VBHI Verde Bio Holdings Inc (PK)

Notes to the Consolidated Financial Statements

(Expressed in US dollars)

2.Summary of Significant Accounting Policies (continued) 

(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, 2021 and 2020, 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)Long-Lived Assets  

Long-lived assets, such as property and equipment, mineral properties, and purchased intangibles with finite lives (subject to amortization), are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable in accordance with ASC 360, Property, Plant, and Equipment and ASC 350, Intangibles – Goodwill and Other. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life. The Company’s long-lived assets consist of computer software and some oil and gas properties. As of April 30, 2021, the computer software has not been placed in use.

Recoverability of assets is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by an asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized as the amount by which the carrying amount exceeds the estimated fair value of the asset. The estimated fair value is determined using a discounted cash flow analysis. Any impairment in value is recognized as an expense in the period when the impairment occurs.  

(f)Royalty Interest in Oil and Gas Properties 

The Company follows the full cost method of accounting for oil and natural gas operations.   Under this approach, all acquisition costs incurred for the purposes of acquiring mineral and royalty interests are capitalized into a full cost pool.  Costs associated with general corporate activities are expensed in the period incurred.

Capitalized costs are amortized using the units-of-production method.  Under this method, the provision for depletion is calculated by multiplying total production for the period by a depletion rate.  The depletion rate is determined by dividing the total unamortized cost base by net equivalent proved reserves at the beginning of the period.

Costs associated with unevaluated properties are excluded from the amortizable cost base until a determination has been made as to the existence of proved reserves.  Unevaluated properties are reviewed periodically to determine whether the costs incurred should be reclassified to the full cost pool and subjected to amortization.  The costs associated with unevaluated properties primarily consist of acquisition costs and capitalized general and administrative costs.  Unevaluated properties are assessed for impairment on an individual basis or as a group if properties are individually insignificant.

F-8

VERDE BIO HOLDINGS INC.

Notes to the Consolidated Financial Statements

(Expressed in US dollars)

2.Summary of Significant Accounting Policies (continued) 

(f)Royalty Interest in Oil and Gas Properties (continued) 

The assessment includes consideration of the following factors, among others: expectation of future drilling activity; past drilling results and activity; geological and geophysical evaluations; the assignment of proved reserves; and the economic viability of development if proved reserves are assigned. During any period in which these factors indicate an impairment, the cumulative acquisition costs incurred to date for such property are transferred to the full cost pool and are then subject to amortization. Sales and abandonments of oil and natural gas properties being amortized are accounted for as adjustments to the full cost pool, with no gain or loss recognized unless the adjustments would significantly alter the relationship between capitalized costs and proved reserves. A significant alteration would not ordinarily be expected to occur upon the sale of reserves involving less than 25% of the reserve quantities of a cost center.

Natural gas volumes are converted to barrels of oil equivalent (Boe) at the rate of six thousand cubic feet (Mcf) of natural gas to one barrel (Bbl) of oil. This convention is not an equivalent price basis and there may be a large difference in value between an equivalent volume of oil versus an equivalent volume of natural gas.

Under the full cost method of accounting, total capitalized costs of oil and natural gas properties, net of accumulated depletion and related deferred income taxes, may not exceed an amount equal to the present value of future net revenues from proved reserves, discounted at 10% per annum ("PV-10"), plus the cost of unevaluated properties less related income tax effects (the ceiling limitation). A ceiling limitation is calculated at each reporting period. If total capitalized costs, net of accumulated DD&A and related deferred income taxes are greater than the ceiling limitation, a write-down or impairment of the full cost pool is required. A write-down of the carrying value of the full cost pool is a noncash charge that reduces earnings and impacts equity in the period of occurrence and typically results in lower depletion expense in future periods. Once incurred, a write-down cannot be reversed at a later date. The ceiling limitation calculation is prepared using an unweighted arithmetic average of oil prices ("SEC oil price") and natural gas prices ("SEC gas price") as of the first day of each month for the trailing 12-month period ended April 30, 2021, adjusted by area for energy content, transportation fees and regional price differentials, as required under the guidelines established by the SEC. If applicable, these net wellhead prices would be further adjusted to include the effects of any fixed price arrangements for the sale of oil and natural gas.

(g)Leases 

Right-of-Use Asset

The Company recognizes right-of-use assets at the commencement date of the lease which is measured at cost, less any accumulated depreciation and impairment losses and adjusted for any remeasurement of lease liabilities. The cost of the right-of-use assets includes the amount of lease liability recognized on the commencement or lease standard adoption date. The right-of-use asset is depreciated over a useful life of the underlying asset.

