability resulted in a discount to the note payable of $33,333, of which $5,333 of the discount resulted from debt issuance costs. The carrying value of the convertible note will be accreted over the term of the convertible note up to the face value of $33,333.
During the year ended April 30, 2020, the Company issued 337,664 shares of common stock for the conversion of $8,196 of the note and $3,212 of accrued interest. During the year ended April 30, 2019, the Company issued 277,661 shares of common stock for the conversion of $13,196 of the note and $1,395 of accrued interest. As at April 30, 2019, the loan was in default, the carrying value of the note was $1,202 (2019 - $9,398), and the unamortized total discount was $nil (2019 - $nil).
Included in the convertible debenture agreement is a $30,000 collateralized secured promissory note and a $33,333 back end note (with the same terms as the convertible debenture mentioned above). As of April 30, 2020, and at the date of filing, no proceeds have been received on the collateralized secured promissory note or the back-end note.
(f)On October 4, 2017, the Company issued a convertible debenture, to a non-related party, for proceeds of $36,000, which was the first tranche of a convertible debenture totaling $102,000 (“the October 4, 2017 Agreement”). Pursuant to this agreement, the note was issued with an original issue discount and as such the purchase price was $25,000. Under the terms of the debenture, the amount is unsecured, bears interest at 10% per annum, and was due on July 9, 2018. The debenture is convertible into common shares of the Company at a conversion price equal to the lesser of the 50% of the lowest trading price of the Company’s common stock of the past ten trading days prior to notice of conversion or the issuance of the note. In the event of default, the conversion price decreases to 40% of the lowest trading price of the Company’s common stock of the ten prior trading days immediately preceding the issuance of the note and the interest rate increases to 20%. During the year ended April 30, 2020, the Company incurred $nil (2019 - $21,910) in penalties that were added to the principal balance of the note.
Due to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and Hedging”. The fair value of the derivative liability resulted in a discount to the note payable of $36,000, of which $11,000 of the discount resulted from debt issuance costs. The carrying value of the convertible note will be accreted over the term of the convertible note up to the face value of $36,000. As at April 30, 2020, the loan was in default, the carrying value of the note was $57,910 (2019 - $57,910), and the unamortized total discount was $nil (2019 - $nil).
(g)On September 28, 2017, the Company issued a convertible debenture, to a non-related party, for proceeds of $33,333. Pursuant to the agreement, the note was issued with an original issue discount and as such the purchase price was $25,500. Under the terms of the debenture, the amount is unsecured, bears interest at 12% per annum, and was due on September 28, 2018. The debenture is convertible into common shares of the Company at a conversion price equal to the lesser of the 50% of the lowest trading price of the Company’s common stock of the past twenty-five trading days prior to notice of conversion or the issuance of the note. In the event of default there is a penalty of 10% of the principal balance of the outstanding note and the interest rate increases to 24%.
F-13
VERDE BIO HOLDINGS, INC.
(FORMERLY APPIPHANY TECHNOLOGIES HOLDINGS CORP.)
Notes to the Consolidated Financial Statements
(Expressed in US dollars)
5. Convertible Debentures (continued)
Due to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and Hedging”. The fair value of the derivative liability resulted in a discount to the note payable of $33,333, of which $7,833 of the discount resulted from debt issuance costs. The carrying value of the convertible note will be accreted over the term of the convertible note up to the face value of $33,333. During the year ended April 30, 2020, the Company recorded a $nil (2019 - $3,333) principal penalty. As at April 30, 2020, the loan was in default, the carrying value of the note was $36,666 (2019 - $36,666), and the unamortized total discount was $nil (2019 - $nil).
Included in the convertible debenture agreement is a back end note for up to $33,333 (with the same amount of proceeds, original issue discount, maturity date, interest rate and conversion terms as the convertible debenture mentioned above). As of April 30, 2020, and at the date of filing, no proceeds have been received on the back-end note.
(h)On November 8, 2017, the Company issued a convertible debenture, to a non-related party, for proceeds of $33,000, which was the second tranche of the October 4, 2017 Agreement. Pursuant to the agreement, the note was issued with an original issue discount and as such the purchase price was $30,000. Under the terms of the debenture, the amount is unsecured, bears interest at 10% per annum, and was due on August 8, 2018. The debenture is convertible into common shares of the Company at a conversion price equal to the lesser of the 50% of the lowest trading price of the Company’s common stock of the past ten trading days prior to notice of conversion or the issuance of the note. In the event of default, the conversion price decreases to 40% of the lowest trading price of the Company’s common stock of the ten prior trading days immediately preceding the issuance of the note and the interest rate increases to 20%. During the year ended April 30, 2020, the Company incurred $nil (2019 - $20,084) in penalties that were added to the principal balance of the note.
Due to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and Hedging”. The fair value of the derivative liability resulted in a discount to the note payable of $33,000, of which $3,000 of the discount resulted from debt issuance costs. The carrying value of the convertible note will be accreted over the term of the convertible note up to the face value of $33,000. As at April 30, 2020, the loan was in default, the carrying value of the note was $53,084 (2019 - $53,084), and the unamortized total discount was $nil (2019 - $nil).
(i)On December 26, 2017, the Company issued a convertible debenture, to a non-related party, for proceeds of $33,000, which was the final tranche of the October 4, 2017 Agreement. Pursuant to the agreement, the note was issued with an original issue discount and as such the purchase price was $30,000. Under the terms of the debenture, the amount is unsecured, bears interest at 10% per annum, and was due on September 26, 2018. The debenture is convertible into common shares of the Company at a conversion price equal to the lesser of the 50% of the lowest trading price of the Company’s common stock of the past ten trading days prior to notice of conversion or the issuance of the note. In the event of default, the conversion price decreases to 40% of the lowest trading price of the Company’s common stock of the ten prior trading days immediately preceding the issuance of the note and the interest rate increases to 20%. During the year ended April 30, 2020, the Company incurred $nil (2019 - $20,084) in penalties that were added to the principal balance of the note.
Due to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and Hedging”. The fair value of the derivative liability resulted in a discount to the note payable of $33,000, of which $3,000 of the discount resulted from debt issuance costs. The carrying value of the convertible note will be accreted over the term of the convertible note up to the face value of $33,000. As at April 30, 2020, the loan was in default, the carrying value of the note was $53,084 (2019 - $53,084), and the unamortized total discount was $nil (2019 - $nil).
F-14
VERDE BIO HOLDINGS, INC.
(FORMERLY APPIPHANY TECHNOLOGIES HOLDINGS CORP.)
Notes to the Consolidated Financial Statements
(Expressed in US dollars)
5. Convertible Debentures (continued)
(j)On March 15, 2019, the Company issued a convertible debenture, to a non-related party, for proceeds of $36,000. Pursuant to the agreement, the note was issued with an original issue discount and as such the purchase price was $30,000. Under the terms of the debenture, the amount is unsecured, bears interest at 10% per annum (20% default interest rate), and is due on December 15, 2019. The debenture is convertible into common shares of the Company at a conversion price equal to the lesser of the 65% of the lowest trading price of the Company’s common stock of the past twenty trading days prior to notice of conversion or the issuance of the note. During the year ended April 30, 2020, the Company incurred $21,995 (2019 - $nil) in default penalties that were added to the principal balance of the note.
Due to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and Hedging”. The fair value of the derivative liability resulted in a discount to the note payable of $36,000, of which $6,000 of the discount resulted from debt issuance costs. The carrying value of the convertible note will be accreted over the term of the convertible note up to the face value of $36,000. As at April 30, 2020, the carrying value of the note was $57,995 (2019 - $nil), and the unamortized total discount was $nil (2019 - $36,000).
(k)On September 12, 2019, the Company issued a convertible debenture, to a non-related party, in the amount of $33,000. Pursuant to the agreement, the note was issued with an original issue discount of $3,000 and as such the purchase price was $30,000. Under the terms of the debenture, the amount is unsecured, bears interest at 10% per annum (20% default interest rate), and is due on June 12, 2020. The debenture is convertible into common shares of the Company at a conversion price $0.078. The Company evaluated the convertible notes for a beneficial conversion feature in accordance with ASC 470-20 “Debt with Conversion and Other Options”. The Company determined that the conversion price was below the closing stock price on the commitment date, and the convertible notes contained a beneficial conversion feature. The Company recognized the intrinsic value of the embedded beneficial conversion feature of $30,462 as additional paid-in capital and reduced the carrying value of the convertible note to $2,538. The carrying value will be accreted over the term of the convertible notes up to their face value of $33,000.
As at April 30, 2020, the carrying value of the convertible note was $20,897 (April 30, 2019 - $nil) and had an unamortized discount of $12,103 (April 30, 2019 - $nil). During the year ended April 30, 2020, the Company recorded accretion expense of $18,359 (2019 - $nil).
