See accompanying notes to consolidated financial statements.
See accompanying notes to consolidated financial statements.
See accompanying notes to consolidated financial statements.
See accompanying notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2022 AND 2021
(Currency expressed in United States Dollars (“US$”), except for number of shares)
NOTE 1 - ORGANIZATION AND BUSINESS BACKGROUND
Verde Resources, Inc. (the “We” or “Company” or “VRDR”) was incorporated on April 22, 2010, in the State of Nevada, U.S.A..
We currently operate in two lines of business: (i) gold exploration and mining through Champmark Sdn. Bhd., a Malaysian corporation (“CSB”); and (ii) production and distribution of renewable commodities through Verde Resources (Malaysia) Sdn. Bhd., a Malaysian corporation. We intend to develop operations in the distribution of THC-free cannabinoid products through Verde Life Inc., an Oregon corporation. We are also considering investment opportunities in other non-mining areas including the bioenergy industry, real properties and the food & beverage sector.
The Company currently is engaged in the sale of gold mineral, distribution of THC-free cannabinoid (CBD) products, production and distribution of renewable commodities and real property holding.
As of June 30, 2022, the Company has the following subsidiaries:-
Name of subsidiary | | Place of incorporation | | Principal activities and place of operation | | Effective interest held |
| | | | | | |
Gold Billion Global Limited (“GBL”) | | British Virgin Islands | | Investment holding | | 100% |
| | | | | | |
Verde Resources (Malaysia) Sdn Bhd | | Malaysia | | Provision of consultation service and distribution of renewable agricultural commodities | | 100% |
| | | | | | |
Verde Renewables, Inc. (“VRI”) | | State of Missouri, U.S.A. | | Management of a processing and packaging facility | | 100% |
| | | | | | |
Verde Life Inc. (“VLI”) | | State of Oregon, U.S.A. | | Distribution of THC-free cannabinoid (CBD) products | | 100% |
| | | | | | |
Champark Sdn Bhd | | Malaysia | | Mining of minerals | | 100% |
| | | | | | |
The Wision Project Sdn Bhd | | Malaysia | | Digital innovation, marketing & consulting firm provides PR, Branding, influencer marketing, event management and media relations services | | 100% |
| | | | | | |
Verde Estates LLC (“VEL”) | | State of Missouri, U.S.A. | | Holding real property | | 100% |
The Company and its subsidiaries are hereinafter referred to as (the “Company”).
During the years ended June 30, 2022 and 2021, there are the major transactions, as below:
On May 10, 2021, the Company announced the Sale and Purchase Agreement to acquire the assets of biofraction plant and the right to use intellectual property license in Sabah, Malaysia from Borneo Energy Sdn Bhd, in consideration of issuance of 166,666,667 shares of the Company’s common stock at $0.03 per share, valued at $5,000,000. 135,666,667 shares and 31,000,000 shares were issued on May 10, 2021 and July 1, 2021, respectively. The completion of the S&P Agreement is subject to all such acts necessary, including but not limited to due diligence exercise to ascertain the valuation of the assets of the biofraction plant and the right to use the licensed intellectual property in Sabah, Malaysia. The consideration shall be refundable if the transaction fails to complete.
The Company also announced the Share Sale Agreement on May 12, 2021 for the acquisition of the entire issued and paid-up share capital of Bio Resources Limited from Taipan International Limited, an unrelated third party, The Wision Project Limited (formerly known as “Borneo Resources Limited”), an unrelated third party, and other unrelated third party individuals, in consideration of an issuance 321,500,000 shares of the Company’s restricted common stock at $0.03 per share, valued at $9,645,000, and the issuance of promissory notes with two-year term period with a principal amount of $20,355,000. 321,500,000 shares were issued on May 12, 2021 and the promissory notes were issued on May 12, 2021. The face value (principal) amount of the promissory notes of $20,355,000 was repayable by May 12, 2023, and bearing zero coupon interest in accordance with the Share Sale Agreement. The promissory note is priced at $16,290,550 considering the current market interest rate. However, on January 20, 2022, the Company reached a mutual agreement to enter into a Supplement to Promissory Note with each of the 17 lenders (“Lenders”) of the promissory notes that were issued on May 12, 2021, to convert the total principal loan amount of $20,355,000 into shares of the Company’s restricted common stock priced at $0.0611 per share, which represents the last ninety (90) days’ volume weighted average price (VWAP) as of the market closing of January 19, 2022. The Company and the Lenders further agreed that the actual date for the allotment and issue of new shares of the Company’s restricted common stock shall be confirmed in a subsequent written agreement. The acquisition of Bio Resourced Limited was subsequently closed on October 12, 2022.
On July 7, 2021, the Company through its wholly-owned subsidiary GBL entered into a Product Supply Agreement (the “Agreement”) with MRX Xtractors, LLC (“MRX”), a company incorporated in the state of Oregon. MRX is a market leader in commercial extraction systems for cannabis and hemp. The Agreement is a partnership between GBL and MRX to establish a purchase and supply arrangement that allows GBL to distribute white-label THC-free CBD products from MRX.
VERDE RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2022 AND 2021
(Currency expressed in United States Dollars (“US$”), except for number of shares)
On June 9, 2021, the Company entered into a Settlement of Debt Agreement (the “Debt Settlement Agreement”) with the Company’s creditors Beijing Changxin Wanlin Technology Co., Ltd, Federal Mining Resources Ltd, Federal Capital Investment Limited and Yorkshire Capital Limited (collectively the “Creditors”) to convert a total of $1,945,096 of the Company’s accounts payable to the Creditors into equity by increasing the share capital by means of a subscription for 64,836,533 new restricted shares of the Company’s common stock at a subscription price of $0.03 per share. As set out in the Debt Settlement Agreements, the new restricted shares for settlement of the account payable to Beijing Changxin Wanlin Technology Co., Ltd, Federal Mining Resources Ltd and Federal Capital Investment Limited were issued to their nominee, Internet.com Ltd on June 9, 2021.
On June 11, 2021, GBL entered into a Sale and Purchase of Assets Agreement (the “SPA Agreement”) to purchase a factory site from a Malaysia company Segama Ventures Sdn Bhd (“Segama Ventures”), an unrelated third party, in order to expand the Company’s biofraction plant in Malaysia. Under the terms of the SPA Agreement, the acquisition is to be satisfied by cash payment of $1,600,000 in two installments of $800,000 each , one payment upon signing of the SPA Agreement, and the second payment within three (3) months from the date of the SPA Agreement. A deposit of $800,000 was paid to Segama Ventures on June 10, 2021. On March 2, 2022, however, GBL entered into a Cancellation of Sale and Purchase of Assets Agreement (“Cancellation Agreement”) for the cancellation of the Sale and Purchase of Assets Agreement to purchase the factory site from Segama Ventures that was signed on June 11, 2021.
Simultaneously, on March 2, 2022, the Company, through GBL, entered into a Commercial Lease Agreement and Option to Purchase (“Lease Agreement”) for renting the factory site from Segama Ventures for a lease term of seven (7) years (“Lease Term”) at a monthly rental of MYR 36,000 ($8,571). The rental for the entire Lease Term amounts to the sum of MYR 3,024,000 ($720,000) (the “Lease Payment”) which shall be paid in advance upon commencement of the Lease Agreement together with a payment of security deposit for the sum of MYR 336,000 ($80,000) (the “Security Payment”). The refundable advance of $800,000 from the Cancellation Agreement above was utilized against the security deposit and payment of the advance rental. The Lease Agreement also provides GBL with an exclusive right and option to purchase the factory site together with all its right title and interest for a consideration of MYR 8,000,000 ($1,904,762) (the “Purchase Price”) or subject to a valuation report on the factory site by a Malaysian registered property valuer at any time during the period of two years from the date of the Lease Agreement. The Lease Payment and Security Payment shall be applied toward the Purchase Price upon GBL exercising the option to purchase. The Option to Purchase is yet to be exercised to date.
On June 17, 2021, the Company through its prospective indirect subsidiary Bio Resources Limited (“BRL”), a company incorporated under the laws of Labuan, entered into a Shares Sale Agreement with Hermalis Binti Mohmad Tahir (“Hermalis”), a company incorporated under the laws of Malaysia, to acquire the entire issued and paid-up share capital of Global Renewables Sdn Bhd. Under the terms of the Shares Sale Agreement, the consideration for the acquisition shall be satisfied in full by the payment of MYR 25,000 ($6,000) upon the execution of the Shares Sale Agreement. The acquisition of Global Renewables Sdn Bhd, however, was cancelled on April 18, 2022.
On June 18, 2021, GBL entered into a Shares Sale Agreement with Lamax Gold Limited (“LGL”), a company incorporated under the laws of the British Virgin Islands, in relation to acquisition of the remaining 15% of the issued and paid-up share capital of CSB for a consideration of MYR 150,000 ($35,669) payable upon the execution of the Shares Sale Agreement. Prior to this acquisition, GBL owned 85% equity in CSB and with the completion of this transaction, CSB. became a wholly owned subsidiary of GBL and indirectly of the Company.
On July 7, 2021, the Company through its wholly-owned subsidiary GBL entered into a Product Supply Agreement (the “Agreement”) with MRX Xtractors, LLC (“MRX”), a company incorporated in the state of Oregon. MRX is a market leader in commercial extraction systems for cannabis and hemp. The Agreement is a partnership between GBL and MRX to establish a purchase and supply arrangement that allows GBL to distribute white-label THC-free CBD products from MRX.