Lease Liability

At the commencement date of the lease, the Company recognizes the lease liability as measured by the present value of the lease payments over the term of the lease. Fixed lease payments are included in the present value calculation and variable lease payments are expensed as they are incurred. If an interest rate is not explicit in a lease, the Company utilizes its incremental borrowing rate for a period that closely matches the lease term.

The incremental rate of borrowing at the lease commencement date was used to calculate the present value of the lease liability as the implicit interest rate of the lease is not readily determinable. Subsequent to the recognition of the lease liability on the commencement date the lease liability increases through accretion of interest and decreases as lease payments are made. The carrying amount of the lease liability is remeasured if there is a modification in the term of the lease or in fixed payment amounts.

F-9

VERDE BIO HOLDINGS INC.

Notes to the Consolidated Financial Statements

(Expressed in US dollars)

2.Summary of Significant Accounting Policies (continued) 

(h)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, 2021, the Company had 7,718,600 (2020 – 39,994,463) potentially dilutive common shares outstanding.

(i)  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, 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, 2021, and 2020. 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, 2021 and 2020 on a recurring basis:

F-10

VERDE BIO HOLDINGS INC.

Notes to the Consolidated Financial Statements

(Expressed in US dollars)

2.Summary of Significant Accounting Policies (continued) 

(j)Revenue Recognition 

The Company recognizes revenue from royalties of its oil and gas interests in accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”).  Under ASC 606, the Company records revenue based on five criteria: (i) identify the contract; (ii) identify separate performance obligations; (iii) determine the transaction price; (iv) allocate the transaction price among the performance obligations; and (v) recognize revenues as the performance obligations are satisfied.

As the Company derives its revenues from its royalty interests, it recognizes revenue based on the monthly royalties it receives from the specific operator or broker of each oil and gas interest held by the Company. The Company’s performance obligation is considered complete once the monthly production revenues are calculated and receivable, as the Company is not obligated to perform any additional services to earn its monthly royalty revenue.  

Revenues from royalty properties are recorded under the cash receipts approach as directly received from the remitters’ statement accompanying the revenue check. Since the revenue checks are generally received 30 to 90 days after the production month, the Company accrues for revenue earned but not received by estimating production volumes and product prices.

Transaction price allocated to remaining performance obligations

The Company’s right to royalty income does not originate until production occurs and, therefore, is not considered to exist beyond each day’s production. Therefore, there are no remaining performance obligations under any of the Company’s royalty income contracts.

Contract balances

Under the Company’s royalty income contracts, it would have the right to receive royalty income from the producer once production has occurred, at which point payment is unconditional. Accordingly, the Company’s royalty income contracts do not give rise to contract assets or liabilities.

Prior-period performance obligations

The Company records revenue in the month production is delivered to the purchaser. However, settlement statements for certain oil and gas sales may not be received for 30 to 90 days after the date production is delivered, and as a result, the Company is required to estimate the amount of royalty income to be received based upon the Company’s interest. The Company records the differences between its estimates and the actual amounts received for royalties in the quarter that payment is received from the producer. Identified differences between the Company’s revenue estimates and actual revenue received historically have not been significant. For the year ended April 30, 2021, revenue recognized in the reporting period related to performance obligations satisfied in prior reporting periods was not material. The Company believes that the pricing provisions of its oil and gas contracts are customary in the industry. To the extent actual volumes and prices of oil and natural gas sales are unavailable for a given reporting period because of timing or information not received from third parties, the royalties related to expected sales volumes and prices for those properties are estimated and recorded.

During the year ended April 30, 2021, the Company earned $48,520 (2020 - $nil) of royalty interest related to its oil and gas properties.  

(k)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

F-11

VERDE BIO HOLDINGS INC.

Notes to the Consolidated Financial Statements

(Expressed in US dollars)

2.Summary of Significant Accounting Policies (continued) 

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.

(l)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, 2021, and 2020, 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.

(j)Concentrations 

The Company purchases oil and gas royalty interests, of which 87% were purchased from the same broker for the year ended April 30, 2021.

(k)Recent Accounting Pronouncements 

The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

3.Right-of-Use Operating Lease Asset and Lease Liability 

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease calculated by discounting fixed lease payments over the lease term at the rate implicit in the lease or the Company’s incremental borrowing rate. Lease liabilities are increased by interest and reduced by payments each period, and the ROU asset is amortized over the lease term. For operating leases, interest on the lease liability and the amortization of the ROU asset result in straight-line rent expense over the lease term. ROU assets and liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term.