(l)On November 13, 2019, the Company issued a convertible debenture, to a non-related party, in the amount of $28,193. Pursuant to the agreement, the note was issued with an original issue discount of $2,563 and as such the purchase price was $25,630. Under the terms of the debenture, the amount is unsecured, bears interest at 10% per annum (20% default interest rate), and is due on August 13, 2020. The debenture is convertible into common shares of the Company at a conversion price $0.048. The Company evaluated the convertible notes for a beneficial conversion feature in accordance with ASC 470-20 “Debt with Conversion and Other Options”. The Company determined that the conversion price was below the closing stock price on the commitment date, and the convertible notes contained a beneficial conversion feature. The Company recognized the intrinsic value of the embedded beneficial conversion feature of $18,795 as additional paid-in capital and reduced the carrying value of the convertible note to $9,398. The carrying value will be accreted over the term of the convertible notes up to their face value of $28,193.
As at April 30, 2020, the carrying value of the convertible note was $18,852 (April 30, 2019 - $nil) and had an unamortized discount of $9,341 (April 30, 2019 - $nil). During the year ended April 30, 2020, the Company recorded accretion expense of $9,454 (2019 - $nil).
F-15
VERDE BIO HOLDINGS, INC.
(FORMERLY APPIPHANY TECHOLOGIES HOLDINGS CORP.)
Notes to the Consolidated Financial Statements
(Expressed in US dollars)
5. Convertible Debentures (continued)
(m)On January 14, 2020, the Company issued a convertible debenture, to a non-related party, in the amount of $35,000. Pursuant to the agreement, the note was issued with an original issue discount of $5,000 and as such the purchase price was $30,000. Under the terms of the debenture, the amount is unsecured, bears interest at 10% per annum (20% default interest rate), and is due on October 14, 2020. The debenture is convertible into common shares of the Company at a conversion price $0.06. The Company evaluated the convertible notes for a beneficial conversion feature in accordance with ASC 470-20 “Debt with Conversion and Other Options”. The Company determined that the conversion price was below the closing stock price on the commitment date, and the convertible notes contained a beneficial conversion feature.
The Company recognized the intrinsic value of the embedded beneficial conversion feature of $23,333 as additional paid-in capital and reduced the carrying value of the convertible note to $11,667. The carrying value will be accreted over the term of the convertible notes up to their face value of $35,000.
As at April 30, 2020, the carrying value of the convertible note was $17,983 (April 30, 2019 - $nil) and had an unamortized discount of $17,017 (April 30, 2019 - $nil). During the year ended April 30, 2020, the Company recorded accretion expense of $6,316 (2019 - $nil).
(n)On January 23, 2020, the Company issued a convertible debenture, to a non-related party, in the amount of $68,000. Pursuant to the agreement, the note was issued with an original issue discount of $8,000 and as such the purchase price was $60,000. On January 23, 2020, the Company received the first tranche totaling $30,000 and recognized an original issue discount of $4,000. Under the terms of the debenture, the amount is unsecured, bears interest at 10% per annum (20% default interest rate), and is due on October 23, 2020. The debenture is convertible into common shares of the Company at a conversion price $0.048. The Company evaluated the convertible notes for a beneficial conversion feature in accordance with ASC 470-20 “Debt with Conversion and Other Options”. The Company determined that the conversion price was below the closing stock price on the commitment date, and the convertible notes contained a beneficial conversion feature.
The Company recognized the intrinsic value of the embedded beneficial conversion feature of $22,667 as additional paid-in capital and reduced the carrying value of the convertible note to $11,333. The carrying value will be accreted over the term of the convertible notes up to their face value of $34,000.
As at April 30, 2020, the carrying value of the convertible note was $16,836 (April 30, 2019 - $nil) and had an unamortized discount of $17,164 (April 30, 2019 - $nil). During the year ended April 30, 2020, the Company recorded accretion expense of $5,503 (2019 - $nil).
(o)On January 23, 2020, the Company issued a convertible debenture, to a non-related party, in the amount of $68,000. Pursuant to the agreement, the note was issued with an original issue discount of $8,000 and as such the purchase price was $60,000. On March 4, 2020, the Company received the second tranche totaling $30,000 and recognized an original issue discount of $4,000. Under the terms of the debenture, the amount is unsecured, bears interest at 10% per annum (20% default interest rate), and is due on December 4, 2020. The debenture is convertible into common shares of the Company at a conversion price $0.048. The Company evaluated the convertible notes for a beneficial conversion feature in accordance with ASC 470-20 “Debt with Conversion and Other Options”. The Company determined that the conversion price was below the closing stock price on the commitment date, and the convertible notes contained a beneficial conversion feature.
The Company recognized the intrinsic value of the embedded beneficial conversion feature of $29,750 as additional paid-in capital and reduced the carrying value of the convertible note to $4,250. The carrying value will be accreted over the term of the convertible notes up to their face value of $34,000.
As at April 30, 2020, the carrying value of the convertible note was $6,720 (April 30, 2019 - $nil) and had an unamortized discount of $27,280 (April 30, 2019 - $nil). During the year ended April 30, 2020, the Company recorded accretion expense of $2,470 (2019 - $nil).
F-16
VERDE BIO HOLDINGS, INC.
(FORMERLY APPIPHANY TECHOLOGIES HOLDINGS CORP.)
Notes to the Consolidated Financial Statements
(Expressed in US dollars)
5. Convertible Debentures (continued)
(p)On March 25, 2020, the Company issued a convertible debenture, to a non-related party, in the amount of $13,000. Pursuant to the agreement, the note was issued with an original issue discount of $3,000 and as such the purchase price was $10,000. Under the terms of the debenture, the amount is unsecured, bears interest at 10% per annum (20% default interest rate), and is due on December 25, 2020. The debenture is convertible into common shares of the Company at a conversion price $0.018. The Company evaluated the convertible notes for a beneficial conversion feature in accordance with ASC 470-20 “Debt with Conversion and Other Options”. The Company determined that the conversion price was below the closing stock price on the commitment date, and the convertible notes contained a beneficial conversion feature.
The Company recognized the intrinsic value of the embedded beneficial conversion feature of $12,500 as additional paid-in capital and reduced the carrying value of the convertible note to $500. The carrying value will be accreted over the term of the convertible notes up to their face value of $13,000.
As at April 30, 2020, the carrying value of the convertible note was $849 (April 30, 2019 - $nil) and had an unamortized discount of $12,151 (April 30, 2019 - $nil). During the year ended April 30, 2020, the Company recorded accretion expense of $349 (2019 - $nil).
6.Derivative Liability
The Company records the fair value of the of the conversion price of the convertible debentures disclosed in Note 5 in accordance with ASC 815, Derivatives and Hedging. The fair value of the derivative was calculated using a Binomial model. The fair value of the derivative liability is revalued on each balance sheet date with corresponding gains and losses recorded in the consolidated statement of operations. During the year ended April 30, 2020, the Company recorded a loss on the change in fair value of derivative liability of $794,930 (2019 – loss of $158,657). As at April 30, 2020, the Company recorded a derivative liability of $1,605,568 (2019 - $1,080,589).
A summary of the activity of the derivative liability is shown below:
|
|
|
|
|
$
|
|
|
|
|
|
|
Balance, April 30, 2018
|
|
|
|
|
928,252
|
Derivative loss due to new issuances
|
|
|
|
|
23,837
|
Debt discount
|
|
|
|
|
36,000
|
Adjustment for conversion
|
|
|
|
|
(42,320)
|
Mark to market adjustment at April 30, 2019
|
|
|
|
|
134,820
|
|
|
|
|
|
|
Balance, April 30, 2019
|
|
|
|
|
1,080,589
|
Adjustment for conversion
|
|
|
|
|
(269,951)
|
Mark to market adjustment at April 30, 2020
|
|
|
|
|
794,930
|
|
|
|
|
|
|
Balance, April 30, 2020
|
|
|
|
|
1,605,568
|
7.Convertible Preferred Series B Stock Liability
On June 13, 2019, the Company designated 1,000,000 shares of preferred stock as Series B. The holders of Series B preferred shares are not entitled to receive dividends except as may be declared by the Board at its sole and absolute discretion. Each Series B preferred share is convertible into common shares according to the following formula: the Stated Value of $1.10 per share of Series B preferred stock divided by the closing price of the Common Stock on the day prior to the conversion. Holders of Series B preferred stock shall not have voting rights.
F-17
VERDE BIO HOLDINGS, INC.
(FORMERLY APPIPHANY TECHOLOGIES HOLDINGS CORP.)
