The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
Notes to Consolidated Financial Statements
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Verde Resources, Inc. (the “Company” or “VRDR”) was incorporated on April 22, 2010, in the State of Nevada, U.S.A. The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America, and the Company’s fiscal year end is June 30.
Gold Billion Global Limited (“Gold Billion” or “GBL”) was incorporated in British Virgin Islands on February 7, 2013. GBL is setup by the Board of Director of Federal Mining Resources Limited (“FMR”). The major operation of GBL is to manage and monitor the mineral exploration and mining projects of FMR.
On July 1, 2013, FMR has assigned its rights and obligation on Champmark Sdn Bhd (“CSB”) to GBL. Four of the five members of CSB Board of Directors were appointed by FMR, with two of the GBL Board of Directors currently sitting on the CSB Board. According to ASC 810-05-08 A, CSB is a deemed subsidiary of GBL where it has controlled the CSB Board of Directors, has assigned rights to receive future benefits and residual value, and obligation to absorb loss and finance for CSB by GBL. GBL has the power to direct the activities of CSB that most significantly impact CSB’s economic performance and the obligation to absorb losses of CSB that could potentially be significant to the CSB or the right to receive benefits from CSB that could potentially be significant to CSB. GBL is the primary beneficiary of CSB because it has been assigned with all relevant rights and obligation and can direct the activities of CSB through the common directors and the 85% shareholder, FMR. Under 810-23-42, 43, it is determined that CSB is de-facto agent of GBL and GBL is the de-facto principal of CSB. GBL will start to consolidate CSB from July 1, 2013 and the Company will consolidated GBL and CSB from October 25, 2013 onwards.
On February 17, 2014, the Company entered into a Supplementary Agreement to the Assignment Agreement and completed an acquisition of GBL pursuant to the Supplementary Agreement. The acquisition was a reverse acquisition in accordance with ASC 805-40 “Reverse Acquisitions”. The legal parent was VRDR which was the accounting acquiree while GBL was the accounting acquirer. There was a 15% non-controlling interest of Champmark SDN BHD (“CSB”) after the acquisition. This transaction was accounted for as a recapitalization effected by a share exchange, wherein GBL with its 85% deemed subsidiary CSB was considered the acquirer for accounting and financial reporting purposes. The assets and liabilities of the acquired entity have been brought forward at their book value and no goodwill has been recognized.
As a result of the acquisition, the Company holds 100% equity interest in GBL and 85% variable interest in CSB. Our consolidated subsidiaries include GBL being our wholly-owned subsidiary and 85% of CSB being a variable interest entity (VIE) and deemed subsidiary of GBL.
On March 17, 2014, the Company through GBL and its deemed subsidiary CSB entered into a Sub-Contract Agreement with Borneo Oil & Gas Corporation Sdn Bhd (“BOG”) for the engagement of its sub-contractor services to carry out exploration and exploitation works on alluvial and lode gold resources at Site IV-1 of the Merapoh Mine. The Sub-Contract Agreement is for a period of 5 years with a renewal for another 5 years subject to review by both parties. BOG is a wholly-owned subsidiary of Borneo Oil Berhad (BOB) which is listed on the main market of Kuala Lumpur Stock Exchange. BOG being a local company in Malaysia provides the Company with the advantage of local knowledge and well-established connection in dealing with the relevant local authorities in our mining operations.
On April 1, 2014, GBL purchased 85% equity interest of CSB, and CSB became indirect subsidiary of the Company.
Effective August 27, 2014, the Company’s Articles of Incorporation were amended to increase the authorized shares of the Company from 100,000,000 shares of common stock to 250,000,000 shares of common stock. A copy of the Certificate of Amendment was filed with the Nevada Secretary of State. The Form 8K announcing the increase of the authorized shares of the Company was filed with SEC on September 15, 2014.
Effective February 20, 2016, Mr. Wu Ming Ding resigned all of his positions as President and Director of the Company with Mr. Balakrishnan B S Muthu being appointed President to fill the vacancy created. Effective February 20, 2016, Mr. Chen Ching was appointed Director of the Company and the entire Board of Directors now consists of Mr. Balakrishnan B S Muthu and Mr. Chen Ching. The SC 14F1 and Form 8-K announcing the change in officers and directors were filed with SEC on February 10, 2016 and February 22, 2016 respectively.