On March 11, 2021, the Company entered into a sublease agreement with a sublandlord regarding its office at 5750 Genesis Court, Suite 220, Frisco, Texas 75036. The agreement was treated as an operating lease in accordance with ASC 842, Lease, which resulted in initial recognition of right-of-use asset and lease liability of $122,120. The incremental borrowing rate used in the calculation is 18%.

F-12

F-13

On July 19, 2020, the Company signed a purchase agreement for a 50% right, title and interest to certain oil and gas properties located in the United States in exchange for 10,000,000 shares of common stock of the Company with fair value of $245,000 which was determined based on the fair value of the Company’s common shares on the date of issuance on August 10, 2020.

On September 21, 2020, the Company signed a purchase agreement for a 100% right, title and interest to certain oil and gas properties located in the United States for consideration of 5,000,000 shares of common stock of the Company with a fair value of $126,500.

On March 5, 2021, the Company signed a purchase and sale agreement for 100% right, title and interest to certain oil and gas properties located in Adams County, Colorado for cash consideration of $150,000.

On March 16, 2021, the Company signed a purchase and sale agreement for 100% right, title and interest to certain oil and gas properties located in Weld County, Colorado for cash consideration of $152,000.

On March 18, 2021, the Company signed a purchase and sale agreement for 100% right, title and interest to certain oil and gas properties located in Desoto and Sabine Parish, LA and Loving County, Texas for cash consideration of $127,500.

On March 18, 2021, the Company signed a purchase and sale agreement for 100% right, title and interest to certain oil and gas properties located in Adams County, Colorado for cash consideration of $150,000.

On March 22, 2021, the Company signed a purchase and sale agreement for 100% right, title and interest to certain oil and gas properties located in Weld County, Colorado for cash consideration of $152,000.

On March 26, 2021, the Company signed a purchase and sale agreement for 100% right, title and interest to certain oil and gas properties located in Red River and Sabine Parish, LA for cash consideration of $380,952.

On April 1, 2021, the Company signed a purchase and sale agreement for 100% right, title and interest to certain oil and gas properties located in Red River and Desoto Parish, LA for cash consideration of $359,975.

On April 1, 2021, the Company signed a purchase and sale agreement for 100% right, title and interest to certain oil and gas properties located in Ohio County, West Virginia for cash consideration of $133,000.

On April 13, 2021, the Company signed a purchase and sale agreement for 100% right, title and interest to certain oil and gas properties located in Laramie County, Wyoming for cash consideration of $502,764.

On April 19, 2021, the Company signed a purchase and sale agreement for 100% right, title and interest to certain oil and gas properties located in Howard County, Texas for cash consideration of $430,000.

5.Related Party Transactions 

(a)During the year ended April 30, 2021, the Company incurred $204,000 (2020 - $nil) in management fees to the President and Director of the Company which was paid in common shares (see Note 11). 

(b)During the year ended April 30, 2021, the Company incurred $nil (2020 - $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 9). 

(c)As at April 30, 2021, the Company owed $nil (2020 –$19,056) to the President and Director of the Company. The amount is non-interest bearing and due on demand. 

F-14

VERDE BIO HOLDINGS INC.

Notes to the Consolidated Financial Statements

(Expressed in US dollars)

6. Notes Payable 

(a) As at April 30, 2021, the Company owed $nil (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 April 30, 2021, the Company owed $nil (2020 – $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, 2021, the Company owed $nil (2020 – $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, 2021, the Company owed $nil (2020 – $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. 

(e)On May 11, 2020, the Company received $22,917 from the United States Small Business Association (“USSBA”) as part of the Paycheck Protection Program (“PPP”).  On April 27, 2021, the USSBA informed the Company that they PPP loan was forgiven.  

7.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, 2021, 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 April 30, 2021, the carrying value of the note was $nil (2020 - $8,990) and the Company recorded derivative liability of $nil (2020 – $32,339).

(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.  On April 22, 2021, the Company settled the outstanding balance owing with a combination of cash and common shares.  Refer to Note 10. 

Due to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and Hedging. As at April 30, 2021, the carrying value of the note was $nil (2020 - $93,965) and the Company recorded derivative liability of $nil (2020 – $229,203).

F-15

VERDE BIO HOLDINGS INC.

Notes to the Consolidated Financial Statements

(Expressed in US dollars)

7.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, 2021, the Company issued 13,082,384 shares of common stock for the conversion of $64,352 principal and $33,817 of accrued interest. 

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 April 30, 2021, the carrying value of the note was $nil (2020 - $64,352) and the Company recorded derivative liability of $nil (2020 - $208,701).