Notes to the Consolidated Financial Statements
(Expressed in US dollars)
7. Convertible Preferred Series B Stock Liability (continued)
On June 17, 2019, the Company issued 530,000 shares of Series B preferred stock, at a value of $583,000 based on the stated value of $1.10 per share, in exchange for the settlement of accounts payable of $266,523, notes payable of $990, accrued interest of $535, and management fees of $33,000. The transaction resulted in a loss on settlement of debt of $281,952. Because the Series B shares represent an unconditional obligation that the Company must or may settle in a variable number of its equity shares and the monetary value of the obligation is predominantly based on a fixed monetary amount ($1.10 worth of common stock), the 530,000 shares with a balance of $583,000 is recorded as a liability on the balance sheet.
8.Common Shares
Authorized: 5,000,000,000 common shares with a par value of $0.001 per share.
On February 14, 2020, the Company effected a reverse stock split on a basis of 1 new common share for every 100 old common shares. The impact of these reverse stock split has been applied on a retroactive basis to all periods presented.
Share Transactions for the Year Ended April 30, 2020
During the year ended April 30, 2020, the Company issued an aggregate of 755,612 common shares with a fair value of $309,729 upon the conversion of $8,196 of convertible debentures, $269,951 of derivative liabilities, $21,255 of accrued interest, and $3,000 in conversion fees resulting in a loss on settlement of debt of $7,527. The remaining loss settlement of debt relates to the issuance of the Series B preferred stock. See Note 7.
Share Transactions for the Year Ended April 30, 2019
During the year ended April 30, 2019, the Company issued an aggregate of 445,591 common shares with a fair value of $54,716 upon the conversion of $14,765 of convertible debentures, $4,130 of accrued interest, $2,500 in conversion fees, and $42,320 of derivative liabilities resulting in a gain on settlement of debt of $8,977.
9.Preferred Shares
Authorized: 10,000,000 preferred shares with a par value of $0.001 per share
Convertible Preferred Series A stock
On April 18, 2017, the Company designated 500,000 shares of preferred stock as Series A. The holders of Series A preferred shares are entitled to receive dividends equal to the amount of the dividend or distribution per share of common stock payable multiplied by the number of shares of common stock the shares of Series A preferred shares held by such holder are convertible into. Series A preferred shares are convertible at a factor of 10,000 Series A shares for one common share. Each holder of Series A preferred shares is entitled to cast 10,000 votes for every one Series A preferred share held.
Convertible Preferred Series B stock – see Note 7.
10. Income Taxes
The Company has $2,756,402 of net operating losses carried forward to offset taxable income in future years which expire commencing in fiscal 2030. The income tax benefit differs from the amount computed by applying the US federal income tax rate of 21% and the Canada federal and provincial tax rate of 26% to net loss before income taxes for the year ended April 30, 2020 and 2019 as a result of the following:
F-18
VERDE BIO HOLDINGS, INC.
(FORMERLY APPIPHANY TECHOLOGIES HOLDINGS CORP.)
Notes to the Consolidated Financial Statements
(Expressed in US dollars)
10.Income Taxes (continued)
|
|
2020
$
|
2019
$
|
|
|
|
|
Net loss before taxes
|
|
(1,575,407)
|
(537,087)
|
Statutory rate
|
|
21%
|
21%
|
|
|
|
|
Computed expected tax recovery
|
|
(330,835)
|
(112,788)
|
Permanent differences and other
|
|
242,525
|
62,953
|
Effect of change in rate
|
|
–
|
–
|
Change in valuation allowance
|
|
88,310
|
49,835
|
|
|
|
|
Income tax provision
|
|
–
|
–
|
The significant components of deferred income tax assets and liabilities as at April 30, 2020 and 2019 after applying enacted corporate income tax rates are as follows:
|
|
2020
$
|
2019
$
|
|
|
|
|
Net operating losses carried forward
|
|
576,967
|
488,657
|
|
|
|
|
Total gross deferred income tax assets
|
|
576,967
|
488,657
|
Valuation allowance
|
|
(576,967)
|
(488,657)
|
|
|
|
|
Net deferred tax asset
|
|
–
|
–
|
Future tax benefits, which may arise as a result of these losses, have not been recognized in these financial statements, and have been offset by a valuation allowance. As at April 30, 2020, the Company has no uncertain tax positions.
11. Commitments and contingencies
On February 19, 2019, the former Chief Executive Officer and Director of the Company entered into a Stock Purchase Agreement to sell his 500,000 Series A Preferred Stock to the current Chief Executive Officer and Director, the closing of which is pending certain closing conditions, including, but not limited to the Company getting current with its SEC filings and restricting some of its outstanding debt. This transaction was completed on November 22, 2019.
On February 5, 2020, the Company signed a joint venture agreement (the “Joint Venture”) for a 25% share in the Hemp seed and genetics industry. The Company has committed to contribute $300,000 to the joint venture on a to be mutually agreed upon schedule. Additionally, the Company will issue 1,500,000 common shares to the other members of the joint venture as compensation for their initial contributions. See note 11.
12. Subsequent Events
Subsequent to the year ended April 30, 2020, the Company issued 2,429,135 common shares upon the conversion of $22,142 of accrued interest on convertible debentures and $500 of conversion fee penalties.
On May 1, 2020 the company entered into a consulting service agreement with an unrelated party. The consultant will render consulting services relating to business planning, execution and acquisition strategy. The Company will issue 2,000,000 shares of common stock at $0.01 par value on the execution of this agreement and pay a minimum retainer of $5,000 each month beginning 07/01/2021 for the duration of the contract. This agreement has been terminated, however, the Company anticipates issuing the 500,000 shares in the future.
On May 11, 2020, the Joint Venture (See Note 10) was terminated with no shares issued or contributions made.
F-19
VERDE BIO HOLDINGS, INC.
(FORMERLY APPIPHANY TECHOLOGIES HOLDINGS CORP.)
Notes to the Consolidated Financial Statements
(Expressed in US dollars)
12.Subsequent Events (continued)
On May 28, 2020, the Company granted 24,500,000 restricted shares in exchange for services valued at $65,000. The shares may not be sold, assigned, transferred, pledged, hypothecated or otherwise disposed without the prior written consent of the Company. 20,000,000 of the restricted shares were issued to the CEO of the Company and 1,000,000 of the restricted shares were issued to the father of the CEO of the Company.
On May 28, 2020, the Company and an unrelated party entered into equity financing agreement, whereby the investor shall invest up to $5,000,000 over the period of 36 months at par value of $0.001 per share. As part of the agreement, the Company issued a convertible promissory note to the unrelated party to offset transaction costs of $20,000, which was deemed as earned upon the execution of the agreement. The note is convertible into common stock of the Company at a fixed price of $0.01, which equals the lowest traded price for the common stock on the trading day preceding the execution of the note.
Subsequent to the year ended April 30, 2020, the Company issued 1,250,000 common shares for proceeds of $25,000.
F-20
INTERIM FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JULY 31, 2020 AND 2019
F-21
VERDE BIO HOLDINGS, INC.
Condensed Consolidated Balance Sheets
(Expressed in US dollars)
|
July 31,
2020
$
|
|
April 30,
2020
$
|
|
(unaudited)
|
|
|
ASSETS
|
|
|
|
Current Assets
|
|
|
|
Cash
|
2,779
|
|
1,631
|
Total Assets
|
2,779
|
|
1,631
|
|
|
|
|
LIABILITIES
|
|
|
|
Current Liabilities
|
|
|
|
Accounts payable and accrued liabilities
|
348,753
|
|
333,034
|
Due to related parties
|
43,288
|
|
19,056
|
Convertible debentures, net of unamortized discount of $70,541 and $95,057, respectively
|
600,251
|
|
564,725
|
Notes payable
|
54,043
|
|
31,126
|
Derivative liability
|
1,973,082
|
|
1,605,568
|
Convertible preferred Series B stock liability
|
583,000
|
|
583,000
|
Total Liabilities
|
3,602,417
|
|
3,136,509
|
|
|
|
|
STOCKHOLDERS’ DEFICIT
|
|
|
|
Preferred stock - 10,000,000 authorized shares with a par value of $0.001 per share
|
|
|
|
Convertible Preferred Series A: Issued and outstanding:
|
|
|
|
500,000 shares, respectively
|
500
|
|
500
|
Common stock – 5,000,000,000 authorized shares with a par value of $0.001 per share
|
|
|
|
Issued and outstanding:
|
|
|
|
30,009,078 and 1,829,867 shares, respectively
|
30,009
|
|
1,830
|
Additional paid-in capital
|
4,787,145
|
|
4,384,537
|
Subscriptions Payable
|
15,000
|
|
-
|
Accumulated deficit
|
(8,432,292)
|
|
(7,521,745)
|
Total Stockholders’ Deficit
|
(3,599,638)
|
|
(3,134,878)
|
|
|
|
|
Total Liabilities and Stockholders’ Deficit
|
2,779
|
|
1,631
|
(The accompanying notes are an integral part of these condensed consolidated interim financial statements)
F-22
VERDE BIO HOLDINGS, INC.