Effective February 2, 2018, the Company’s Articles of Incorporation were amended to increase the authorized shares of the Company from 250,000,000 shares of common stock to 10,000,000,000 shares of common stock. A copy of the Certificate of Amendment was filed with the Nevada Secretary of State. The Form 8K announcing the increase of the authorized shares of the Company was filed with SEC on February 6, 2018.
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. 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 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 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 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. 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 auditing and due diligence exercise to ascertain the valuation of Bio Resources Limited. The consideration shall be refundable if the transaction fails to complete.
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 USD1,945,096 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 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 (“Segaman 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 Segaman Ventures on June 10, 2021. 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 factory site. The consideration shall be refundable if the transaction fails to complete.
On June 17, 2021, the Company through its prospective indirect subsidiary Bio Resources Limited (“BRL”), a company incorporated under the laws of the Labuan, entered into a Shares Sale Agreement with Hermalis Binti Mohmad Tahir (“Hermalis”), a company incorporated under the laws of the Malaysia, to acquire the entire issued and paid-up share capital of Global Renewables. Under the terms of the Shares Sale Agreement, the consideration for the acquisition shall be satisfied in full by the payment of Malaysia Ringgit MYR 25,000 upon the execution of the Shares Sale Agreement. The acquisition of Global Renewables was subject to the successful completion of the acquisition of the entire issued and paid-up share capital of BRL. Therefore, the acquisition of Global Renewables will dependent upon the successful acquisition of BRL.
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 MYR 150,000 ($36,130) upon the execution of the Shares Sale Agreement. 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 auditing and due diligence exercise to ascertain the valuation of 15% of the issued and paid-up share capital of CSB. A deposit of MYR 150,000 ($36,130) was paid to LGL on June 21, 2021. The consideration shall be refundable if the transaction fails to complete.
On August 10, 2021, the Company formed a wholly owned subsidiary, Verde Renewables, Inc., for the purpose of conducting business in Missouri (using palm waste to create biochar and related products). Another entity, Verde Estates, LLC, was also formed on August 10, 2021 to own property in Missouri. Verde Estates, LLC is a wholly owned subsidiary of Verde Renewables, Inc.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America (GAAP). These consolidated financial statements are expressed in United States dollars ($). Financial statements prepared in accordance with GAAP contemplate the realization of assets and the satisfaction of liabilities in the normal course of business. These condensed consolidated audited financial statements include all adjustments that, in the opinion of management, are necessary in order to make the financial statements not misleading.
Basis of Consolidation
The consolidated financial statements include the financial statements of Verde Resources, Inc., its wholly owned subsidiary Gold Billion Global Limited (“GBL”) and 85% of the indirect subsidiary Champmark SDN BHD (“CSB”). All inter-company balances and transactions between the Company and its subsidiary and indirect subsidiary have been eliminated upon consolidation.
The Company has adopted ASC Topic 810-10-5-8, “Variable Interest Entities”, which requires a variable interest entity or VIE to be consolidated by a company if that company is subject to a majority of the risk of loss for the VIE or is entitled to receive a majority of the VIE’s residual returns.
Variable Interest Entity and Indirect Subsidiary
On July 1, 2013, the Company’s subsidiary, GBL entered into a series of agreements (“VIE agreements”) with FMR and details of the VIE agreements are as follows:
|
|
1.
|
Management Agreement, FMR entrusted the management rights of its subsidiary CSB to GBL that include:
|
|
|
i)
|
management and administrative rights over the day-to-day business affairs of CSB and the mining operation at Site IV-1 of the Merapoh Gold Mine;
|
|
|
ii)
|
final right for the appointment of members to the Board of Directors and the management team of CSB;
|
|
|
iii)
|
act as principal of CSB;
|
|
|
iv)
|
obligation to provide financial support to CSB;
|
|
|
v)
|
option to purchase an equity interest in CSB;
|
|
|
vi)
|
entitlement to future benefits and residual value of CSB;
|
|
|
vii)
|
right to impose no dividend policy;
|
|
|
viii)
|
human resources management.
|
|
|
2.
|
Debt Assignment, FMR assigned to GBL the sum of money in the amount of US Dollars One Hundred Nine Thousand Eight Hundred One And Cents Seventy-Two Only (US$ 109,801.72), now due to GBL from CSB under the financing obligation from the FMR to CSB.
|
With the above agreements, GBL demonstrates its ability to control CSB as the primary beneficiary and the operating results of the VIE was included in the condensed consolidated financial statements for the year ended June 30, 2014.