(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%. 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. During the year ended April 30, 2021, the Company issued 26,618,284 shares of common stock for the conversion of $55,341 of principal, $45,742 of accrued interest and $2,500 of conversion fees and finance costs. 

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. As at April 30, 2021, the carrying value of the note was $nil (2020 - $55,341) and the Company recorded derivative liability of $nil (2020 - $148,430).

(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% 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%. 

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.

F-16

VERDE BIO HOLDINGS INC.

Notes to the Consolidated Financial Statements

(Expressed in US dollars)

7.Convertible Debentures (continued) 

As at April 30, 2021, the carrying value of the note was $1,203 (April 30, 2020 - $1,203) and the Company recorded derivative liability of $8,519 (April 30, 2020 - $7,896).

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, 2021, and at the date of filing, no proceeds have been received on the collateralized secured promissory note or the back-end note.

(f)On September 19, 2017, the Company issued a convertible debenture, to a non-related party, in the amount of $36,000, which was the first tranche of funding 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%. On April 22, 2021, the Company settled the outstanding balance owing with a combination of cash and common shares.  Refer to Note 10.  

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 April 30, 2021, the carrying value of the note was $nil (2020 - $57,910) and the Company recorded derivative liability of $nil (2020 - $268,129).

(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%.  During the year ended April 30, 2021, the Company issued 11,733,557 to convert $36,666 of principal and $25,831 of accrued interest and the note 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 $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. As at April 30, 2021, the carrying value of the note was $nil (2020 - $36,666) and the Company recorded derivative liability of $nil (2020 - $131,830).

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, 2021, and at the date of filing, no proceeds have been received on the back-end note.

F-17

VERDE BIO HOLDINGS INC.

Notes to the Consolidated Financial Statements

(Expressed in US dollars)

7.Convertible Debentures (continued) 

(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, 2021, the Company issued 23,400,000 common shares for the conversion of $32,400 of principal and $4,074 of accrued interest.  On April 22, 2021, the Company settled the outstanding balance owing with a combination of cash and common shares.  Refer to Note 10.  

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 April 30, 2021, the carrying value of the note was $nil (2020 - $53,084) and the Company recorded derivative liability of $nil (2020 - $219,765).

(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%. On April 22, 2021, the Company settled the outstanding balance owing with a combination of cash and common shares.  Refer to Note 10.  

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 April 30, 2021, the carrying value of the note was $nil (2020 - $53,084) and the Company recorded derivative liability of $nil (2020 - $231,308).

(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% 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. On April 22, 2021, the Company settled the outstanding balance owing with a combination of cash and common shares.  Refer to Note 10.  

F-18

VERDE BIO HOLDINGS INC.

Notes to the Consolidated Financial Statements

(Expressed in US dollars)

7.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 $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, 2021, the carrying value of the note was $nil (2020 - $57,995) and recorded derivative liability of $ nil (2020 - $127,967).

(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 due on June 12, 2020, which was extended until June 12, 2021.  The debenture is convertible into common shares at a conversion price of $0.078 per share. The Company evaluated the convertible notes for a beneficial conversion feature in accordance with ASC 470-20 “Debt with Conversion and Other Options” and determined that there was a beneficial conversion features as the conversion price was below the closing stock price on the commitment date. 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%. On April 22, 2021, the Company settled the outstanding balance owing with a combination of cash and common shares.  Refer to Note 10.  

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 April 30, 2021, the carrying value of the note was $nil (2020 - $20,897), and the unamortized total discount was $nil (2020 - $12,103). During the year ended April 30, 2021, the Company recorded accretion expense of $12,103 (2020 - $18,359).

(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, which was extended to February 13, 2021. The debenture is convertible into common shares of the Company at a conversion price of $0.048 per share. The Company evaluated the convertible notes for a beneficial conversion feature in accordance with ASC 470-20 “Debt with Conversion and Other Options” and determined that there was a beneficial conversion features as the conversion price was below the closing stock price on the commitment date. 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. On April 22, 2021, the Company settled the outstanding balance owing with a combination of cash and common shares.  Refer to Note 10.  

As at April 30, 2021, the carrying value of the convertible notes was $nil (2020 - $18,852) and had an unamortized discount of $nil (2020 - $9,341). During the year ended April 30, 2021, the Company recorded accretion expense of $9,341 (2020 - $9,454).

F-19

VERDE BIO HOLDINGS INC.