On February 10, 2022, the Company, through VEL, entered into a Commercial Lease Agreement and Option to Purchase (the “Lease Agreement”) to rent a 24-acre property in La Belle Missouri from Jon Neal Simmons and Betty Jo Simmon (the “Landlord”) to support carbon farming with biochar in Missouri. Under the Lease Agreement, the term of the lease will be for a period of two (2) years and the Company will have the right to renew the lease with a total of three renewal periods with each term being two years. The base rent is ten thousand dollars ($10,000) for the term, payable on the commencement of the Lease Agreement, together with a security deposit of $240,000. The Lease Agreement also grants the Company the exclusive right and option to purchase the premises together with all the right title and interest from the Landlord for a consideration of $490,000, including the security deposit, at any time during the two years period of the lease term. The Option to purchase was exercised on September 27, 2022.
On March 23, 2022, the Company, through Verde Malaysia, entered into a Sale of Shares Agreement (“SSA”) with The Wision Project Sdn Bhd (“Wision”), a company incorporated under the laws of Malaysia, and its sole shareholder Jack Wong, to acquire the one hundred percent (100%) of the issued and paid up ordinary shares in Wision from Mr. Wong. Under the terms of the SSA, the consideration for the acquisition shall be satisfied by the payment of MYR 1 ($0.23) upon the execution of the SSA. Wision is a digital development, marketing and consulting firm that provides public relations, branding, profile building, influencer marketing, event management and media relations services to the Company.
On April 19, 2022, the Company, through its wholly-owned subsidiary, Verde Resources (Malaysia) Sdn Bhd (“Verde Malaysia”), a company incorporated in Malaysia, entered into Term Sheet for Regenerative Carbon Negative Agriculture Initiative (the “Borneo Agreement”) with The Borneo Food Group Sdn. Bhd (“SB”), a company incorporated in Malaysia, to supply proprietary blend of various carbon negative agricultural products such as plant natural enzyme, FAA bio enzyme and enriched biochar to SB. SB is a wholly-owned subsidiary of Borneo Oil Berhad (BORNOIL), a company listed on the Main Board Stock Exchange of Malaysia and an affiliate of the Company by virtue of owning more than 10% shares of the Company’s Common Stock. Under the Borneo Agreement, Verde Malaysia has the expertise, technical know-how supply of proprietary blend of various carbon negative agricultural products to assist SB in achieving a long term and consistent supply of various agriculture produce for its business while ensuring that all ingredients utilized by SB is farmed in a sustainable and environmentally friendly manner which is not just carbon neutral but carbon negative to create a long term carbon negative footprint. Verde Malaysia will provide the services and supply the proprietary blend of various carbon negative agricultural products to SB at the agreed fixed rates which may be subject to price increase in the event of any drastic fluctuations in the cost of fuel and/or related production costs with a minimum notice of two weeks in writing to SB. The term of the Borneo Agreement will be for a fixed period of five (5) years commencing from May 1, 2022 to April 30, 2027, and both parties may extend the agreement for a further term as may be mutually agreed on terms to be separately negotiated.
On April 27, 2022, the Company entered into a Professional Engineering Services Contract (the “Agreement”) with BioDiverse Energies, LLC (“BDE”). Under the Agreement, BDE will provide professional services on the feasibility assessment, preliminary engineering and preliminary market analysis related to the biochar enhanced compost project. The Company will pay BDE a total of $42,000 for completion of the professional services under the Agreement. An initial payment of $25,000 will be paid prior to the commencement of work by BDE, with another $10,000 and $7,000 to be paid upon completion of the professional services in two stages respectively. On May 4, 2022, the Company assigned the Agreement to its wholly owned subsidiary VRI to assume from the Company all the obligations, responsibilities and liabilities associated with the Agreement.
On April 29, 2022, the Company through its wholly owned subsidiary VRI closed on the purchase of residential real property located in Chesterfield, Missouri (the “Property”). The purchase price for the Property was $750,000.00 paid in cash at closing. The Company used cash on hand to purchase the Property. The Property was purchased from Yimin Huang and Claudine Huang (the “Sellers”). There are no material relationships between the Sellers and the Company or any of its affiliates. The Company plans on holding the property as an investment and using it for corporate housing.
On June 8, 2022, the Company through its wholly owned subsidiary VRI entered into a Services Agreement with Gary F. Zimmer to engage him as its corporate consultant to develop and formulate a designer compost and the Company's integrated regenerative farming programs as designated in the Services Agreement. Under the Agreement, the Company will pay Gary F. Zimmer by the issuance of 1,000,000 shares of the Company’s restricted common stock, par value $0.001 per share on or before July 15, 2022. The shares were issued subsequent to the financial year end.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated financial statements reflect the application of certain significant accounting policies as described in this note and elsewhere in the accompanying consolidated financial statements and notes.
These accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”).
· | Use of Estimates and Assumptions |
VERDE RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2022 AND 2021
(Currency expressed in United States Dollars (“US$”), except for number of shares)
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company’s periodic filings with the Securities and Exchange Commission include, where applicable, disclosures of estimates, assumptions, uncertainties and markets that could affect the financial statements and future operations of the Company.
Identified below are the accounting policies that reflect the Company’s most significant estimates and judgments, and those that the Company believes are the most critical to fully understand and evaluate its consolidated financial statements.
In preparing these consolidated financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheet and revenues and expenses during the years reported. Actual results may differ from these estimates.
The consolidated financial statements include the financial statements of Verde Resources, Inc. and its subsidiaries. All significant inter-company balances and transactions within the Company and its subsidiaries have been eliminated upon consolidation.
Accounting Standard Codification (“ASC”) Topic 280, Segment Reporting establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organization structure as well as information about geographical areas, business segments and major customers in consolidated financial statements. Currently, the Company operates in four reportable operating segments.
· | Concentrations of Credit Risk |
VERDE RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2022 AND 2021
(Currency expressed in United States Dollars (“US$”), except for number of shares)
The Company’s financial instruments that are exposed to concentrations of credit risk primarily consist of its cash and cash equivalents and related party payables it will likely incur in the near future. The Company places its cash and cash equivalents with financial institutions of high credit worthiness. At times, its cash and cash equivalents with a particular financial institution may exceed any applicable government insurance limits. The Company’s management plans to assess the financial strength and credit worthiness of any parties to which it extends funds, and as such, it believes that any associated credit risk exposures are limited.
The Company operates in the resource exploration industry that is subject to significant risks and uncertainties, including financial, operational, technological, and other risks associated with operating a resource exploration business and venturing into new biofraction and CBD product industries, including the potential risk of business failure.
· | Cash and Cash Equivalents |
| |
Cash and cash equivalents are carried at cost and represent cash in banks, money market funds, and certificates of term deposits with maturities of less than three months, which are readily convertible to known amounts of cash and which, in the opinion of management, are subject to an insignificant risk of loss in value. The Company had $418,917 and $2,117,622 in cash and cash equivalents at June 30, 2022 and 2021.
At and June 30, 2022 and 2021, cash and cash equivalents consisted of bank deposits in a Malaysian bank and petty cash on hands.
Accounts receivable are recognized and carried at net realizable value. An allowance for doubtful accounts will be recorded in the period when a loss is probable based on an assessment of specific evidence indicating troubled collection, historical experience, accounts aging, ongoing business relation and other factors. Accounts are written off after exhaustive efforts at collection. If accounts receivable are to be provided for, or written off, they would be recognized in the consolidated statement of operations within operating expenses. At June 30, 2022 and 2021, the Company has no allowance for doubtful accounts, as per management’s judgment based on their best knowledge. As of June 30, 2022 and 2021, the longest credit term for certain customers are 60 days.
Inventories are stated at the lower of cost or market value (net realizable value), cost being determined on a first-in-first-out method. Costs include material, labor and overhead costs. The Company provides inventory allowances based on excess and obsolete inventories determined principally by customer demand.
As of June 30, 2022 and 2021, the Company did not record an allowance for obsolete inventories, nor have there been any write-offs.
Property and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Depreciation is calculated on the straight-line basis over the following expected useful lives from the date on which they become fully operational and after taking into account their estimated residual values:
| | Expected useful life | | |
Land and buildings | | 3-27.5 years | | |
Plant and machinery | | 5-7years | | |
Office equipment | | 3 years | | |
Project equipment | | 5 years | | |
Computer | | 5 years | | |
Motor vehicle | | 5 years | | |
Furniture & fittings | | 5 years | | |
Expenditures for maintenance and repairs, which do not materially extend the useful lives of the assets, are charged to expense as incurred. Expenditures for major renewals and betterment which substantially extend the useful life of assets are capitalized. The cost and related accumulated depreciation of assets retired or sold are removed from the respective accounts, and any gain or loss is recognized in the consolidated statements of income and other comprehensive income in other income or expenses.
· | Impairment of Long-lived Assets |
In accordance with the provisions of ASC Topic 360, Impairment or Disposal of Long-Lived Assets, all long-lived assets such as property and equipment owned and held by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is evaluated by a comparison of the carrying amount of an asset to its estimated future undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceed the fair value of the assets.