On April 1, 2014, the Board of Director of GBL notified FMR upon the decision to exercise the right of option to purchase 85% equity interest of CSB under Management Agreement Section 3.2.4 dated July 1, 2013 between GBL and FMR. This acquisition was completed on April 1, 2014 with consideration of US$1. GBL then became 85% shareholder of CSB and is required to consolidate CSB as a subsidiary.
On June 18, 2021, GBL entered into a Shares Sale Agreement to acquire the remaining 15% of the issued and paid-up share capital of CSB. GBL would own the entire issued and paid-up share capital of CSB upon completion of the acquisition.
Operating leases
In February 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU 2016-02, Leases (Topic 842), which is effective for annual reporting periods (including interim periods) beginning after December 15, 2018, and early adoption is permitted. The Company adopted the Topic 842 on July 1, 2019 using a modified retrospective and has elected not to recast comparative period in the consolidated financial statements. The Company leases its facility, which are classified as operating leases in accordance with Topic 842. Under Topic 842, lessees are required to recognize the following for all leases (with the exception of short-term leases) on the commencement date: (i) lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (ii) right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. At the commencement date, the Company recognizes the lease liability at the present value of the lease payments not yet paid, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate for the same term as the underlying lease. The right-of-use asset is recognized initially at cost, which primarily comprises the initial amount of the lease liability, plus any initial direct costs incurred, consisting mainly of brokerage commissions, less any lease incentives received. All right-of-use assets are reviewed for impairment. There was no impairment for right-of-use lease assets as of June 30, 2021.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company’s periodic filings with the Securities and Exchange Commission include, where applicable, disclosures of estimates, assumptions, uncertainties and markets that could affect the financial statements and future operations of the Company.
Cash and Cash Equivalents
Cash and cash equivalents include cash in banks, 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 $2,117,622 and $24,027 in cash and cash equivalents at June 30, 2021 and June 30, 2020, respectively.
Concentrations of Credit Risk
The Company’s financial instruments that are exposed to concentrations of credit risk primarily consist of its cash and cash equivalents and related party payables it will likely incur in the near future. The Company places its cash and cash equivalents with financial institutions of high credit worthiness. At times, its cash and cash equivalents with a particular financial institution may exceed any applicable government insurance limits. The Company’s management plans to assess the financial strength and credit worthiness of any parties to which it extends funds, and as such, it believes that any associated credit risk exposures are limited.
Risks and Uncertainties
The Company operates in the resource exploration industry that is subject to significant risks and uncertainties, including financial, operational, technological, and other risks associated with operating a resource exploration business, including the potential risk of business failure.
Property and equipment
Property and equipment are stated at cost. The straight-line depreciation method is used to compute depreciation over the estimated useful lives of the assets with a 5% estimated residual values, as follows:
|
|
|
Useful Lives
|
|
|
Land & Buildings
|
|
3-6 years
|
|
|
Machinery
|
|
5 years
|
|
|
Furniture, fixture and electronic equipment
|
|
3 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.
Accounts Receivable
Accounts receivable are recognized and carried at net realizable value. An allowance for doubtful accounts will be recorded in the period when a loss is probable based on an assessment of specific evidence indicating troubled collection, historical experience, accounts aging, ongoing business relation and other factors. Accounts are written off after exhaustive efforts at collection. If accounts receivable are to be provided for, or written off, they would be recognized in the consolidated statement of operations within operating expenses. At June 30, 2021 and June 30, 2020, the Company has no allowance for doubtful accounts, as per management’s judgment based on their best knowledge. As of June 30, 2021 and June 30, 2020, the longest credit term for certain customers are 60 days.
Provision for Doubtful Accounts
The Company maintains an allowance for doubtful accounts to reserve for potentially uncollectible receivables and reviews accounts receivable by amounts due by customers which are past due to identify specific customers with known disputes or collectability issues. In determining the amount of the reserve, the Company makes judgments about the creditworthiness of customers based on past collection experience and ongoing credit risk evaluations. At June 30, 2021 and June 30, 2020 there was no allowance for doubtful accounts.
Fair Value
ASC Topic 820 “Fair Value Measurement and Disclosures” establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market.