Notes to the Consolidated Financial Statements

(Expressed in US dollars)

7.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, which was extended to April 14, 2021. The debenture is convertible into common shares of the Company at a conversion price of $0.06 per share. 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. On April 22, 2021, the Company settled the outstanding balance owing with a combination of cash and common shares.  Refer to Note 10.  

  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, 2021, the carrying value of the convertible notes was $nil (2020 - $17,983) and had an unamortized discount of $nil (2020 - $17,017). During the year ended April 30, 2021, the Company recorded accretion expense of $17,017 (2020 - $6,316). 

(n)On January 23, 2020, the Company issued a convertible debenture, to a non-related party, in the amount of $34,000, which was the first tranche of a convertible debenture totaling $68,000 and 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, which was extended to April 23, 2021. The debenture is convertible into common shares of the Company at a conversion price of $0.048 per share. 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. On April 22, 2021, the Company settled the outstanding balance owing with a combination of cash and common shares.  Refer to Note 10.  

As at April 30, 2021, the carrying value of the convertible notes was $nil (2020 - $16,836) and had an unamortized discount of $nil (2020 - $17,164). During the year ended April 30, 2021, the Company recorded accretion expense of $17,164 (2020 - $5,503).

(o)On March 4, 2020, the Company issued a convertible debenture, to a non-related party, in the amount of $34,000. This is the second tranche of the January 23, 2020 convertible note. and 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, which was extended to June 4, 2021. The debenture is convertible into common shares of the Company at a conversion price of $0.048 per share. 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. On April 22, 2021, the Company settled the outstanding balance owing with a combination of cash and common shares.  Refer to Note 10.  

F-20

VERDE BIO HOLDINGS INC.

Notes to the Consolidated Financial Statements

(Expressed in US dollars)

7.Convertible Debentures (continued) 

As at April 30, 2021, the carrying value of the convertible note was $nil (2020 - $6,720) and had an unamortized discount of $nil (2020 - $27,280). During the year ended April 30, 2021, the Company recorded accretion expense of $27,280 (2020 - $2,470).

(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 of $0.018 per share. 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. On April 22, 2021, the Company settled the outstanding balance owing with a combination of cash and common shares.  Refer to Note 10.

As at April 30, 2021, the carrying value of the convertible note was $nil (2020 - $849) and had an unamortized discount of $nil (2020 - $12,151). During the year ended April 30, 2021, the Company recorded accretion expense of $12,151 (2020 - $349).

(q)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 of $0.01 per share. 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. On April 22, 2021, the Company settled the outstanding balance owing with a combination of cash and common shares.  Refer to Note 10.

During the year ended April 30, 2021, the Company recorded accretion expense of $19,500 (2020 - $nil).

(r)On September 10, 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 June 10, 2021. The debenture is convertible into common shares of the Company at a conversion price of $0.0132 per share. 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. 

F-21

VERDE BIO HOLDINGS INC.

Notes to the Consolidated Financial Statements

(Expressed in US dollars)

7.Convertible Debentures (continued) 

The Company recognized the intrinsic value of the embedded beneficial conversion feature of $23,030 as additional paid-in capital and reduced the carrying value of the convertible note to $11,970. The carrying value will be accreted over the term of the convertible notes up to their face value of $35,000. On April 22, 2021, the Company settled the outstanding balance owing with a combination of cash and common shares.  Refer to Note 10.

During the year ended April 30, 2021, the Company recorded accretion expense of $23,030 (2020 - $nil).

(s)On November 3, 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 August 3, 2021. The debenture is convertible into common shares of the Company at a conversion price of $0.0118 per share. 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 $29,322 as additional paid-in capital and reduced the carrying value of the convertible note to $5,678. The carrying value will be accreted over the term of the convertible notes up to their face value of $35,000. On April 22, 2021, the Company settled the outstanding balance owing with a combination of cash and common shares.  Refer to Note 10.

During the year ended April 30, 2021, the Company recorded accretion expense of $29,322 (2020 - $nil).

(t)On December 22, 2020, the Company issued a convertible debenture, to a non-related party, in the amount of $30,556. 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 (5% default interest rate), and is due on June 22, 2021. The debenture is convertible into common shares of the Company at a conversion price equal to 50% of the average of the two lowest trading prices of the Company’s common stock of the past twenty-five 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 $24,500, of which $6,056 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 $30,556. During the year ended April 30, 2021, the Company made a cash repayment of $45,349 which is comprised of $30,556 of principal, $4,328 of accrued interest and $10,465 of repayment penalties.

During the year ended April 30, 2021, the Company recorded accretion expense of $30,556 (2020 - $nil).