VERDE RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2022 AND 2021
(Currency expressed in United States Dollars (“US$”), except for number of shares)
ASC Topic 606, Revenue from Contracts with Customers (“ASC Topic 606”), establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts to provide goods or services to customers.
The Company applies the following five steps in order to determine the appropriate amount of revenue to be recognized as it fulfils its obligations under each of its agreements:
∙ | identify the contract with a customer; | |
∙ | identify the performance obligations in the contract; | |
∙ | determine the transaction price; | |
∙ | allocate the transaction price to performance obligations in the contract; and | |
∙ | recognize revenue as the performance obligation is satisfied. | |
Revenue is recognized when the Company satisfies its performance obligation under the contract by transferring the promised product to its customer that obtains control of the product and collection is reasonably assured. A performance obligation is a promise in a contract to transfer a distinct product or service to a customer. Most of the Company’s contracts have a single performance obligation, as the promise to transfer products or services is not separately identifiable from other promises in the contract and, therefore, not distinct.
Product sales
Revenues from product sales are recognized when the customer obtains control of the Company’s product, which occurs at a point in time, typically upon delivery to the customer. The Company expenses incremental costs of obtaining a contract as and when incurred if the expected amortization period of the asset that it would have recognized is one year or less or the amount is immaterial.
Revenues from product sales are recorded net of reserves established for applicable discounts and allowances that are offered within contracts with the Company’s customers.
Product revenue reserves, which are classified as a reduction in product revenues, are generally characterized in the following categories: discounts, returns and rebates. These reserves are based on estimates of the amounts earned or to be claimed on the related sales and are classified as reductions of accounts receivable as the amount is payable to the Company’s customer.
Gold mining
Revenue from the sales of gold mineral or other minerals to registered gold trading companies or other customers in Malaysia is recognized as revenue in accordance with the following core principles: at the time of gold or minerals sales, the contract with customers and the performance obligations are identified. The transaction and selling price is determined by the prevailing market value of gold bullion quoted by the leading registered gold trading company in Malaysia or at an agreed price. Sales invoice will be prepared to reflect the proper transaction price based on the performance obligation allocation. After delivery is completed and the performance obligation is satisfied, sales invoice will be presented to the customers and so revenue is then recognized accordingly.
The Company determines if an arrangement is a lease or contains a lease at inception. Operating lease liabilities are recognized based on the present value of the remaining lease payments, discounted using the discount rate for the lease at the commencement date. As the rate implicit in the lease is not readily determinable for the operating lease, the Company generally uses an incremental borrowing rate based on information available at the commencement date to determine the present value of future lease payments. Operating lease right-of-use (“ROU assets”) assets represent the Company’s right to control the use of an identified asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets are generally recognized based on the amount of the initial measurement of the lease liability. Lease expense is recognized on a straight-line basis over the lease term.
ROU assets are reviewed for impairment when indicators of impairment are present. ROU assets from operating and finance leases are subject to the impairment guidance in ASC Topic 360, Property, Plant, and Equipment, as ROU assets are long-lived nonfinancial assets.
ROU assets are tested for impairment individually or as part of an asset group if the cash flows related to the ROU asset are not independent from the cash flows of other assets and liabilities. An asset group is the unit of accounting for long-lived assets to be held and used, which represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities.
The Company recognized no impairment of ROU assets as of June 30, 2022 and 2021.
VERDE RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2022 AND 2021
(Currency expressed in United States Dollars (“US$”), except for number of shares)
The operating lease is included in operating lease right-of-use assets and operating lease liabilities as current and non-current liabilities in the consolidated balance sheets at June 30, 2022 and 2021.
Leases that transfer substantially all the rewards and risks of ownership to the lessee, other than legal title, are accounted for as finance leases. Substantially all of the risks or benefits of ownership are deemed to have been transferred if any one of the four criteria is met: (i) transfer of ownership to the lessee at the end of the lease term, (ii) the lease containing a bargain purchase option, (iii) the lease term exceeding 75% of the estimated economic life of the leased asset, (iv) the present value of the minimum lease payments exceeding 90% of the fair value. At the inception of a finance lease, we as the lessee records an asset and an obligation at an amount equal to the present value of the minimum lease payments. The leased asset is amortized over the shorter of the lease term or its estimated useful life if title does not transfer to us, while the leased asset is depreciated in accordance with our depreciation policy if the title is to eventually transfer to us. The periodic rent payments made during the lease term are allocated between a reduction in the obligation and interest element using the effective interest method in accordance with the provisions of ASC Topic 842.
The Company adopted the ASC Topic 740, Income tax provisions of paragraph 740-10-25-13, which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the consolidated financial statements. Under paragraph 740-10-25-13, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Paragraph 740-10-25-13 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. The Company had no material adjustments to its liabilities for unrecognized income tax benefits according to the provisions of paragraph 740-10-25-13.
The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying balance sheets, as well as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its balance sheets and provides valuation allowances as management deems necessary.
The Company did not take any uncertain tax positions and had no adjustments to its income tax liabilities or benefits pursuant to the ASC Topic 740 provisions of Section 740-10-25 for the years ended June 30, 2022 and 2021.
· | Foreign Currencies Translation |
The Company’s reporting currency is the United States dollar (“US$”) and the accompanying consolidated financial statements have been expressed in United States dollars. The Company’s functional currency is the Malaysian Ringgit (“MYR”) which is a functional currency as being the primary currency of the economic environment in which their operations are conducted.
Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the consolidated statement of operations.
For reporting purposes, in accordance with ASC Topic 830 ”Translation of Financial Statements”, capital accounts of the consolidated financial statements are translated into United States dollars from MYR at their historical exchange rates when the capital transactions occurred. Assets and liabilities are translated at the exchange rates as of balance sheet date. Income and expenditures are translated at the average exchange rate of the respective year. The gains and losses resulting from translation of financial statements subsidiaries to the reporting currency are recorded as a separate component of accumulated other comprehensive income within the statements of changes in stockholder’s equity.
Translation of MYR into U.S. dollars has been made at the following exchange rates for the following periods:-
| | June 30, 2022 | | June 30, 2021 |
Year-end MYR:US$ exchange rate | | 4.40773 | | 4.15110 |
Annualized average MYR:US$ exchange rate | | 4.23181 | | 4.11692 |
ASC Topic 220, Comprehensive Income, establishes standards for reporting and display of comprehensive income, its components and accumulated balances. Comprehensive income as defined includes all changes in equity during a period from non-owner sources. Accumulated other comprehensive income, as presented in the accompanying consolidated statements of changes in stockholders’ equity, consists of changes in unrealized gains and losses on foreign currency translation. This comprehensive income is not included in the computation of income tax expense or benefit.
VERDE RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2022 AND 2021
(Currency expressed in United States Dollars (“US$”), except for number of shares)
The Company accounts for noncontrolling interest in accordance with ASC Topic 810-10-45, which requires the Company to present noncontrolling interests as a separate component of total shareholders’ equity on the consolidated balance sheets and the consolidated net loss attributable to the noncontrolling interest be clearly identified and presented on the face of the consolidated statements of operations and comprehensive loss.
The Company calculates net loss per share in accordance with ASC Topic 260, Earnings per Share. Basic income per share is computed by dividing the net income by the weighted-average number of common shares outstanding during the period. Diluted income per share is computed similar to basic income per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common stock equivalents had been issued and if the additional common shares were dilutive.
· | Stock Based Compensation |
The Company accounts for stock-based compensation in accordance with ASC Topic 718-10, Compensation-Stock Compensation, which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors including employee stock options, restricted stock units, and stock appreciation rights are based on estimated fair values. Stock-based compensation expense recognized during the period is based on the value of the portion of share-based payment awards that is ultimately expected to vest during the period.
The Company accounts for non-employee stock-based awards at fair value in accordance with the measurement and recognition criteria of ASC Topic 505-50, “Equity-Based Payments to Non-Employees”.
Contributions to retirement plans (which are defined contribution plans) are charged to general and administrative expenses in the accompanying statements of operation as the related employee service are provided.
· | Mineral Acquisition and Exploration Costs |
Mineral property acquisition and exploration costs are expensed as incurred. When it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves, the costs incurred to develop such property are capitalized. Such costs will be amortized using the units-of-production method over the estimated life of the probable reserves.
· | Environmental Expenditures |
The operations of the Company have been, and may in the future, be affected from time to time in varying degree by changes in environmental regulations, including those for future reclamation and site restoration costs. Both the likelihood of new regulations and their overall effect upon the Company vary greatly and are not predictable. The Company’s policy is to meet or, if possible, surpass standards set by relevant legislation by application of technically proven and economically feasible measures.
Environmental expenditures that relate to ongoing environmental and reclamation programs are charged against earnings as incurred or capitalized and amortized depending on their future economic benefits. All of these types of expenditures incurred since inception have been charged against earnings due to the uncertainty of their future recoverability. Estimated future reclamation and site restoration costs, when the ultimate liability is reasonably determinable, are charged against earnings over the estimated remaining life of the related business operation, net of expected recoveries.
The Company follows the ASC 850-10, Related Party for the identification of related parties and disclosure of related party transactions.
Pursuant to section 850-10-20 the related parties include a) affiliates of the Company; b) entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of section 825-10-15, to be accounted for by the equity method by the investing entity; c) trusts for the benefit of employees, such as pension and Income-sharing trusts that are managed by or under the trusteeship of management; d) principal owners of the Company; e) management of the Company; f) other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.