Condensed Consolidated Statements of Operations
(Expressed in US dollars)
(unaudited)
|
For the three
months ended
July 31,
2020
$
|
For the three
months ended
July 31,
2019
$
|
|
|
|
Operating Expenses
|
|
|
|
|
|
(Recovery) bad debt
|
–
|
(1,569)
|
Consulting fees
|
40,800
|
–
|
General and administrative
|
62,092
|
2,217
|
Professional fees
|
34,670
|
10,109
|
Management fees
|
204,000
|
33,000
|
|
|
|
Total Operating Expenses
|
341,562
|
43,757
|
|
|
|
Operating Income (Loss)
|
(341,562)
|
(43,757)
|
|
|
|
Other Income (Expenses)
|
|
|
|
|
|
Loss on change in fair value of derivative liability
|
(471,266)
|
(27,005)
|
Interest expense
|
(96,717)
|
(25,363)
|
Gain (loss) on extinguishment of debt
|
(1,002)
|
(290,303)
|
|
|
|
Total Other Income (Expenses)
|
(568,985)
|
(342,671)
|
|
|
|
Net Loss
|
(910,547)
|
(386,428)
|
Net Loss Per Share, Basic and Diluted
|
(0.04)
|
(0.36)
|
Weighted Average Shares Outstanding – Basic and Diluted
|
22,370,654
|
1,080,072
|
|
|
|
(The accompanying notes are an integral part of these condensed consolidated interim financial statements)
F-23
VERDE BIO HOLDINGS, INC.
Consolidated Statement of Stockholders Deficit
(Expressed in US dollars)
For the three months ended July 31, 2019 and 2020
(unaudited)
|
Series A
Preferred Stock
|
Common Stock
|
Additional Paid-in
|
Accumulated
|
|
|
Shares
|
Par Value
|
Shares
|
|
Par Value
|
Capital
|
Deficit
|
Total
|
|
#
|
$
|
#
|
|
$
|
$
|
$
|
$
|
|
|
|
|
|
|
|
|
|
Balance – April 30, 2019
|
500,000
|
500
|
1,074,255
|
|
1,074
|
3,938,057
|
(5,946,338)
|
(2,006,707)
|
|
|
|
|
|
|
|
|
|
Shares issued upon conversion of notes payable
|
-
|
-
|
107,110
|
|
107
|
156,272
|
-
|
156,379
|
|
|
|
|
|
|
|
|
|
Net loss
|
–
|
–
|
–
|
|
–
|
–
|
(386,428)
|
(386,428)
|
|
|
|
|
|
|
|
|
|
Balance – July 31, 2019
|
500,000
|
500
|
1,181,365
|
|
1,181
|
4,094,329
|
(6,332,766)
|
(2,236,756)
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock
|
Common Stock
|
Additional
|
|
Accumulated
|
|
|
Shares
|
Par Value
|
Shares
|
|
Par Value
|
Paid-in Capital
|
Subscriptions Payable
|
Deficit
|
Total
|
|
#
|
$
|
#
|
|
$
|
$
|
$
|
$
|
$
|
Balance – April 30, 2020
|
500,000
|
500
|
1,829,867
|
|
1,830
|
4,384,537
|
–
|
(7,521,745)
|
(3,134,878)
|
Rounding shares (reverse split)
|
–
|
–
|
76
|
|
–
|
–
|
–
|
–
|
–
|
|
|
|
|
|
|
|
|
|
|
Shares issued for management and consulting fees
|
–
|
–
|
24,500,000
|
|
24,500
|
225,400
|
–
|
–
|
249,900
|
Shares issued upon conversion of notes payable
|
–
|
–
|
2,429,135
|
|
2,429
|
133,958
|
–
|
–
|
136,387
|
|
|
|
|
|
|
|
|
|
|
Shares issued for cash
|
–
|
–
|
1,250,000
|
|
1,250
|
23,750
|
–
|
–
|
25,000
|
|
|
|
|
|
|
|
|
|
|
Beneficial conversion feature on convertible debt
|
–
|
–
|
–
|
|
–
|
19,500
|
–
|
–
|
19,500
|
|
|
|
|
|
|
|
|
|
|
Subscriptions payable
|
–
|
–
|
–
|
|
–
|
–
|
15,000
|
–
|
15,000
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
–
|
–
|
–
|
|
–
|
–
|
–
|
(910,547)
|
(910,547)
|
|
|
|
|
|
|
|
|
|
|
Balance – July 31, 2020
|
500,000
|
500
|
30,009,078
|
|
30,009
|
4,787,145
|
15,000
|
(8,432,292)
|
(3,599,638)
|
(The accompanying notes are an integral part of these condensed consolidated interim financial statements)
F-24
VERDE BIO HOLDINGS, INC.
Condensed Consolidated Statements of Cashflow
(Expressed in US dollars)
(unaudited)
|
For the three
months ended
July 31,
2020
$
|
For the three
months ended
July 31,
2019
$
|
|
|
|
Operating Activities
|
|
|
Net Loss
|
(910,547)
|
(386,428)
|
|
|
|
Adjustments to reconcile net income (loss) to net cash used in operating activities:
|
|
|
|
|
|
Amortization of discount on convertible debt payable
|
44,016
|
20
|
Conversion penalties related to conversion of convertible note
|
500
|
500
|
Loss on change in fair value of derivative liability
|
471,266
|
27,005
|
Preferred shares issued for management fees
|
–
|
33,000
|
Loss on settlement of debt
|
1,002
|
290,303
|
Commitment fee for equity purchase agreement
|
20,000
|
–
|
Shares issued for management and consulting fees
|
249,900
|
–
|
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
37,862
|
26,304
|
Due to related parties
|
24,232
|
–
|
|
|
|
Net Cash Used In Operating Activities
|
(61,769)
|
(9,296)
|
|
|
|
Financing Activities
|
|
|
|
|
|
Proceeds from issuance of common stock
|
25,000
|
–
|
Proceeds from subscriptions payable
|
15,000
|
–
|
Proceeds from issuance of PPP Loan – SBA
|
22,917
|
–
|
|
|
|
Net Cash Provided by Financing Activities
|
62,917
|
–
|
|
|
|
Increase (decrease) in Cash
|
1,148
|
(9,296)
|
|
|
|
Cash – Beginning of Period
|
1,631
|
23,752
|
|
|
|
Cash – End of Period
|
2,779
|
14,456
|
|
|
|
Supplemental Disclosures
|
|
|
Interest paid
|
–
|
–
|
Income tax paid
|
–
|
–
|
Non-cash investing and financing activities
|
|
|
Beneficial conversion feature
|
19,500
|
–
|
Common stock issued for conversion of convertible debentures
|
136,387
|
156,379
|
Series B preferred shares issued for settlement of accounts and notes payable
|
–
|
550,000
|
F-25
VERDE BIO HOLDINGS, INC.
Notes to the Condensed Consolidated Interim Financial Statements
(Expressed in US dollars)
(unaudited)
1.Nature of Operations and Continuance of Business
Verde Bio Holdings Inc. (formerly Appiphany Technologies Holdings Corp.) (the “Company”) was incorporated in the State of Nevada on February 24, 2010. Currently, the Company is in the business of oil and gas exploration and investment.
On March 11, 2020, the World Health Organization declared COVID-19 a global pandemic. This contagious disease outbreak and any related adverse public health developments, has adversely affected workforces, economies, and financial markets globally, leading to an economic downturn. The impact on the Company is not currently determinable but management continues to monitor the situation.
Going Concern
These condensed consolidated financial statements have been prepared on a going concern basis, which implies that the Company will continue to realize its assets and discharge its liabilities in the normal course of business. As at July 31, 2020, the Company has not recognized significant revenue, has a working capital deficit of $3,599,638, and has an accumulated deficit of $8,432,292. The continuation of the Company as a going concern is dependent upon the continued financial support from its management, and its ability to identify future investment opportunities and obtain the necessary debt or equity financing, and generating profitable operations from the Company’s future operations. The Company will continue to rely on equity sales of its common shares in order to continue to fund business operations. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern for a period of one year from the date these financial statements are issued. These condensed consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
2.Summary of Significant Accounting Policies
(a)Basis of Presentation and Principles of Consolidation
The accompanying unaudited interim condensed consolidated financial statements of the Company should be read in conjunction with the consolidated financial statements and accompany notes filed with the U.S. Securities and Exchange Commission for the year ended April 30, 2020. These interim condensed consolidated financial statements have been prepared on the same basis as the annual financial statements and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s financial position, results of operations and cash flows for the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for a full year or for any future period.
These interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”) and are expressed in U.S. dollars. The condensed consolidated financial statements are comprised of the records of the Company and its wholly owned subsidiary, IP Control Risk Inc., a company incorporated in the State of Nevada, United States. All intercompany transactions have been eliminated on consolidation. The Company’s fiscal year end is April 30.