(u)On January 6, 2021, the Company issued a convertible debenture, to a non-related party, in the amount of $55,500. Pursuant to the agreement, the note was issued with an original issue discount of $3,500 and as such the purchase price was $52,000. Under the terms of the debenture, the amount is unsecured, bears interest at 12% per annum (22% default interest rate), and is due on January 6, 2022. The debenture may be convertible at any time after 180 days of the date of issuance into common shares of the Company at a conversion price equal to the lesser of the 58% 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. 

F-22

VERDE BIO HOLDINGS INC.

Notes to the Consolidated Financial Statements

(Expressed in US dollars)

7.Convertible Debentures (continued) 

Due to this provision, the Company considered whether the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and Hedging”. As the note was not convertible until 180 days following issuance, no derivative liability was initially recognized.  On April 13, 2021, the Company repaid $72,912, resulting in a loss on settlement of debt of $17,412.

During the year ended April 30, 2021, the Company recorded accretion expense of $3,500 (2020 - $nil).

(v)On February 2, 2021, the Company issued a convertible debenture, to a non-related party, in the amount of $43,500. Pursuant to the agreement, the note was issued with an original issue discount of $3,500 and as such the purchase price was $40,000. Under the terms of the debenture, the amount is unsecured, bears interest at 12% per annum (22% default interest rate), and is due on February 2, 2022. The debenture may be convertible at any time after 180 days of the date of issuance into common shares of the Company at a conversion price equal to the lesser of the 58% 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 Company considered whether the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and Hedging”. As the note was not convertible until 180 days following issuance, no derivative liability was initially recognized. On April 13, 2021, the Company repaid $57,147, resulting in a loss on settlement of debt of $13,647.

During the year ended April 30, 2021, the Company recorded accretion expense of $3,500 (2020 - $nil).

8.Derivative Liability 

The fair value of the derivative liability 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, 2021, the Company recorded a loss on the change in fair value of $121,974 (2020 –$794,930). As at April 30, 2021, the Company recorded a derivative liability of $8,519 (2020 - $1,605,568).

A summary of the activity of the derivative liability is shown below:

F-23

VERDE BIO HOLDINGS INC.

Notes to the Consolidated Financial Statements

(Expressed in US dollars)

9.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, 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. During the year ended April 30, 2021, the Company issued 21,441,440 shares of common stock for the conversion of 334,600 shares of Series B preferred stock. As of April 30, 2021, the carrying value of 195,400 Convertible Preferred Series B Stock Liability was $214,940.

10.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 splits has been applied on a retroactive basis to all periods presented.

Share Transactions for the Year Ended April 30, 2021

On May 22, 2020, the Company issued 20,000,000 common shares valued at $204,000 for management services to the President and Director of the Company.

On May 22, 2020, the Company issued 4,000,000 common shares valued at $40,800 for consulting services.

On May 22, 2020, the Company issued 500,000 common shares with valued at $5,100 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, $55,340 of convertible notes payable, conversion fees of $500 and derivative liability of $82,030 and resulting in loss 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, and derivative liability of $5,031 and resulting in gain on settlement of debt of $1.

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 August 10, 2020, the Company issued 10,000,000 common shares pursuant to the terms of the oil and gas option agreement valued at $245,000.

On August 19, 2020, the Company issued 1,200,000 common shares with a fair value of $20,400 for the conversion of accrued interest of $9,060 and gain on settlement of debt of $7,759.

On October 5, 2020, the Company issued 4,801,500 shares of common stock with a fair value of $96,030 for the conversion of 87,300 shares of Series B preferred stock (see Note 9).

F-24

VERDE BIO HOLDINGS INC.

Notes to the Consolidated Financial Statements

(Expressed in US dollars)

10.Common Shares (continued) 

On October 9, 2020, the Company issued 2,000,000 shares of common stock with a fair value of $52,400 for the conversion of accrued interest of $13,100 and loss on settlement of debt of $28,958.

On December 22, 2020, the Company issued 913,756 shares of common stock with at fair value of $27,413 for Commitment fee for Equity Purchase Agreement (see Note 14).

On December 28, 2021, the Company issued 2,450,000 common shares with a fair value of $105,350 for the conversion of $8,989 of accrued interest, $8,773 of convertible notes payable, and derivative liability of $96,394 and resulting in gain on settlement of debt of $8,806.

On January 21, 2021, the Company issued 2,625,900 common shares with a fair value of $65,910 for the conversion of $10,459 of accrued interest, $4,796 of convertible notes payable, conversion fees of $500 and derivative liability of $54,546 and resulting in gain on settlement of debt of $4,391.