VERDE RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2022 AND 2021
(Currency expressed in United States Dollars (“US$”), except for number of shares)
The consolidated financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a) the nature of the relationship(s) involved; b) a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c) the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d) amount due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.
· | Commitments and Contingencies |
The Company follows the ASC 450-20, Commitments to report accounting for contingencies. Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or un-asserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or un-asserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available at this time that these matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.
· | Fair Value of Financial Instruments |
The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and has adopted paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 of the FASB Accounting Standards Codification establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, paragraph 820-10-35-37 of the FASB Accounting Standards Codification establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by paragraph 820-10-35-37 of the FASB Accounting Standards Codification are described below:
Level 1 | | Quoted market prices available in active markets for identical assets or liabilities as of the reporting date. |
| | |
Level 2 | | Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. |
| | |
Level 3 | | Pricing inputs that are generally observable inputs and not corroborated by market data. |
Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.
The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.
The carrying amounts of the Company’s financial assets and liabilities, such as cash and cash equivalents, loan and fee receivable, prepayments and other receivables, amounts due from related parties, accrued liabilities and other payables, loans payable, amounts due to related parties approximate their fair values because of the short maturity of these instruments.
VERDE RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2022 AND 2021
(Currency expressed in United States Dollars (“US$”), except for number of shares)
· | Recent Accounting Pronouncements |
ASU 2020-06 - Debt - Debt with conversion and other options (subtopic 470-20) and derivatives and hedging - contracts in entity’s own equity (subtopic 815-40): accounting for convertible instruments and contracts in an entity’s own equity. The amendments in this update are intended to simplify the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. The ASU is part of the FASB’s simplification initiative, which aims to reduce unnecessary complexity in U.S. GAAP. For public business entities that are not smaller reporting companies, the ASU’s amendments are effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years. For all other entities, the effective date is for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. The guidance may be early adopted for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Company adopted ASU 2020-06 effective July 1, 2021. The adoption of ASU 2020-06 did not have a material impact on the Company’s financial statements.
During the year ended June 30, 2022, there have been no new, or existing, recently issued accounting pronouncements that are of significance, or potential significance, that impact the Company’s consolidated financial statements.
NOTE 3 - GOING CONCERN UNCERTAINTIES
The accompanying consolidated financial statements have been prepared using the going concern basis of accounting, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.
The Company has generated recurring losses and suffered from an accumulated deficit of $10,357,920 as of June 30, 2022. The continuation of the Company as a going concern in the next twelve months is dependent upon the Company's success in pursuing additional financing for its operations. However, there is no assurance that the Company will be successful in securing sufficient funds to sustain the operations.
The ability of the Company to survive is dependent upon, among other things, obtaining additional financing to continue operations, and development of its business plan. In response to these problems, management intends to raise additional funds through public or private placement offerings, and related party loans.
No assurance can be given that any future financing, if needed, will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, if needed, it may contain undue restrictions on its operations, in the case of debt financing, or cause substantial dilution for its stockholders, in the case of equity financing.
These and other factors raise substantial doubt about the Company’s ability to continue as a going concern. These consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets and liabilities that may result in the Company not being able to continue as a going concern.
NOTE 4 - BUSINESS SEGMENT INFORMATION
Currently, the Company has four reportable business segments:
(i) | Gold mineral mining; |
(ii) | Distribution of THC-free cannabinoid (CBD) products, mainly operates; |
(iii) | Production and distribution of renewable commodities; and |
(iv) | Real property holding |
VERDE RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2022 AND 2021
(Currency expressed in United States Dollars (“US$”), except for number of shares)
In the following table, revenue is disaggregated by primary major product line, and timing of revenue recognition. The table also includes a reconciliation of the disaggregated revenue with the reportable segments for the years ended June 30, 2022 and 2021:
| | Year ended June 30, 2022 | |
| | Gold mineral mining | | | Distribution of THC-free cannabinoid (CBD) products | | | Production and distribution of renewable commodities | | | Holding property | | | Corporate unallocated | | | Consolidated | |
| | | | | | | | | | | | | | | | | | |
Revenue | | $ | - | | | $ | - | | | $ | 25,690 | | | $ | - | | | $ | 12,479 | | | $ | 38,169 | |
Cost of revenue | | | - | | | | - | | | | (145,356 | ) | | | - | | | | - | | | | (145,356 | ) |
Gross loss | | | - | | | | - | | | | (119,666 | ) | | | - | | | | 12,479 | | | | (107,187 | ) |
Selling, general & administrative expenses | | | (190,240 | ) | | | (4,583 | ) | | | (201,591 | ) | | | (524,304 | ) | | | (989,462 | ) | | | (1,910,180 | ) |
Loss from operations | | | (190,240 | ) | | | (4,583 | ) | | | (321,257 | ) | | | (524,304 | ) | | | (976,983 | ) | | | (2,017,367 | ) |
Interest expense | | | - | | | | - | | | | - | | | | (1,065) | | | | (1,948,086 | ) | | | (1,949,151 | ) |
Other income | | | 11,963 | | | | - | | | | 26 | | | 115 | | | | - | | | | 12,104 | |
Loss before income tax | | | (178,277 | ) | | | (4,583 | ) | | | (321,231 | ) | | | (525,254 | ) | | | (2,925,069 | ) | | | (3,954,414 | ) |
Income tax | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
Net loss | | $ | (178,277 | ) | | $ | (4,583 | ) | | $ | (321,231 | ) | | $ | (525,254 | ) | | | (2,925,069 | ) | | $ | (3,954,414 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total assets at June 30, 2022 | | $ | 35,960 | | | $ | 148,703 | | | $ | 230,279 | | | $ | 1,345,156 | | | $ | 31,903,365 | | | $ | 33,663,463 | |
| | Year ended June 30, 2021 | |
| | | | | | | | | | | | | | | | | | |
| | Gold mineral mining | | | Distribution of THC-free cannabinoid (CBD) products | | | Production and distribution of renewable commodities | | | Holding property | | | Corporate unallocated | | | Consolidated | |
| | | | | | | | | | | | | | | | | | |
Revenue | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | |
Cost of revenue | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
Gross loss | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
Selling, general & administrative expenses | | | (147,645 | ) | | | - | | | | - | | | | - | | | | (426,529 | ) | | | (574,174 | ) |
Loss from operations | | | (147,645 | ) | | | - | | | | - | | | | - | | | | (426,529 | ) | | | (574,174 | ) |
Interest expenses | | | - | | | | - | | | | - | | | | - | | | | (245,392 | ) | | | (245,392 | ) |
Other income | | | 26,559 | | | | - | | | | - | | | - | | | | - | | | | 26,559 | |
Loss before income tax | | | (121,086 | ) | | | - | | | | - | | | | - | | | | (671,921 | ) | | | (793,007 | ) |
Income tax | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
Net loss | | $ | (121,086 | ) | | $ | - | | | $ | - | | | $ | - | | | $ | (671,921 | ) | | $ | (793,007) | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total assets as June 30, 2021 | | $ | 97,949 | | | $ | - | | | $ | - | | | $ | - | | | | 32,961,205 | | | $ | 33,059,154 | |
The below revenues are based on the countries in which the customer is located. Summarized financial information concerning the geographic segments is shown in the following tables:
| | Years ended June 30, | |
| | 2022 | | | 2021 | |
| | | | | | |
Malaysia | | $ | 38,169 | | | $ | - | |
NOTE 5 - INVENTORIES
Inventories as of June 30, 2022 and 2021 consisted of the following:
| | As of June 30, | |
| | 2022 | | | 2021 | |
| | | | | | |
Bio produce | | $ | 87,035 | | | $ | - | |
VERDE RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2022 AND 2021
(Currency expressed in United States Dollars (“US$”), except for number of shares)
NOTE 6 - DEPOSITS AND PREPAYMENTS
Deposits and prepayments as of June 30, 2022 and 2021 consisted of the following:
| | As of June 30, | |
| | 2022 | | | 2021 | |
Deposits | | | 118,516 | | | - | |
Prepayments | | | 722 | | | 6,137 | |
| | $ | 119,238 | | $ | 6,137 | |
NOTE 7 - PROPERTY AND EQUIPMENT
A summary of property and equipment at June 30, 2022 and 2021 is as follows:
| | As of June 30, | |
| | 2022 | | | 2021 | |
| | | | | | |
Land and building | | $ | 1,642,102 | | | $ | 947,292 | |
Plant and machinery | | | 134,198 | | | | 16,399 | |
Office equipment | | | 23,353 | | | | 18,968 | |
Project equipment | | | 615,420 | | | | 653,374 | |
Computer | | | 14,846 | | | | 11,170 | |
Motor vehicle | | | 225,861 | | | | 35,710 | |
Furniture & fittings | | | 2,527 | | | | - | |
| | | 2,658,307 | | | | 1,682,913 | |
Less: accumulated depreciation | | | (1,609,414 | ) | | | (1,682,358 | ) |
| | $ | 1,048,893 | | | $ | 555 | |
Depreciation expense for the years ended June 30, 2022 and 2021 totaled $24,792 and $170, respectively.
Subsequent to year, land and building with a carrying amount of $746,145 was pledged to a financial institution for facilities granted.