(b)Use of Estimates
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions
F-26
VERDE BIO HOLDINGS, INC.
Notes to the Condensed Consolidated Interim Financial Statements
(Expressed in US dollars)
(unaudited)
2.Summary of Significant Accounting Policies (continued)
related to the collectability of accounts receivable, fair value and estimated useful life of long-lived assets, fair value of convertible debentures,
derivative liabilities, and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates.
To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
(c)Basic and Diluted Net Loss per Share
The Company computes net loss per share in accordance with ASC 260, Earnings per Share. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net loss available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. As of July 31, 2020, the Company had 83,348,239 (July 31, 2019 – 3,658,450) potentially dilutive common shares outstanding.
(d)Fair Value Measurements
The Company measures and discloses the estimated fair value of financial assets and liabilities using the fair value hierarchy prescribed by U.S. generally accepted accounting principles. The fair value hierarchy has three levels, which are based on reliable available inputs of observable data. The hierarchy requires the use of observable market data when available. The three-level hierarchy is defined as follows:
Level 1 – quoted prices for identical instruments in active markets;
Level 2 – quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model derived valuations in which significant inputs and significant value drivers are observable in active markets; and
Level 3 – fair value measurements derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
Financial instruments consist principally of cash, other assets, accounts payable and accrued liabilities, notes payable, convertible debentures, derivative liabilities and amounts due to related parties. The fair value of cash is determined based on Level 1 inputs. The fair value of the derivative liabilities are determined based on Level 3 inputs. There were no transfers into or out of “Level 3” during the periods presented. The recorded values of all other financial instruments approximate their current fair values because of their nature and respective relatively short maturity dates or durations.
Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
F-27
VERDE BIO HOLDINGS, INC.
Notes to the Condensed Consolidated Interim Financial Statements
(Expressed in US dollars)
(unaudited)
2.Summary of Significant Accounting Policies (continued)
The following table presents assets and liabilities that are measured and recognized at fair value as of July 31, 2020 and April 30, 2020 on a recurring basis:
July 31, 2020
Description
|
|
Level 1
$
|
|
Level 2
$
|
|
Level 3
$
|
|
Total Gains and (Losses)
$
|
Derivative liability
|
|
|
-
|
|
|
-
|
|
|
(1,973,082)
|
|
|
(471,266)
|
April 30, 2020
Description
|
|
Level 1
$
|
|
Level 2
$
|
|
Level 3
$
|
|
Total Gains and (Losses)
$
|
Derivative liability
|
|
|
-
|
|
|
-
|
|
|
(1,605,568)
|
|
|
(794,930)
|
(e)Recent Accounting Pronouncements
The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
3.Related Party Transactions
During the three months ended July 31, 2020, the Company incurred $204,000 (2019 - $nil) in management fees to the President and Director of the Company which was paid in convertible common shares (see note 8).
During the three months ended July 31, 2020, the Company incurred $nil (2019 - $33,000) in management fees to the former President and Director of the Company, which was paid in Convertible Preferred Series B shares (see Note 7).
As at July 31, 2020, the Company owed the President and Director of the Company $43,288 (2019 - $nil). The amount is non-interest bearing and due on demand.
F-28
VERDE BIO HOLDINGS, INC.
Notes to the Condensed Consolidated Interim Financial Statements
(Expressed in US dollars)
(unaudited)
4.Notes Payable
(a) As at July 31, 2020, the Company owed $3,626 (April 30, 2020 - $3,626) in notes payable to non-related parties. Under the terms of the notes, the amounts are unsecured, bear interest at 6% per annum, and were due on July 31, 2016. The notes bear a default interest rate of 18% per annum.
(b) As at July 31, 2020, the Company owed $10,000 (April 30, 2020 - $10,000) in notes payable to non-related parties. Under the terms of the note, the amount is unsecured, bears interest at 5% per annum, and was due on July 6, 2017. The note bears a default interest rate of 12% per annum.
(c)As at July 31, 2020, the Company owed $2,500 (April 30, 2020 - $2,500) in notes payable to non-related parties. Under the terms of the note, the amount is unsecured, bears interest at 5% per annum, and was due on February 1, 2018. The note bears a default interest rate of 12% per annum.
(d)As at July 31, 2020, the Company owed $15,000 (April 30, 2020 - $15,000) in notes payable to a non-related party. The note payable was issued as a commitment fee and was recorded to additional paid-in capital. Under the terms of the note, the amount is unsecured, bears interest at 8% per annum, and was due on September 15, 2017. The note bears a default interest rate of 20% per annum.
(e)On May 7, 2020, the Company received $22,917 (April 30, 2020 - $nil) in notes payable to a non-related party. The note payable was issued as a Small Business Administration Paycheck Protection from Wells Fargo SBA Lending. Under the terms of the note, the amount is unsecured, bears fixed interest at 1% per annum, and is due on May 07, 2022.
5.Convertible Debentures
(a)On February 13, 2017, the Company issued a convertible debenture, to a non-related party, for proceeds of $105,000. Pursuant to the agreement, the note was issued with an original issue discount and as such the purchase price was $94,500. Under the terms of the debenture, the amount is unsecured, bears interest at 10% per annum, and was due on November 13, 2017. The debenture is convertible into common shares of the Company at a conversion price equal to 60% of the lowest trading price of the Company’s common stock of the ten prior trading days immediately preceding the issuance of the note. In the event of default, the conversion price decreases to 50% of the lowest trading price of the Company’s common stock of the ten prior trading days immediately preceding the issuance of the note and the interest rate increases to 20%. During the year ended April 30, 2020, the Company incurred $nil (2019 - $1,020 in penalties that were added to the principal balance of the note. During the three months ended July 31, 2020, the Company issued 1,115,335 shares of common stock for the conversion of $8,990 principal and $7,740 of accrued interest and the loan was fully converted.
Due to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and Hedging”. The fair value of the derivative liability resulted in a discount to the note payable of $105,000, of which $20,000 of the discount resulted from debt issuance costs. The carrying value of the convertible note was accreted over the term of the convertible note up to the face value of $105,000. As at July 31, 2020, the loan was in default, the carrying value of the note was $nil (April 30, 2020 - $8,990), and the unamortized total discount was $nil (2020 - $nil).
(b)On February 24, 2017, the Company issued a convertible debenture, to a non-related party, for proceeds of $33,000. Under the terms of the debenture, the amount is unsecured, bears interest at 12% per annum pre-default and 20% per annum thereafter, and was due on November 30, 2017. The debenture is convertible into common shares of the Company at a conversion price equal to 58% of the average of the lowest two trading
F-29
VERDE BIO HOLDINGS, INC.
Notes to the Condensed Consolidated Interim Financial Statements
(Expressed in US dollars)
(unaudited)
5.Convertible Debentures (continued)
prices of the Company’s common stock of the fifteen prior trading days immediately preceding the issuance of the note. During the three months ended July 31, 2020, the Company incurred a $nil (year ended April 30, 2020 - $nil) default fee on the note.
Due to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and Hedging. As at July 31, 2020, the loan was in default and the carrying value of the note was $93,965 (April 30, 2020 - $93,965).
(c)On May 9, 2017, the Company issued a convertible debenture, to a non-related party, totaling $36,450. Pursuant to the agreement, the note was issued with an original issue discount and as such the purchase price was $30,000. Under the terms of the debenture, the amount is unsecured, bears interest at 10% per annum, and was due on February 9, 2018. The debenture is convertible into common shares of the Company at a conversion price equal to 60% of the lowest trading price of the Company’s common stock of the past ten trading days prior to notice of conversion. In the event of default, the conversion price decreases to 50% of the lowest trading price of the Company’s common stock of the ten prior trading days immediately preceding the issuance of the note and the interest rate increases to 20%. During the three months ended July 31, 2020, the Company incurred $nil (year ended April 30, 2020 - $nil) in penalties that were added to the principal balance of the note.
Due to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and Hedging”. The fair value of the derivative liability resulted in a discount to the note payable of $36,450, of which $6,450 of the discount resulted from debt issuance costs. The carrying value of the convertible note was accreted over the term of the convertible note up to the face value of $36,450. As at July 31, 2020, the loan was in default and the carrying value of the note was $64,352 (April 30, 2020 - $64,352).
(d)On June 28, 2017, the Company issued a convertible debenture, to a non-related party, totaling $57,250. Pursuant to the agreement, the note was issued with an original issue discount and as such the purchase price and proceeds received was $49,500. Under the terms of the debenture, the amount is unsecured, bears interest at 12% per annum, and was due on March 28, 2018. The debenture is convertible into common shares of the Company at a conversion price equal to the lesser of the 50% of the lowest trading price of the Company’s common stock of the past twenty-five trading days prior to notice of conversion or the issuance of the note. In the event of default, the interest rate increases to 24%.