On January 25, 2021, the Company issued 1,501,500 shares of common stock with a fair value of $30,031 for the conversion of 27,300 shares of Series B preferred stock (see Note 9).

On February 8, 2021, the Company issued 1,736,842 shares of common stock with a fair value of $33,000 for the conversion of 30,000 shares of Series B preferred stock (see Note 9).

On February 9, 2021, the Company issued 5,000,000 common shares pursuant to the terms of the oil and gas option agreement valued at $126,500.

On February 11, 2021, the Company issued 3,751,900 shares of common stock with a fair value of $140,696 for the conversion of $764 of accrued interest, $19,897 of convertible notes payable, $500 of conversion fee and $93,141 of derivative liability and resulting in loss on settlement of debt of $25,894.

On February 19, 2021, the Company issued 2,926,000 shares of common stock with a fair value of $61,446 for the conversion of $27,431 of convertible notes payable and $36,841 of derivative liability, resulting in gain on settlement of debt of $2,826.

On March 3, 2021, the Company issued 2,926,000 shares of common stock with a fair value of $49,449 for the conversion of $19,259 of convertible notes payable, $2,629 of accrued interest, and $26,483 of derivative liability, resulting in loss on settlement of debt of $1,078.

On March 10, 2021, the Company issued 2,640,000 shares of common stock with a fair value of $33,000 for the conversion of 30,000 shares of Series B preferred stock (see Note 9).

On March 11, 2021, the Company issued 1,580,384 shares of common stock with a fair value of $28,130 for the conversion of $8,888 of convertible notes payable, $40 of accrued interest, and $13,698 of derivative liability, resulting in loss on settlement of debt of $5,503.

On March 17, 2021, the Company issued 5,412,054 shares of common stock with a fair value of $88,000 for the conversion of 80,000 shares of Series B preferred stock (see Note 9).

On March 22, 2021, the Company issued 5,000,000 shares of common stock with a fair value of $135,000 to settle accounts payable of $50,000, resulting in loss on settlement of $85,000.

On March 23, 2021, the Company issued 9,000,000 shares of common stock with a fair value of $252,000 for the conversion of $13,440 of convertible notes payable, $30,636 of accrued interest, and $181,915 of derivative liability, resulting in loss on settlement of debt of $26,009.

On March 30, 2021, the Company issued 14,400,000 shares of common stock with a fair value of $230,400 for the conversion of $44,470 of convertible notes payable, $173 of accrued interest, and $153,629 of derivative liability, resulting in loss on settlement of debt of $32,128.

On March 29, 2021, the Company issued 13,102,398 shares of common stock with a fair value of $258,117 for the conversion of $30,648 of convertible notes payable, $927 of accrued interest, $500 of conversion fee, and $154,986 of derivative liability, resulting in loss on settlement of debt of $71,086.

F-25

VERDE BIO HOLDINGS INC.

Notes to the Consolidated Financial Statements

(Expressed in US dollars)

10.Common Shares (continued) 

On April 7, 2021, the Company issued 5,349,544 shares of common stock with a fair value of $88,000 for the conversion of 80,000 shares of Series B preferred stock (see Note 9).

On April 7, 2021, the Company issued 5,824,286 shares of common stock with a fair value of $165,410 for the conversion of $18,196 of accrued interest, $500 of conversion fee, and $89,897 of derivative liability, resulting in loss on settlement of debt of $56,816.

On April 9, 2021, the Company issued 11,733,557 shares of common stock with a fair value of $240,538 for the conversion of $36,666 of convertible notes payable, $25,831 of accrued interest, and $173,071 of derivative liability, resulting in loss on settlement of debt of $4,970.

On April 22, 2021, the Company issued 3,000,000 shares of common stock with a fair value of $37,500 for consulting services.

During the year ended April 30, 2021, the Company issued 535,450,000 shares of common stock for gross proceeds of $5,379,500 and incurred cash share issuance cost of $17,976. As of April 30, 2021, the Company received proceeds of $595,000 for subsequent share issuance which were recorded under shares issuable. See Note 15.

On April 22, 2021, the Company entered into a debt settlement agreement with GHS Investments, LLC, a Nevada liability company, whereby the Company agreed to settle multiple convertible debts and loans with cash consideration of $650,000 and issuance of 6,500,000 shares of common stock with fair value of $81,250. Pursuant to this agreement, the Company settled $507,921 of convertible debts and loans, $173,220 of accrued interest, and $392,223 of derivative liabilities, resulting in a gain on settlement of debt of $342,114. The fair value of 6,500,000 shares of common stock was recorded under shares issuable as of April 30, 2021. These shares were issued subsequent to the year ended April 30, 2021. See Note 15.