NOTE 8 - DEPOSITS PAID
At June 30, 2022 and 2021, deposits consist of the following:
| | As of June 30, | |
| | 2022 | | | 2021 | |
Deposits paid for acquisition of subsidiaries | | | | | | |
- Bio Resources Limited (#1) | | $ | 25,935,550 | | | $ | 25,935,550 | |
- Champmark Sdn Bhd (#2) | | | - | | | | 36,130 | |
| | $ | 25,935,550 | | | $ | 25,971,680 | |
| | | | | | | | |
Deposits paid for acquisition of property and equipment | | | | | | | | |
- Intellectual property license (#3) | | $ | 5,000,000 | | | $ | 4,070,000 | |
- Factory site (#4) | | | 80,000 | | | | 800,000 | |
| | $ | 5,080,000 | | | $ | 4,870,000 | |
| | | | | | | | |
Security deposit (#5) | | $ | 240,000 | | | $ | - | |
___________
(#1) The Company announced the Share Sale Agreement on May 12, 2021 for the acquisition of the entire issued and paid-up share capital of Bio Resources Limited from Taipan International Limited, an unrelated third party, The Wision Project Limited (formerly known as “Borneo Resources Limited”), an related third party, and other unrelated third party individuals, in consideration of issuance of 321,500,000 shares of the Company’s restricted common stock at $0.03 per share, valued at $9,645,000, and the issuance of promissory notes with two-year term period with a principal amount of $20,355,000. 321,500,000 shares were issued on May 12, 2021 and the promissory notes were issued on May 12, 2021. The face value (principal) amount of $20,355,000 was repayable by May 12, 2023, and bearing zero coupon interest. Based on a subsequent agreement with the Lenders, the face value (principal) amount of $20,355,000 bearing zero coupon interest is now convertible to restricted common stock priced at $0.0611 per share to be allotted at a later date to be mutually agreed. The promissory note is priced at $16,290,550 considering the current market interest rate. The acquisition of BRL was subsequently closed on October 12, 2022.
VERDE RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2022 AND 2021
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(#2) On June 18, 2021, GBL entered into a Shares Sale Agreement with Lamax Gold Limited (“LGL”), a company incorporated under the laws of the British Virgin Islands, in relation to acquisition of the remaining 15% of the issued and paid-up share capital of CSB. Prior to this acquisition, GBL owned 85% equity in CSB. Upon completion of the acquisition, GBL would own the entire issued and paid-up share capital of CSB. Under the terms of the Shares Sale Agreement, the consideration for the acquisition shall be satisfied in full by the payment of Malaysia Ringgit MYR150,000 ($36,130) upon the execution of the Shares Sale Agreement. A deposit of MYR 150,000 ($36,130) was paid to LGL on June 21, 2021. With the completion of the acquisition on October 20,2021, CSB became a wholly owned subsidiary of GBL, and indirectly, of the Company.
(#3) On May 10, 2021, the Company announced the Sale and Purchase Agreement to acquire the assets of biofraction plant and the right to use intellectual property license in Sabah, Malaysia from Borneo Energy Sdn Bhd, in consideration of issuance of 166,666,667 share of the Company’s stock at $0.03 per share, valued at $5,000,000. 135,666,667 shares and 31,000,000 shares were issued on May 10, 2021 and July 1, 2021, respectively. This acquisition is currently in progress and the completion of the S&P Agreement is subject to all such acts necessary, including but not limited to due diligence exercise to ascertain the valuation of the assets of the biofraction plant and the right to use the licensed intellectual property in Sabah, Malaysia. The consideration shall be refundable if the transaction fails to complete.
(#4) On June 11, 2021, GBL entered into a Sale and Purchase of Assets Agreement (the “SPA Agreement”) to purchase a factory site from a Malaysia company Segama Ventures Sdn Bhd (“Segama Ventures”), an unrelated third party, in order to expand the Company’s biofraction plant in Malaysia. Under the terms of the SPA Agreement, the acquisition is satisfied by cash payment of $1,600,000 in two instalments of $800,000 each, one payment upon signing the SPA Agreement, and the second payment within three (3) months from the date of the SPA Agreement. A deposit of $800,000 was paid to Segama Ventures on June 10, 2021. On March 2, 2022, however, GBL entered into a Cancellation of Sale and Purchase of Assets Agreement (“Cancellation Agreement”) for the cancellation of the Sale and Purchase of Assets Agreement to purchase the factory site from Segama Ventures that was signed on June 11, 2021.
Simultaneously, on March 2, 2022, the Company, through GBL, entered into a Commercial Lease Agreement and Option to Purchase (“Lease Agreement”) for renting the factory site from Segama Ventures for a lease term of seven (7) years (“Lease Term”) at a monthly rental of MYR 36,000 ($8,571). The rental for the entire Lease Term amounts to the sum of MYR 3,024,000 ($720,000) (the “Lease Payment”) which shall be paid in advance upon commencement of the Lease Agreement together with a payment of security deposit for the sum of MYR 336,000 ($80,000) (the “Security Payment”). The refundable advance of $800,000 from the Cancellation Agreement above was utilized against the security deposit and payment of the advance rental.
(#5) On February 10, 2022, the Company, through VEL, a limited liability company incorporated in the State of Missouri, which is an indirect wholly-owned subsidiary of the Company via Verde Renewables, Inc., entered into a Commercial Lease Agreement and Option to Purchase (the “Lease Agreement”) to rent a 24-acre property in La Belle from Jon Neal Simmons and Betty Jo Simmon (the “Landlord”) in order to kickstart carbon farming with biochar in Missouri.
Under the Lease Agreement, the term of the lease will be for a period of two (2) years and the Company will have the right to renew the lease with a total of three renewal periods with each term being two years. The monthly base rent is $10,000 for the term, was payable on the commencement of the Lease Agreement, together with a security deposit of $240,000. The Lease Agreement also grants the Company the exclusive right and option to purchase the premises together with all the right title and interest from the Landlord for a consideration of $490,000 at any time during the two-year term of the lease. If the Company exercises the option to purchase the premises from the Landlord, the upfront lease payment and security deposit may be utilized as part payment of the purchase consideration. The option to purchase was exercised on September 27, 2022.
NOTE 9 - MINING RIGHT
On June 14, 2021, a lump sum payment of RM260,500 ($62,260) was made upfront to rent under a non-cancellable operating lease, the mining space with lease period for 2 years up to June 13, 2023, and no ongoing payments will be made under the terms of these mining leases. Lease expense for lease payment is recognized on a straight-line basis over the lease term.
The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.
The table below presents the operating lease related assets and liabilities recorded on the balance sheets.
| | Ended June 30, 2022 | |
Balance as at the 1 July 2021 | | $ | 60,131 | |
Amortization charge for the period | | | (30,779 | ) |
Foreign exchange adjustment | | | (2,264 | ) |
Balance as of June 30, 2022 | | $ | 27,088 | |
Amortization charge of rights of use lease assets was $30,779 and $0 for the year ended June 30, 2022 and 2021, respectively.
NOTE 10 - AMOUNTS DUE TO RELATED PARTIES
The following breakdown of the balances due to related parties, consisted of:-
| | As of June 30, | |
| | 2022 | | | 2021 | |
| | | | | | |
BOG (#1) | | $ | 555,527 | | | $ | 579,783 | |
Federal Capital Investment Limited (#2) | | | - | | | | 6,000 | |
| | $ | 555,527 | | | $ | 585,783 | |
(#1) Borneo Oil and Gas Corporation Sdn Bhd (“BOG”) is a wholly owned subsidiary of Borneo Oil Berhad (“BOB”) which holds 20.0% and 22.8% of the Company’s issued and outstanding common stock as of June 30, 2021 and June 30, 2022, respectively. The advances are related to ordinary business transactions and bear no interest or collateral, repayable and renewable under normal business advancement terms.
(#2) One of the directors of Federal Capital Investment Limited, Mr. Wu Ming Ding, has resigned as director of the Company effective on February 20, 2016. The advances are related to ordinary business transactions and bear no interest or collateral, repayable and renewable under normal business advancement terms. On June 9, 2021, the Company entered into a Settlement of Debt Agreement (the “Debt Settlement Agreement”) with Federal Capital Investment Limited, to convert a total of USD 142,000 of the Company’s accounts payable to the creditor as of December 31, 2020 into equity by means of a subscription for 4,733,333 new restricted shares of the Company’s common stock at a subscription price of $0.03 per share.
NOTE 11 - PROMISSORY NOTES
On May 10, 2021, the Company announced the Share Sale Agreement on May 12, 2021 for the acquisition of the entire issued and paid-up share capital of Bio Resources Limited from Taipan International Limited, an unrelated third party, The Wision Project Limited (formerly known as “Borneo Resources Limited”), an un-related third party, and other unrelated third party individuals, in consideration of issuance of 321,500,000 shares of the Company’s restricted common stock at $0.03 per share, valued at $9,645,000, and the issuance of promissory notes with two-year term period with a principal amount of $20,355,000. 321,500,000 shares were issued on May 12, 2021 and the promissory notes were issued on May 12, 2021. The face value (principal) amount of $20,355,000 was repayable by May 12, 2023, and bearing zero coupon interest. On January 20, 2022, the Company had reached a mutual agreement with the Lenders of the Notes to enter into a Supplement to Promissory Note, with each Lender, to convert the total principal loan amount of $20,355,000 into shares of the Company’s restricted Common Stock priced at $0.0611 per share, which represents the last ninety (90) days’ volume weighted average price (VWAP) as of the market closing of January 19, 2022. The Company and the Lenders further agreed that the actual date for the allotment and issue of new shares of the Company’s restricted common stock shall be confirmed in a subsequent written agreement.