Due to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and Hedging”. The fair value of the derivative liability resulted in a discount to the note payable of $57,250, of which $7,750 of the discount resulted from debt issuance costs. The carrying value of the convertible note was accreted over the term of the convertible note up to the face value of $57,250. During the three months ended July 31, 2020, the Company issued 1,313,800 shares of common stock for the conversion of $5,412 of accrued interest and $500 of conversion fees and finance costs. During the year ended April 30, 2020, the Company issued 417,948 shares of common stock for the conversion of $18,044 of the accrued interest and $3,000 of conversion fees and finance costs. As at July 31, 2020, the loan was in default and the carrying value of the note was $55,341 (April 30, 2020 - $55,341).
(e)On July 19, 2017, the Company issued a convertible debenture, to a non-related party, in the amount of $33,333. Pursuant to the agreement, the note was issued with an original issue discount and as such the purchase price was $28,000. Under the terms of the debenture, the amount is unsecured, bears interest at 12%
F-30
VERDE BIO HOLDINGS, INC.
Notes to the Condensed Consolidated Interim Financial Statements
(Expressed in US dollars)
(unaudited)
5.Convertible Debentures (continued)
per annum, and was due on July 19, 2018. The debenture is convertible into common shares of the Company at a conversion price equal to 50% of the lowest trading price of the Company’s common stock of the past twenty-five trading days prior to notice of conversion or the issuance of the note. In the event of default, the interest rate increases to 24%. During the year ended April 30, 2020, the Company incurred $nil in penalties that were added to the principal balance of the note.
Due to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and Hedging”. The fair value of the derivative liability resulted in a discount to the note payable of $33,333, of which $5,333 of the discount resulted from debt issuance costs. The carrying value of the convertible note was be accreted over the term of the convertible note up to the face value of $33,333.
During the year ended April 30, 2020, the Company issued 377,664 shares of common stock for the conversion of $8,196 of the note and $3,212 of accrued interest. As at July 31, 2020, the loan was in default, the carrying value of the note was $1,203 (April 30, 2020 - $1,203), and the unamortized total discount was $nil (April 30, 2020 - $nil).
Included in the convertible debenture agreement is a $30,000 collateralized secured promissory note and a $33,333 back end note (with the same terms as the convertible debenture mentioned above). As of July 31, 2020, and at the date of filing, no proceeds have been received on the collateralized secured promissory note or the back-end note.
(f)On October 4, 2017, the Company issued a convertible debenture, to a non-related party, in the amount of $36,000, which was the first tranche of a convertible debenture totaling $102,000 (the “October 4, 2017 agreement”). Pursuant to the agreement, the note was issued with an original issue discount and as such the purchase price was $25,000. Under the terms of the debenture, the amount is unsecured, bears interest at 10% per annum, and was due on July 9, 2018. The debenture is convertible into common shares of the Company at a conversion price equal to the lesser of the 50% of the lowest trading price of the Company’s common stock of the past ten trading days prior to notice of conversion or the issuance of the note. In the event of default, the conversion price decreases to 40% of the lowest trading price of the Company’s common stock of the ten prior trading days immediately preceding the issuance of the note and the interest rate increases to 20%. During the year ended April 30, 2020, the Company incurred $nil in penalties that were added to the principal balance of the note.
Due to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and Hedging”. The fair value of the derivative liability resulted in a discount to the note payable of $36,000, of which $11,000 of the discount resulted from debt issuance costs. The carrying value of the convertible note was accreted over the term of the convertible note up to the face value of $36,000. As at July 31, 2020, the loan was in default, the carrying value of the note was $57,910 (April 30, 2020 - $57,910), and the unamortized total discount was $nil (April 30, 2020 - $nil).
(g)On September 28, 2017, the Company issued a convertible debenture, to a non-related party, in the amount of $33,333. Pursuant to the agreement, the note was issued with an original issue discount and as such the purchase price was $25,500. Under the terms of the debenture, the amount is unsecured, bears interest at 12% per annum, and was due on September 28, 2018. The debenture is convertible into common shares of the Company at a conversion price equal to the lesser of the 50% of the lowest trading price of the Company’s common stock of the past twenty-five trading days prior to notice of conversion or the issuance of the note. In the event of default there is a penalty of 10% of the principal balance of the outstanding note and the interest rate increases to 24%.
Due to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and Hedging”. The fair value of the derivative liability resulted in a discount to the note
F-31
VERDE BIO HOLDINGS, INC.
Notes to the Condensed Consolidated Interim Financial Statements
(Expressed in US dollars)
(unaudited)
5.Convertible Debentures (continued)
payable of $33,333, of which $7,833 of the discount resulted from debt issuance costs. The carrying value of the convertible note was accreted over the term of the convertible note up to the face value of $33,333. During the year ended April 30, 2020, the Company recorded $nil (2020 - $nil) principal penalty. As at July 31, 2020, the loan was in default, the carrying value of the note was $36,666 (April 30, 2020 - $36,666), and the unamortized total discount was $nil (April 30, 2020 - $nil).
Included in the convertible debenture agreement is a back end note for up to $33,333 (with the same amount of proceeds, original issue discount, maturity date, interest rate and conversion terms as the convertible debenture mentioned above). As of April 30, 2020, and at the date of filing, no proceeds have been received on the back-end note.
(h)On November 8, 2017, the Company issued a convertible debenture, to a non-related party, in the amount of $33,000, which was the second tranche of the October 4, 2017 agreement. Pursuant to the agreement, the note was issued with an original issue discount and as such the purchase price was $30,000. Under the terms of the debenture, the amount is unsecured, bears interest at 10% per annum, and was due on August 8, 2018. The debenture is convertible into common shares of the Company at a conversion price equal to the lesser of the 50% of the lowest trading price of the Company’s common stock of the past ten trading days prior to notice of conversion or the issuance of the note. In the event of default, the conversion price decreases to 40% of the lowest trading price of the Company’s common stock of the ten prior trading days immediately preceding the issuance of the note and the interest rate increases to 20%. During the year ended April 30, 2020, the Company incurred $nil in penalties that were added to the principal balance of the note.
Due to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and Hedging”. The fair value of the derivative liability resulted in a discount to the note payable of $33,000, of which $3,000 of the discount resulted from debt issuance costs. The carrying value of the convertible note was accreted over the term of the convertible note up to the face value of $33,000. As at July 31, 2020, the loan was in default, the carrying value of the note was $53,084 (April 30, 2020 - $53,084), and the unamortized total discount was $nil (April 30, 2020 - $nil).
(i)On December 26, 2017, the Company issued a convertible debenture, to a non-related party, in the amount of $33,000, which was the final tranche of the October 4, 2017 agreement. Pursuant to the agreement, the note was issued with an original issue discount and as such the purchase price was $30,000. Under the terms of the debenture, the amount is unsecured, bears interest at 10% per annum, and was due on September 26, 2018. The debenture is convertible into common shares of the Company at a conversion price equal to the lesser of the 50% of the lowest trading price of the Company’s common stock of the past ten trading days prior to notice of conversion or the issuance of the note. In the event of default, the conversion price decreases to 40% of the lowest trading price of the Company’s common stock of the ten prior trading days immediately preceding the issuance of the note and the interest rate increases to 20%. During the year ended April 30, 2020, the Company incurred $nil in penalties that were added to the principal balance of the note.
Due to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and Hedging”. The fair value of the derivative liability resulted in a discount to the note payable of $33,000, of which $3,000 of the discount resulted from debt issuance costs. The carrying value of the convertible note was accreted over the term of the convertible note up to the face value of $33,000. As at July 31, 2020, the loan was in default, the carrying value of the note was $53,084 (April 30, 2020 - $53,084), and the unamortized total discount was $nil (April 30, 2020 - $nil).
(j)On March 15, 2019, the Company issued a convertible debenture, to a non-related party, in the amount of $36,000. Pursuant to the agreement, the note was issued with an original issue discount and as such the purchase price was $30,000. Under the terms of the debenture, the amount is unsecured, bears interest at 10%
F-32
VERDE BIO HOLDINGS, INC.
Notes to the Condensed Consolidated Interim Financial Statements
(Expressed in US dollars)
(unaudited)
5.Convertible Debentures (continued)
per annum (20% default interest rate), and is due on December 15, 2019. The debenture is convertible into common shares of the Company at a conversion price equal to the lesser of the 65% of the lowest trading price of the Company’s common stock of the past twenty trading days prior to notice of conversion or the issuance of the note.
Due to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and Hedging”. The fair value of the derivative liability resulted in a discount to the note payable of $36,000, of which $6,000 of the discount resulted from debt issuance costs. The carrying value of the convertible note will be accreted over the term of the convertible note up to the face value of $36,000. As at July 31, 2020, the loan was in default, the carrying value of the note was $57,995 (April 30, 2020 - $57,995), and the unamortized total discount was $nil (April 30, 2020 - $nil).