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 10.

11.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. Each Series A preferred shares is convertible into 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 9.

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VERDE BIO HOLDINGS INC.

Notes to the Consolidated Financial Statements

(Expressed in US dollars)

12. Income Taxes

The Company has $5,758,828 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, 2021 and 2020 as a result of the following:

The significant components of deferred income tax assets and liabilities as at April 30, 2021 and 2020 after applying enacted corporate income tax rates are as follows:

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, 2021, the Company has no uncertain tax positions.

13. Commitments and contingencies

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.

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 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 last 10 trading days leading up to each put notice, subject to a floor 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 (see Note 11). As of April 30, 2021, no common shares have been sold pursuant to the equity financing agreement.

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VERDE BIO HOLDINGS INC.

Notes to the Consolidated Financial Statements

(Expressed in US dollars)

14.Reserve and Related Financial Data - unaudited 

Oil and Gas Reserves

Proved reserves represent quantities of oil and natural gas reserves which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be recoverable in the future from known reservoirs under existing economic conditions, operating methods, and government regulations.  Proved developed reserves are proved reserves which can be expected to be recovered through existing wells with existing equipment, infrastructure, and operating methods.  Proved reserves were estimated in accordance with guidelines established by the SEC, which require that reserve estimates be prepared under existing economic and operating conditions based upon the 12-month unweighted average of the first-day-of-the-month prices.

Estimates of proved reserves are inherently imprecise and are continually subject to revision based on production history, results of additional exploration and development, price changes, and other factors.  The reserves are located in various fields located in the states of Oklahoma, Louisiana, West Virginia, Colorado, Texas, and Wyoming.  All of the proved reserves are located in the continental United States.

Standardized Measure of Discounted Net Cash Flows

Guidelines prescribed in FASB’s Accounting Standards Codification Topic 932 Extractive Industries—Oil and Gas (“ASC Topic 932”), have been followed for computing a standardized measure of future net cash flows and changes therein relating to estimated proved reserves. Future cash inflows are determined by applying prices and costs, including transportation, quality, and basis differentials, to the year-end estimated quantities of oil, natural gas and NGLs to be produced in the future. The resulting future net cash flows are reduced to present value amounts by applying a ten percent annual discount factor.

The assumptions used to compute the standardized measure are those prescribed by the FASB and the SEC. These assumptions do not necessarily reflect the Company’s expectations of actual revenues to be derived from those reserves, nor their present value. The limitations inherent in the reserve quantity estimation process, as discussed previously, are equally applicable to the standardized measure computations since these reserve quantity estimates are the basis for the valuation process. Reserve estimates are inherently imprecise and estimates of new discoveries and undeveloped locations are more imprecise than estimates of established proved producing oil and gas properties. Accordingly, these estimates are expected to change as future information becomes available.

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VERDE BIO HOLDINGS INC.

Notes to the Consolidated Financial Statements

(Expressed in US dollars)

14.Reserve and Related Financial Data – unaudited (continued) 

The following table sets forth the discounted future net cash flows attributable to the Company’s proved oil and natural gas reserves as at April 30, 2021 based on the standardized measure prescribed in ASC Topic 932:

The following prices were used in the determination of the standardized measure:

Principal changes in the standardized measure of discounted future net cash flows attributable to the Company’s proved reserves are as follows:

15. Subsequent Events

On May 10, 2021, the Company issued 6,500,000 common shares to settle $81,250 of subscription payable pursuant to the settlement and release agreement dated April 22, 2021. See Note 10.

On May 13, 2021, the Company issued 15,030,769 common shares pursuant to the conversion of $195,400 of preferred series B stock.

On May 17, 2021, the Company issued 1,000,000 common shares pursuant to a $10,000 debt settlement agreement dated May 14, 2021.

On June 14, 2021, the Company acquired certain minerals and surface property located in Jack County, Texas for $1,600,000.

On August 20, 2021, the company acquired certain minerals in surface property located in Jack County, Texas for $900,000.

Subsequent to April 30, 2021, the Company issued 6,400,000 common shares for consulting services valued at approximately $94,910.

Subsequent to April 30, 2021, the Company acquired multiple oil and gas properties for $2,331,425.

Subsequent to April 30, 2021, the Company issued 451,550,000 common shares for gross proceeds of $3,929,550, of which $595,000 recorded as subscriptions payable as of April 30, 2021, was received as of April 30, 2021.

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