VERDE RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2022 AND 2021
(Currency expressed in United States Dollars (“US$”), except for number of shares)
The fair value of the outstanding promissory notes was calculated with the following assumptions:
Risk free rate | | | 0.268 | % |
Credit spread | | | 6.513 | % |
Liquidity risk premium | | | 5.000 | % |
The following is a reconciliation of the beginning and ending balances of promissory notes payable using Level 3 inputs:
| | June 30 | | | June 30 | |
| | 2022 | | | 2021 | |
Balance at the beginning of year | | $ | 16,535,942 | | | $ | - | |
Promissory notes issued to unrelated third parties at fair value | | | - | | | | 16,290,550 | |
Interest expense | | | 1,948,086 | | | | 245,392 | |
Balance at the end of year | | $ | 18,484,028 | | | $ | 16,535,942 | |
The Company recorded $1,948,086 and $245,392 interest expense for the years ended June 30, 2022 and 2021, respectively.
NOTE 12 - LEASES
The Company adopted ASU No. 2016-02, Leases and determines whether an arrangement is a lease at inception. This determination generally depends on whether the arrangement conveys the right to control the use of an identified fixed asset explicitly or implicitly for a period of time in exchange for consideration. Control of an underlying asset is conveyed if we obtain the rights to direct the use of and to obtain substantially all of the economic benefit from the use of the underlying asset. Some of our leases include both lease and non-lease components which are accounted for as a single lease component as the Company has elected the practical expedient. Some of the operating lease agreements include variable lease costs, primarily taxes, insurance, common area maintenance or increases in rental costs related to inflation. Substantially all of our equipment leases and some of our real estate leases have terms of less than one year and, as such, are accounted for as short-term leases as we have elected the practical expedient.
Operating leases are included in the right-of-use lease assets, other current liabilities and long-term lease liabilities on the Consolidated Balance Sheet. Right-of-use assets and lease liabilities are recognized at each lease’s commencement date based on the present values of its lease payments over its respective lease term. When a borrowing rate is not explicitly available for a lease, the incremental borrowing rate is used based on information available at the lease’s commencement date to determine the present value of its lease payments. Operating lease payments are recognized on a straight-line basis over the lease term.
The Company adopts a 5% as weighted average incremental borrowing rate to determine the present value of the lease payments. The weighted average remaining life of the lease was 3 years.
The table below presents the lease-related assets and liabilities recorded on the balance sheet.
| | As of June 30, | |
| | 2022 | | | 2021 | |
| | | | | | |
Assets | | | | | | |
Right-of-use asset # | | $ | 685,714 | | | $ | 60,131 | |
| | | | | | | | |
Liabilities | | | | | | | | |
Current: | | | | | | | | |
Finance lease liabilities | | $ | 75,224 | | | $ | - | |
| | | | | | | | |
Non-current: | | | | | | | | |
Finance lease liabilities | | | 97,900 | | | | - | |
| | | | | | | | |
Total lease liabilities | | $ | 173,124 | | | $ | - | |
VERDE RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2022 AND 2021
(Currency expressed in United States Dollars (“US$”), except for number of shares)
As of June 30, 2022, right-of-use assets were $685,714 and lease liabilities were $173,124.
As of June 30, 2021, right-of-use assets were $60,131 and lease liabilities were $0.
The Company excludes short-term leases (those with lease terms of less than one year at inception) from the measurement of lease liabilities or right-of-use assets. The following tables summarize the lease expense for the years.
| | Years ended June 30, | |
| | 2022 | | | 2021 | |
| | | | | | |
Finance lease cost: | | | | | | |
Interest on lease liabilities (per ASC 842) | | $ | 1,065 | | | $ | - | |
| | | | | | | | |
Operating lease cost: | | | | | | | | |
Amortisation charge for the year (per ASC 842) | | | 34,286 | | | | 2,636 | |
| | | | | | | | |
Total lease expense | | $ | 35,351 | | | $ | 2,636 | |
Components of Lease Expense
The Company recognizes lease expense on a straight-line basis over the term of the operating leases, as reported within “general and administrative” expense on the accompanying consolidated statement of operations.
Future Contractual Lease Payments as of June 30, 2022
The below table summarizes our (i) minimum lease payments over the next five years, (ii) lease arrangement implied interest, and (iii) present value of future lease payments for the next five years and thereafter ending June 30:
Years ending June 30, | | Operating and finance lease amount | |
| | | |
2023 | | $ | 75,244 | |
2024 | | | 21,448 | |
2025 | | | 21,448 | |
2026 | | | 21,448 | |
2027 | | | 21,448 | |
Thereafter | | | 12,108 | |
Total minimum finance lease liabilities payment | | | 173,124 | |
Less: interest | | | - | |
| | | | |
Present value of lease liabilities | | $ | 173,124 | |
| | | | |
Representing:- | | | | |
Current liabilities | | $ | 75,224 | |
Non-current liabilities | | | 97,900 | |
| | $ | 173,124 | |
For the years ended June 30, 2022 and 2021, the amortization charge was $34,286 and $0, respectively.
# This leasing arrangement for the lease of the Segama factory amounting to $720,000 is for a lease term of seven (7) years and includes an exclusive right and option to purchase the factory site, together with all its right title and interest, for a consideration to be mutually agreed between the parties at any time during the period of two years from the date of the Lease Agreement. The Lease Payment and Security Payment shall be applied toward the Purchase Price upon GBL exercising the option to purchase. The Company’s lease agreements do not contain any material restrictive covenants.
VERDE RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2022 AND 2021
(Currency expressed in United States Dollars (“US$”), except for number of shares)
There are no corresponding lease liabilities recorded as the lease payments for the entire lease period has been paid upfront upon inception of the agreement.
NOTE 13 - STOCKHOLDERS’ EQUITY
Authorized Stock
The Company has authorized 10,000,000,000 common shares and 50,000,000 preferred shares, both with a par value of $0.001 per share. Each common share entitles the holder to one vote, in person or proxy, on any matter on which action of the stockholders of the corporation is sought.
Preferred stock outstanding
There are no preferred shares outstanding as of June 30, 2022 and 2021.
The Company has no stock option plan, warrants, or other dilutive securities.
Common stock outstanding
On May 10, 2021, the Company announced the Sale and Purchase Agreement to acquire the assets of biofraction plant and the right to use intellectual property license in Sabah, Malaysia from Borneo Energy Sdn Bhd, in consideration of issuance of 166,666,667 share of the Company’s stock at $0.03 per share, valued at $5,000,000. 135,666,667 shares and 31,000,000 shares were issued on May 10, 2021 and July 1, 2021, respectively. The completion of the S&P Agreement is subject to all such acts necessary, including but not limited to due diligence exercise to ascertain the valuation of the assets of the biofraction plant and the right to use the licensed intellectual property in Sabah, Malaysia.
On May 12, 2021, the Company, through its wholly-owned subsidiary GBL, entered into a Share Sale Agreement in relation to acquisition of the entire issued and paid-up share capital of Bio Resources Limited ("BRL")with Taipan International Limited, an unrelated third party, The Wision Project Limited (formerly known as “Borneo Resources Limited”), an unrelated third party and other individuals unrelated third parties, in consideration of issuance of 321,500,000 shares of the Company’s restricted common stock at $0.03 per share, valued at $9,645,000, and the issuance of promissory notes two-year term period a principal amount of $20,355,000. 321,500,000 shares were issued on May 12, 2021 and the promissory notes were issued on May 12, 2021. The face value (principal) amount of $20,355,000 is repayable by May 12, 2023, and bearing zero coupon interest. The promissory note is priced at $16,290,550 considering the current market interest rate. On January 20, 2022, the Company has reached a mutual agreement with the Lenders of the Notes to enter into a Supplement to Promissory Note, with each Lender, to convert the total principal loan amount of $20,355,000 into shares of the Company’s restricted Common Stock priced at $0.0611 per share, which represents the last ninety (90) days’ volume weighted average price (VWAP) as of the market closing of January 19, 2022. The acquisition of BRL was consummated on October 12, 2022.
On June 4, 2021, the Company issued a total of 65,900,000 restricted common shares for US$1,647,500 at US$0.025 per share to six non-US shareholders, including Borneo Oil Berhad and Victor Subbrayan Paul who are existing shareholders.
On June 9, 2021, the Company entered into a Settlement of Debt Agreement (the “Debt Settlement Agreement”) with the Company's creditors Beijing Changxin Wanlin Technology Co., Ltd, Federal Mining Resources Ltd, Federal Capital Investment Limited and Yorkshire Capital Limited (collectively the “Creditors”) to convert a total of USD 1,945,096 of the Company’s accounts payable to the Creditors into equity by increasing the share capital by means of a subscription for 64,836,533 new restricted shares of the Company’s common stock at a subscription price of $0.03 per share. As set out in the Debt Settlement Agreements, the new restricted shares for settlement of the account payable to Beijing Changxin Wanlin Technology Co., Ltd, Federal Mining Resources Ltd and Federal Capital Investment Limited were issued to their nominee, Internet.com Ltd on June 9, 2021.