(k)On September 12, 2019, the Company issued a convertible debenture, to a non-related party, in the amount of $33,000. Pursuant to the agreement, the note was issued with an original issue discount of $3,000 and as such the purchase price was $30,000. Under the terms of the debenture, the amount is unsecured, bears interest at 10% per annum (20% default interest rate), and is due on June 12, 2020. The debenture is convertible into common shares of the Company at a conversion price $0.078. The Company evaluated the convertible notes for a beneficial conversion feature in accordance with ASC 470-20 “Debt with Conversion and Other Options”. The Company determined that the conversion price was below the closing stock price on the commitment date, and the convertible notes contained a beneficial conversion feature. The Company recognized the intrinsic value of the embedded beneficial conversion feature of $30,462 as additional paid-in capital and reduced the carrying value of the convertible note to $2,538. The carrying value will be accreted over the term of the convertible notes up to their face value of $33,000. In the event of default, the conversion price decreases to 45% of the lowest trading price of the Company’s common stock of the twenty prior trading days immediately preceding the issuance of the note and the interest rate increases to 20%.
Due to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and Hedging”. The fair value of the derivative liability resulted in a discount to the note payable of $33,000. The carrying value of the convertible note was accreted over the term of the convertible note up to the face value of $33,000. As at July 31, 2020, the due date of the loan had been extended to June 12, 2021, the carrying value of the note was $33,000 (April 30, 2020 - $20,897), and the unamortized total discount was $nil (April 30, 2020 - $12,103). During the three months ended July 31, 2020, the Company recorded accretion expense of $12,103 (2020 - $nil).
(l)On November 13, 2019, the Company issued a convertible debenture, to a non-related party, in the amount of $28,193. Pursuant to the agreement, the note was issued with an original issue discount of $2,563 and as such the purchase price was $25,630. Under the terms of the debenture, the amount is unsecured, bears interest at 10% per annum (20% default interest rate), and is due on August 13, 2020. The debenture is convertible into common shares of the Company at a conversion price $0.048. The Company evaluated the convertible notes for a beneficial conversion feature in accordance with ASC 470-20 “Debt with Conversion and Other Options”. The Company determined that the conversion price was below the closing stock price on the commitment date, and the convertible notes contained a beneficial conversion feature. The Company recognized the intrinsic value of the embedded beneficial conversion feature of $18,795 as additional paid-in capital and reduced the carrying value of the convertible note to $9,398. The carrying value will be accreted over the term of the convertible notes up to their face value of $28,193.
As at July 31, 2020, the carrying value of the convertible notes was $27,153 (April 30, 2020 - $18,852) and had an unamortized discount of $1,040 (April 30, 2020 - $9,341). During the three months ended July 31, 2020, the Company recorded accretion expense of $8,301 (2020 - $nil).
F-33
VERDE BIO HOLDINGS, INC.
Notes to the Condensed Consolidated Interim Financial Statements
(Expressed in US dollars)
(unaudited)
5.Convertible Debentures (continued)
(m)On January 14, 2020, the Company issued a convertible debenture, to a non-related party, in the amount of $35,000. Pursuant to the agreement, the note was issued with an original issue discount of $5,000 and as such the purchase price was $30,000. Under the terms of the debenture, the amount is unsecured, bears interest at 10% per annum (20% default interest rate), and is due on October 14, 2020. The debenture is convertible into common shares of the Company at a conversion price $0.06. The Company evaluated the convertible notes for a beneficial conversion feature in accordance with ASC 470-20 “Debt with Conversion and Other Options”. The Company determined that the conversion price was below the closing stock price on the commitment date, and the convertible notes contained a beneficial conversion feature.
The Company recognized the intrinsic value of the embedded beneficial conversion feature of $23,333 as additional paid-in capital and reduced the carrying value of the convertible note to $11,667. The carrying value will be accreted over the term of the convertible notes up to their face value of $35,000.
As at July 31, 2020, the carrying value of the convertible notes was $25,823 (April 30, 2020 - $17,983) and had an unamortized discount of $9,177 (April 30, 2020 - $17,017). During the three months ended July 31, 2020, the Company recorded accretion expense of $7,840 (2020 - $nil).
(n)On January 23, 2020, the Company issued a convertible debenture, to a non-related party, in the amount of $68,000. Pursuant to the agreement, the note was issued with an original issue discount of $8,000 and as such the purchase price was $60,000. On January 23, 2020, the Company received the first tranche totaling $30,000 and recognized an original issue discount of $4,000. Under the terms of the debenture, the amount is unsecured, bears interest at 10% per annum (20% default interest rate), and is due on October 23, 2020. The debenture is convertible into common shares of the Company at a conversion price $0.048. The Company evaluated the convertible notes for a beneficial conversion feature in accordance with ASC 470-20 “Debt with Conversion and Other Options”. The Company determined that the conversion price was below the closing stock price on the commitment date, and the convertible notes contained a beneficial conversion feature. The Company recognized the intrinsic value of the embedded beneficial conversion feature of $22,667 as additional paid-in capital and reduced the carrying value of the convertible note to $11,333. The carrying value will be accreted over the term of the convertible notes up to their face value of $34,000.
As at July 31, 2020 the carrying value of the convertible notes was $24,250 (April 30, 2020 - $16,836) and had an unamortized discount of $9,750 (April 30, 2020 - $17,164). During the three months ended July 31, 2020, the Company recorded accretion expense of $7,414 (2020 - $nil).
(o)On March 25, 2020, the Company issued a convertible debenture, to a non-related party, in the amount of $13,000. Pursuant to the agreement, the note was issued with an original issue discount of $3,000 and as such the purchase price was $10,000. Under the terms of the debenture, the amount is unsecured, bears interest at 10% per annum (20% default interest rate), and is due on December 25, 2020. The debenture is convertible into common shares of the Company at a conversion price $0.018. The Company evaluated the convertible notes for a beneficial conversion feature in accordance with ASC 470-20 “Debt with Conversion and Other Options”. The Company determined that the conversion price was below the closing stock price on the commitment date, and the convertible notes contained a beneficial conversion feature.
The Company recognized the intrinsic value of the embedded beneficial conversion feature of $12,500 as additional paid-in capital and reduced the carrying value of the convertible note to $500. The carrying value will be accreted over the term of the convertible notes up to their face value of $13,000.
As at July 31, 2020, the carrying value of the convertible note was $2,321 (April 30, 2020 - $849) and had an unamortized discount of $10,679 (April 30, 2020 - $12,151). During three months ended July 31, 2020, the Company recorded accretion expense of $1,472 (2020 - $nil).
F-34
VERDE BIO HOLDINGS, INC.
Notes to the Condensed Consolidated Interim Financial Statements
(Expressed in US dollars)
(unaudited)
5.Convertible Debentures (continued)
(p) On May 28, 2020, the Company issued a convertible debenture, to a non-related party, in the amount of $20,000 as a financing fee related to the Equity Purchase Agreement discussed in Note 10. Under the terms of the debenture, the amount is unsecured, bears interest at 10% per annum (20% default interest rate), and is due on February 28, 2021. The debenture is convertible into common shares of the Company at a conversion price $0.01. The Company evaluated the convertible notes for a beneficial conversion feature in accordance with ASC 470-20 “Debt with Conversion and Other Options”. The Company determined that the conversion price was below the closing stock price on the commitment date, and the convertible notes contained a beneficial conversion feature.
The Company recognized the intrinsic value of the embedded beneficial conversion feature of $19,500 as additional paid-in capital and reduced the carrying value of the convertible note to $500. The carrying value will be accreted over the term of the convertible notes up to their face value of $20,000.
As at July 31, 2020, the carrying value of the convertible note was $1,079 (April 30, 2020 - $nil) and had an unamortized discount of $18,921 (April 30, 2020 - $nil). During the three months ended July 31, 2020, the Company recorded accretion expense of $579 (2020 - $nil).
(q) On March 4, 2020, the Company issued a convertible debenture, to a non-related party, in the amount of $34,000. Pursuant to the agreement, the note was issued with an original issue discount of $4,250 and as such the purchase price was $29,750. Under the terms of the debenture, the amount is unsecured, bears interest at 10% per annum (20% default interest rate), and is due on December 4, 2020. The debenture is convertible into common shares of the Company at a conversion price $0.048. The Company evaluated the convertible notes for a beneficial conversion feature in accordance with ASC 470-20 “Debt with Conversion and Other Options”. The Company determined that the conversion price was below the closing stock price on the commitment date, and the convertible notes contained a beneficial conversion feature.
The Company recognized the intrinsic value of the embedded beneficial conversion feature of $29,750 as additional paid-in capital and reduced the carrying value of the convertible note to $4,250. The carrying value will be accreted over the term of the convertible notes up to their face value of $34,000.