VERDE RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2022 AND 2021
(Currency expressed in United States Dollars (“US$”), except for number of shares)
On June 10, 2021, the Company issued a total of 4,690,500 restricted common shares at US$0.03 per share to each of the two directors, of which 2,095,233 restricted common shares to Balakrishnan B S Muthu and 2,595,267 restricted common shares to Chen Ching to serve as a director of the Company for a one-year term (from July 1, 2020 to June 30, 2021). An aggregate of $140,715 for this transaction was recognized as stock-based compensation under selling, general and administrative expenses for the year ended June 30, 2021.
On June 10, 2021, the Company issued a total of 13,009,500 restricted common shares at US$0.03 per share to five consultants under the Consultant Agreements, of which 3,695,233 restricted common shares to Vincent Yong Tuck Seng, 3,695,233 restricted common shares to Lai Kui Shing Andy, 2,095,233 restricted common shares to Chan Hoi Kwong Paul, 2,095,233 restricted common shares to Sylvia Chan and 1,428,568 restricted common shares to Ng Tung to serve as consultants of the Company for a one-year term (from June 10, 2021 to June 9, 2022. An aggregate of $390,285 for this transaction, $34,716 was recognized as stock-based compensation according to the service period under selling, general and administrative expenses for the year ended June 30, 2021.
On June 18, 2021, the Company issued a total of 58,100,000 restricted common shares for US$1,452,500 at US$0.025 per share to twenty-four non-US shareholders.
On April 25, 2022, the Company issued a total of 8,445,946 restricted common shares for $1,000,000 at $0.1184 per share to two non-US shareholders.
There were 819,188,055 and 779,742,109 shares of common stock issued and outstanding at June 30, 2022 and June 30, 2021, respectively.
NOTE 14 - NET LOSS PER SHARE
The following table sets forth the computation of basic and diluted net (loss) income per share for the respective years:
| | Years ended June 30, | |
| | 2022 | | | 2021 | |
| | | | | | |
Net loss | | $ | (3,954,414 | ) | | $ | (793,007 | ) |
Less: Net loss attributable to non-controlling interest | | | 6,979 | | | | 18,158 | |
Net loss attributable to Verde Resources, Inc. shareholders | | $ | (3,947,435 | ) | | $ | (774,849 | ) |
| | | | | | | | |
Weighted average common shares outstanding: | | | | | | | | |
- Basic | | | 812,847,811 | | | | 191,278,280 | |
- Diluted | | | 812,847,811 | | | | 191,278,280 | |
| | | | | | | | |
Net loss per share: | | | | | | | | |
- Basic | | $ | (0.00 | ) | | $ | (0.00 | ) |
- Diluted | | $ | (0.00 | ) | | $ | (0.00 | ) |
# less than $0.001
For the years ended June 30, 2022 and 2021, diluted weighted-average common shares outstanding is equal to basic weighted-average common shares, due to the Company’s net loss position. Hence, no common stock equivalents were included in the computation of diluted net loss per share since such inclusion would have been antidilutive.
The Company has no potentially dilutive securities, such as, options or warrants, currently issued and outstanding other than the restricted common stock to be issued at $0.0611 per share upon conversion of the Promissory Notes with a principal amount of $20,355,000 at a future date to be to be mutually agreed with the Lenders, and the commitment to issue 1,000,000 shares to Gary F. Zimmer on or before July 15, 2022 pursuant to a contract of service.
NOTE 15 - INCOME TAX
For the years ended June 30, 2022 and 2021, the local (“United States of America”) and foreign components of loss before income taxes were comprised of the following:
| | Years ended June 30, | |
| | 2022 | | | 2021 | |
| | | | | | |
Tax jurisdiction from: | | | | | | |
- Local (US regime) | | $ | (3,130,173 | ) | | $ | (536,320 | ) |
- Foreign, including | | | | | | | | |
British Virgin Island | | | (325,539 | ) | | | (135,601 | ) |
Malaysia | | | (498,702 | ) | | | (121,086 | ) |
| | | | | | | | |
Loss before income taxes | | $ | (3,954,414 | ) | | $ | (793,007 | ) |
The provision for income taxes consisted of the following:
| | Years ended June 30, | |
| | 2022 | | | 2021 | |
| | | | | | |
Current tax: | | $ | - | | | $ | - | |
- Local | | | - | | | | - | |
- Foreign | | | - | | | | - | |
| | | | | | | | |
Deferred tax | | | | | | | | |
- Local | | | - | | | | - | |
- Foreign | | | - | | | | - | |
| | | | | | | | |
Income tax expense (benefit) | | $ | - | | | $ | - | |
VERDE RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2022 AND 2021
(Currency expressed in United States Dollars (“US$”), except for number of shares)
The effective tax rate in the years presented is the result of the mix of income earned in various tax jurisdictions that apply a broad range of income tax rate. The Company mainly operates in U.S.A. and Malaysia that is subject to taxes in the jurisdictions in which they operate, as follows:
United States of America
The Company is registered in the State of Nevada and is subject to the tax laws of United States of America. The U.S. Tax Cuts and Jobs Act (the “Tax Reform Act”) was signed into law. The Tax Reform Act significantly revised the U.S. corporate income tax regime by, among other things, lowering the U.S. corporate tax rate from 35% to 21% effective January 1, 2018. The Company’s policy is to recognize accrued interest and penalties related to unrecognized tax benefits in its income tax provision. The Company has not accrued or paid interest or penalties which were not material to its results of operations for the periods presented. Deferred tax asset is not provided for as the tax losses may not be able to carry forward after a change in substantial ownership of the Company.
For the years ended June 30, 2022 and 2021, there were no operating income in US tax regime.
BVI
Under the current BVI law, the Company is not subject to tax on income.
Malaysia
The Company’s subsidiary is registered in Malaysia and is subject to the Malaysia corporate income tax at a standard income tax rate of 24% on the assessable income arising in Malaysia during its tax year.
For the year ended June 30, 2022, the operation in Malaysia incurred $5,248,593 of cumulative net operating losses which can be carried forward to offset future taxable income. The net operating loss carryforwards has no expiration. The Company has provided for a full valuation allowance against the deferred tax assets of $1,259,662 on the expected future tax benefits from the net operating loss (“NOL”) carryforwards as the management believes it is more likely than not that these assets will not be realized in the future.
| | Years ended June 30, | |
| | 2022 | | | 2021 | |
| | | | | | |
Loss before income taxes | | $ | (498,702 | ) | | $ | (121,086) | |
Statutory income tax rate | | | 24 | % | | | 24 | % |
Income tax expense at statutory rate | | | (119,688 | ) | | | (29,061 | ) |
Non-deductible items | | | 4,505 | | | | - | |
Net operating loss | | | 115,183 | | | | 29,061 | |
Income tax expense | | $ | - | | | $ | - | |
The following table sets forth the significant components of the deferred tax assets of the Company:
| | As of June 30, | |
| | 2022 | | | 2021 | |
| | | | | | |
US tax regime | | $ | 169,688 | | | $ | - | |
Malaysia tax regime | | | 1,259,662 | | | | 1,198,944 | |
Less: valuation allowance | | | (1,429,310 | ) | | | (1,198,944 | ) |
Deferred tax assets, net | | $ | - | | | $ | - | |
The Company has recorded valuation allowances for certain tax attribute carry forwards and other deferred tax assets due to uncertainty that exists regarding future realizability. If in the future the Company believes that it is more likely than not that these deferred tax benefits will be realized, the majority of the valuation allowances will be recognized in the consolidated statement of operations. The Company did not have any interest and penalty provided or recognized in the income statements for years ended June 30, 2022 and June 30, 2021. The Company did not have uncertainty tax positions or events leading to uncertainty tax position within the next 12 months.
VERDE RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2022 AND 2021
(Currency expressed in United States Dollars (“US$”), except for number of shares)
NOTE 16 - PENSION COSTS
The Company is required to make contribution to their employees under a government-mandated defined contribution pension scheme for its eligible full-times employees in Malaysia. The Company is required to contribute a specified percentage of the participants’ relevant income based on their ages and wages level. During the years ended June 30, 2022 and 2021, $7,219 and $6,374 contributions were made accordingly.
NOTE 17 - RELATED PARTY TRANSACTIONS
| | For the Years ended | |
| | June 30, | |
| | 2022 | | | 2021 | |
Related party transactions: | | | | | | |
Sales to: | | | | | | |
Borneo Eco Food Sdn Bhd (#3) | | $ | 7,314 | | | $ | - | |
Other income – Sales of wash sand to: | | | | | | | | |
Jusra Mining Merapoh Sdn Bhd (#1) | | $ | 10 | | | $ | 26,559 | |
Site expenses: | | | | | | | | |
Warisan Khidmat Sdn Bhd (#5) | | $ | 16,085 | | | $ | - | |
Professional services provided by: | | | | | | | | |
Federal Capital Investment Limited (#2) | | $ | - | | | $ | 24,000 | |
Warisan Khidmat Sdn Bhd (#5) | | $ | 9,091 | | | $ | - | |
Related party balances: | | | |
| | June 30, | |
| | 2022 | | | 2021 | |
Trade receivables | | | | | | |
Borneo Eco Food Sdn Bhd (#3) | | $ | 5,933 | | | $ | - | |
| | | | | | | |
Deposits paid for acquisition of property and equipment | | | | | | | |
Borneo Energy Sdn Bhd (#3) | | $ | 5,000,000 | | | $ | 4,070,000 | |
| | | | | | | | |
Other receivable | | | | | | | | |
Jusra Mining Merapoh Sdn Bhd (#1) | | $ | - | | | $ | 26,338 | |
| | | | | | | | |
Advanced to related parties | | | | | | | | |
Advanced to Global Renewable Sdn Bhd (#4) | | $ | - | | | $ | 6,691 | |
| | | | | | | | |
Trade Payables | | | | | | | | |
Warisan Khidmat Sdn Bhd (#5) | | $ | 7,253 | | | $ | - | |
| | | | | | | | |
Advanced from related parties | | | | | | | | |
Advanced from BOG (#6) | | $ | 555,527 | | | $ | 579,783 | |
Advanced from Federal Capital Investment Limited (#7) | | $ | - | | | $ | 6,000 | |
(#1) Lamax Gold Limited (“LGL”) held 15% equity interests of Champmark Sdn Bhd which was disposed on October 20, 2021 to Verde Resources Asia Pacific Limited (formerly known as Gold Billion Global Limited) and is also the major shareholder of Jusra Mining Merapoh Sdn Bhd.
(#2) One of the directors of Federal Capital Investment Limited, Mr. Wu Ming Ding, has resigned as director of the Company effective February 20, 2016.
(#3) Borneo Oil Berhad (“BOB”) is ultimate holding company of Borneo Eco Food Sdn. Bhd. and Borneo Energy Sdn Bhd, and held 20.0% and 22.8% of the Company’s issued and outstanding common stock as of June 30, 2021 and June 30, 2022, respectively.
(#4) Balakrishnan B.S. Muthu was a common director of Global Renewable Sdn Bhd and the Company, and had since resigned from Global Renewables Sdn. Bhd. in January 2022.
(#5) Warisan Khidmat Sdn. Bhd. is a company whose shareholdings is entirely held by a Director of Verde Malaysia.
(#6) Borneo Oil and Gas Corporation Sdn Bhd (“BOG”) is a wholly owned subsidiary of Borneo Oil Berhad (“BOB”) (holding 20.0% and 22.8% of the Company’s issued and outstanding common stock as of June 30, 2021 and June 30, 2022, respectively). The advances are related to ordinary business transactions and bear no interest or collateral, repayable and renewable under normal business advancement terms.
(#7) One of the directors of Federal Capital Investment Limited, Mr. Wu Ming Ding, has resigned as director of the Company effective on February 20, 2016. The advances are related to ordinary business transactions and bear no interest or collateral, repayable and renewable under normal business advancement terms. On June 9, 2021, the Company entered into a Settlement of Debt Agreement (the “Debt Settlement Agreement”) with Federal Capital Investment Limited, to convert a total of USD 142,000 of the Company’s accounts payable to the creditor as of December 31, 2020 into equity by means of a subscription for 4,733,333 new restricted shares of the Company’s common stock at a subscription price of $0.03 per share.
Apart from the transactions and balances detailed elsewhere in these accompanying consolidated financial statements, the Company has no other significant or material related party transactions during the years presented.
NOTE 18 - CONCENTRATIONS OF RISK
The Company is exposed to the following concentrations of risk:
For the years ended June 30, 2022 and 2021, there was no single customer whose revenue exceeded 10% of the revenue.
(b) | Economic and political risk |
The Company’s major operations are conducted in U.S.A. and Malaysia. Accordingly, the political, economic, and legal environments in U.S.A. and Malaysia, as well as the general state of U.S.A. and Malaysia’s economy may influence the Company’s business, financial condition, and results of operations.
The Company cannot guarantee that the current exchange rate will remain steady; therefore there is a possibility that the Company could post the same amount of profit for two comparable periods and because of the fluctuating exchange rate actually post higher or lower profit depending on exchange rate of HKD converted to US$ on that date. The exchange rate could fluctuate depending on changes in political and economic environments without notice.
NOTE 19 - COMMITMENTS AND CONTINGENCIES
As of June 30, 2022, the Company has no material commitments or contingencies.
VERDE RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2022 AND 2021
(Currency expressed in United States Dollars (“US$”), except for number of shares)
NOTE 20 - SUBSEQUENT EVENTS
In accordance with ASC Topic 855, “Subsequent Events”, which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before consolidated financial statements are issued, the Company has evaluated all events or transactions that occurred after June 30, 2022, up through the date the Company issued the audited consolidated financial statements.
On May 12, 2021, the Company, through its wholly-owned subsidiary Gold Billion Global Limited (“GBL”), a company incorporated under the laws of the British Virgin Islands, entered into a Share Sale Agreement in relation to the acquisition of the entire issued and paid-up share capital of Bio Resources Limited (the “Share Sale Agreement”) with Taipan International Limited, a company incorporated under the laws of the Labuan, and Borneo Resources Limited, a company incorporated under the laws of the Labuan, and other individuals. Under the terms of the Share Sale Agreement, the acquisition of the entire issued and paid-up share capital of BRL, through the Company’s wholly-owned subsidiary GBL, shall be satisfied by the issuance of 321,500,000 shares of the Company’s restricted common stock, par value $0.001 per share (the “Common Stock”) at a price per share of $0.03, and the issuance of promissory notes with a two-year term period for the amount of $20,355,000. The acquisition of BRL was consummated on October 12, 2022.
Bio Resources Limited (“BRL”) is the beneficial and/or registered proprietor of the intellectual property known as “Catalytic Biofraction Process”, which is a slow pyrolysis process using a proprietary catalyst to depolymerise palm biomass wastes (empty fruit bunches or palm kernel shells) in temperature range of 350 degrees Celsius to 500 degrees Celsius to yield commercially valuable bio products: bio-oil, wood vinegar (pyroligneous acid), biochar and bio-syngas. The intellectual property is a second-generation pyrolysis process where non-food feedstock like palm biomass wastes is used as feedstock. Upon fulfilling UN’s (United Nations) ACM 22 protocol as well as LCA (Life Cycle Assessment) requirements, we anticipate that the by-products from this IP would lead to certification and issuance of Carbon Avoidance Credits as well as Carbon Removal Credits to generate carbon revenue for the company.
On July 8, 2022, the Company, through its wholly-owned subsidiary Verde Renewables, Inc. (“VRI”), a company incorporated in the State of Missouri, U.S.A., entered into a Services Agreement (the “Agreement”) with Lisa Leilani Zimmer Durand to engage her as its corporate consultant to provide training on biological farming, write articles and white papers on the Company’s products and develop new product formulations as designated in the Agreement. Under the Agreement, the Company will pay Lisa Leilani Zimmer Durand by the issuance of 500,000 shares of the Company’s restricted common stock, par value $0.001 per share (the “Common Stock”) and $25,000 advanced deposit on or before July 15, 2022.
On July 15, 2022, the Company issued 1,000,000 and 500,000 restricted common shares to our corporate consultants Gary F. Zimmer and Lisa Leilani Zimmer Durand, respectively.
On September 27, 2022, the Company exercised its Option to Purchase a 24-acre property in La Belle Missouri pursuant to a Commercial Lease Agreement and Option to Purchase (the “Lease Agreement”) entered into on February 10,2022 by the Company through Verde Estates, LLC, with Jon Neal Simmons and Betty Jo Simmon (the “Landlord”) to support carbon farming with biochar in Missouri, for a consideration of $500,000. The Company had paid to the Landlord a security deposit in the sum of 240,000 prior to the execution of the Lease Agreement. The Company paid the balance of the sum of 260,000 at the closing of the purchase of the Property.
On October 1, 2022, Balakrishnan B S Muthu resigned his position as President of Verde Resources, Inc. (“Verde” or the “Company”). Balakrishnan B S Muthu shall remain as Treasurer, Chief Financial Officer, General Manager and Director of Verde and Liang Wai Keen shall remain as Secretary of the Company.
Mr. Jack Wong has been appointed President and Chief Executive Officer of the Company effective October 1, 2022. Mr. Wong was the sole shareholder of The Wision Project Sdn Bhd (“Wision”), a subsidiary which was acquired by the Company through its wholly owned subsidiary Verde Resources (Malaysia) Sdn Bhd (“Verde Malaysia”) pursuant to Share Sale Agreement (“SSA”) signed on March 23, 2022 for the acquisition of one hundred percent 100% of the issued and paid-up ordinary shares in Wision from Mr. Wong.
On October 1, 2022, the Company’s Board of Directors adopted an employment and compensation agreement for Mr. Wong (the “Agreement”). The Agreement provides for an employment term of five (5) years. Mr. Wong will receive an annual salary of $287,650 inclusive of any tax payable as required by law. The Company will also provide Mr. Wong an executive vehicle, executive housing, health benefits, and equity incentives upon the Company adopting an equity incentive plan.
On October 26, 2022, the Company entered into a corporate consulting services agreement (the “Consulting Agreement”) for investor communication and public relations services with Dutchess Group LLC (“DGL”). Pursuant to terms of the Consulting Agreement, the Company agreed to issue 1,500,000 shares of the Company’s restricted common stock to DGL within forty-five (45) days of signing the Consulting Agreement.