As at July 31, 2020, the carrying value of the convertible note was $13,026 (April 30, 2020 - $6,720) and had an unamortized discount of $20,974 (April 30, 2020 - $27,280). During the three months ended July 31, 2020, the Company recorded accretion expense of $6,306 (2020 - $nil).
6.Derivative Liability
The Company records the fair value of the of the conversion price of the convertible debentures disclosed in Note 5 in accordance with ASC 815, Derivatives and Hedging. The fair value of the derivative was calculated using a Binomial model. The fair value of the derivative liability is revalued on each balance sheet date with corresponding gains and losses recorded in the consolidated statement of operations. During the three months ended July 31, 2020, the Company recorded a loss on the change in fair value of derivative liability of $471,266 (July 31, 2019 – gain of $27,005). As at July 31, 2020, the Company recorded a derivative liability of $1,973,082 (April 30, 2020 - $1,605,568).
F-35
VERDE BIO HOLDINGS, INC.
Notes to the Condensed Consolidated Interim Financial Statements
(Expressed in US dollars)
(unaudited)
6.Derivative Liability (continued)
A summary of the activity of the derivative liability is shown below:
|
|
|
|
|
$
|
|
|
|
|
|
|
Balance, April 30, 2020
|
|
|
|
|
1,605,568
|
Adjustment for conversion
|
|
|
|
|
(103,752)
|
Mark to market adjustment at July 31, 2020
|
|
|
|
|
471,266
|
|
|
|
|
|
|
Balance, July 31, 2020
|
|
|
|
|
1,973,082
|
7.Convertible Preferred Series B Stock Liability
On June 13, 2019, the Company designated 1,000,000 shares of preferred stock as Series B. The holders of Series B preferred shares are not entitled to receive dividends except as may be declared by the Board at its sole and absolute discretion. Each Series B preferred share is convertible into common shares according to the following formula: the Stated Value of $1.10 per share of Series B preferred stock divided by the closing price of the Common Stock on the day prior to the conversion. Holders of Series B preferred stock shall not have voting rights.
On June 17, 2019, the Company issued 530,000 shares of Series B preferred stock, at a value of $583,000 based on the stated value of $1.10 per share, in exchange for the settlement of accounts payable of $266,523, notes payable of $990, accrued interest of $535, management fees of $33,000. The transaction resulted in a loss on settlement of debt of $281,952. Because the Series B shares represent an unconditional obligation that the Company must or may settle in a variable number of its equity shares and the monetary value of the obligation is predominantly based on a fixed monetary amount ($1.10 worth of common stock), the 530,000 shares with a balance of $583,000 is recorded as a liability on the balance sheet.
8.Common Shares
Authorized: 5,000,000,000 common shares with a par value of $0.01 per share.
On February 14, 2020, the Company effected a reverse stock split on basis of 1 new common share for every 100 old common shares. The impact of these reverse stock split has been applied on a retroactive basis to all periods presented.
On May 22, 2020, the company issued 20,000,000 common shares with par value of $20,000 for management services to the President and Director of the Company.
On May 22, 2020, the Company issued 4,000,000 common shares with the par value of $4,000 for consulting services.
On May 22, 2020, the Company issued 500,000 common shares with the par value of $500 for legal services.
On June 5, 2020, the Company issued 1,313,800 common shares with a fair value of $92,097 for the conversion of $5,412 of accrued interest, conversion fees of $500 and derivative liability of $82,030 and resulting in gain on settlement of debt of $4,155.
On June 5, 2020, the company issued 91,300 common shares with a fair value of $6,400 for the conversion of $1,370 accrued interest, conversion fees of $nil and derivative liability of $5,031 and resulting in gain on settlement of debt of $nil.
F-36
VERDE BIO HOLDINGS, INC.
Notes to the Condensed Consolidated Interim Financial Statements
(Expressed in US dollars)
(unaudited)
8.Common Shares (continued)
On June 29, 2020, the company issued 1,024,035 common shares with a fair value of $37,889 for the conversion of $8,990 of convertible notes payable, accrued interest of $6,370 and derivative liability of $25,681 and gain on settlement of debt of $3,152.
On June 10, 2020, the company issued 250,000 common shares as private placement with the par value of $250 and received proceeds of $5,000.
On July 1, 2020, the company issued 1,000,000 common shares as private placement with the par value of $1,000 and received proceeds of $20,000.
As at July 31, 2020, the Company received $15,000 for 750,000 shares. Due to the fact that shares have not been issued as July 31, 2020, this transaction has been recorded as subscription payable on the balance sheet. See note 11.
9.Preferred Shares
Authorized: 10,000,000 preferred shares with a par value of $0.001 per share
Convertible Preferred Series A stock
On April 18, 2017, the Company designated 500,000 shares of preferred stock as Series A. The holders of Series A preferred shares are entitled to receive dividends equal to the amount of the dividend or distribution per share of common stock payable multiplied by the number of shares of common stock the shares of Series A preferred shares held by such holder are convertible into. Series A preferred shares are convertible at a factor of 10,000 Series A shares for one common share. Each holder of Series A preferred shares is entitled to cast 10,000 votes for every one Series A preferred share held.
Convertible Preferred Series B stock – see Note 7.
10.Commitments and Contingencies
On May 28, 2020, the Company and an unrelated party entered into equity financing agreement, whereby the investor shall invest up to $5,000,000 of common stock over a period of 36 months pursuant to a “put” option held by the Company, subject to certain limitations. The price of the common shares shall be equal to 80% of the lowest traded price during the 10 trading days leading up to each put notice, subject to a floor of $0.04 per share. As part of the agreement, the Company issued a convertible promissory note to the unrelated party to offset transaction costs of $20,000, which was deemed as earned upon the execution of the agreement. The note is convertible into common stock of the Company at a fixed price of $0.01, which equals the lowest traded price for the common stock on the trading day preceding the execution of the note (see Note 5(p)). As of July 31, 2020, no common shares have been sold pursuant to the equity financing agreement.
On February 5, 2020, the Company signed a joint venture agreement (the “Joint Venture”) for a 25% share in the Hemp seed and genetics industry. The Company has committed to contribute $300,000 to the joint venture on a to be mutually agreed upon schedule. Additionally, the Company will issue 1,500,000 common shares to the other members of the joint venture as compensation for their initial contributions. On May 11, 2020, the Joint Venture was cancelled.
11. Subsequent Events
On August 10, 2020, the Company issued 11,250,000 common shares of the Company, of which $15,000 was received as at July 31, 2020.
F-37
VERDE BIO HOLDINGS, INC.
Notes to the Condensed Consolidated Interim Financial Statements
(Expressed in US dollars)
(unaudited)
11. Subsequent Events (continued)
On August 17, 2020, GHS Investments, LLC (“GHS”) elects to exercise its conversion right pursuant to $69,900 convertible note dated May 9, 2017. With conversion right, the GHS agreed to convert the accrued interest of $9,060 into 1,200,000 free trading shares of common stock of Verde Bio Holdings Inc.
On July 19, 2020, the Company signed a purchase agreement for a 50% right, title and interest to certain oil and gas properties for consideration of $200,000 payable via shares of the Company. The agreement was closed on August 10, 2020 with the issuance of 10,000,000 common shares of the Company.
On September 10, 2020, the Company issued a convertible promissory note to an unrelated party for $35,000. Pursuant to the agreement, the note was issued with a 10% original issue discount and with $2,000 being withheld by the Holder to offset transaction costs. As such the purchase price was $29,500. The note is convertible into common stock of the Company at $0.0132, which equals 60% multiplied by the lowest Trading Price for the Common Stock on the Trading Day preceding the execution of the note. The promissory note shall bear interest at 10% per annum and is due on June 10, 2021.
On September 23,2020, the Company issued 4,801,500 shares of common stock to three holders of Series B preferred stock in exchange for an aggregate of 87,300 shares of Series B preferred stock
On October 8, 2020, GHS Investments, LLC (“GHS”) elected to exercise its conversion right under that certain Convertible Promissory Note in the amount of $59,900 dated May 9, 2017 and covert convert the principal plus accrued interest of $13,100 into 2,000,000 shares of common stock of Verde Bio Holdings, Inc.
On November 03, 2020, the Company issued a convertible promissory note to an unrelated party for $35,000. Pursuant to the agreement, the note was issued with a 10% original issue discount and with $2,000 being withheld by the Holder to offset transaction costs. As such the purchase price was $30,000. The note is convertible into common stock of the Company at $0.0118, which equals 60% multiplied by the lowest Trading Price for the Common Stock on the Trading Day preceding the execution of the note. The promissory note shall bear interest at 10% per annum and is due on August 03, 2021.
Subsequent to July 31, 2020, the Company received $22,000 in advances from a related party. The amount advanced is unsecured, non-interest bearing, and due on demand.
F-38