These tiers include:
|
|
•
|
Level 1 - defined as observable inputs such as quoted prices in active markets;
|
|
|
•
|
Level 2 - defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and
|
|
|
•
|
Level 3 - defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.
|
The Company’s financial instruments consist of cash and cash equivalents, trade receivables, other receivables, payables, and short term and long term debt. The carrying values of cash and cash equivalents, trade receivables, other receivables, and payables approximate their fair value due to their short maturities. The carrying value of long term debt approximates the fair value of debt of similar terms and remaining maturities available to the company.
The Company’s non-financial assets are measured on a recurring basis. These non-financial assets are measured for impairment annually on the Company’s measurement date at the reporting unit level using Level 3 inputs. For most assets, ASC 820 requires that the impact of changes resulting from its application be applied prospectively in the year in which the statement is initially applied.
The Company’s non-financial assets measured on a non-recurring basis include the Company’s property, plant and equipment and finite-use intangible assets which are measured for recoverability when indicators for impairment are present. ASC 820 requires companies to disclose assets and liabilities measured on a non-recurring basis in the period in which the re-measurement at fair value is performed.
Foreign Currency Translation
The Company’s reporting currency is the United States dollar (“$”) and the accompanying consolidated financial statements have been expressed in United States dollars. The Company’s functional currency is the Malaysian Ringgit ( “MYR”) which is a functional currency as being the primary currency of the economic environment in which their operations are conducted.
In accordance with ASC Topic 830 “Translation of Financial Statements” , capital accounts of the consolidated financial statements are translated into United States dollars from MYR at their historical exchange rates when the capital transactions occurred. Assets and liabilities are translated at the exchange rates as of balance sheet date. Income and expenditures are translated at the average exchange rate of the respective year. The resulting exchange differences are recorded in the consolidated statement of operations.
|
|
|
June 30,
2021
|
|
|
June 30,
2020
|
|
|
Year-end MYR : $1 exchange rate
|
|
|
0.2409
|
|
|
|
0.2334
|
|
|
Average MYR : $1 exchange rate
|
|
|
0.2429
|
|
|
|
0.2376
|
|
Stock-Based Compensation
The Company accounts for stock-based compensation in accordance with ASC 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 505-50 “Equity-Based Payments to Non-Employees.
Comprehensive Income
Comprehensive income is defined to include all changes in equity except those resulting from investments by owners and distributions to owners. Among other disclosures, all items that are required to be recognized under current accounting standards as components of comprehensive income are required to be reported in a financial statement that is presented with the same prominence as other financial statements. Comprehensive income includes net income and the foreign currency translation changes.
Related Party
Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control or significant influence, such as a family member or relative, shareholder, or a related corporation.
Non-controlling Interest
The Company’s non-controlling interest represents the minority shareholder’s ownership interest related to the Company’s subsidiary, CSB. The Company reports its non-controlling interest in subsidiaries as a separate component of equity in the Consolidated Balance Sheets and reports both net loss attributable to the non-controlling interest and net loss attributable to the Company’s common shareholders on the face of the Consolidated Statements of Operations. The Company’s equity interest in CSB is 85.0% and the non-controlling stockholder’s interest is 15%. This is reflected in the Consolidated Statements of Equity.
Segment Reporting
The Company currently engages in one operation segment: Gold Mining. The expenses incurred were consisting principally of management services. The Company’s major operation is located in Malaysia.
Mineral Acquisition and Exploration Costs
The Company has been primarily engaged in the acquisition, exploration, and development of mining properties. The Company was no longer considered an exploration stage company after the reverse take-over with its subsidiary GBL.
Mineral property acquisition and exploration costs are expensed as incurred. When it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves, the costs incurred to develop such property are capitalized. Such costs will be amortized using the units-of-production method over the estimated life of the probable reserves.
Environmental Expenditures
The operations of the Company have been, and may in the future be affected from time to time in varying degree by changes in environmental regulations, including those for future reclamation and site restoration costs. Both the likelihood of new regulations and their overall effect upon the Company vary greatly and are not predictable. The Company’s policy is to meet or, if possible, surpass standards set by relevant legislation by application of technically proven and economically feasible measures.
Environmental expenditures that relate to ongoing environmental and reclamation programs are charged against earnings as incurred or capitalized and amortized depending on their future economic benefits. All of these types of expenditures incurred since inception have been charged against earnings due to the uncertainty of their future recoverability. Estimated future reclamation and site restoration costs, when the ultimate liability is reasonably determinable, are charged against earnings over the estimated remaining life of the related business operation, net of expected recoveries.
Revenue Recognition
In accordance with the ASC Topic 606, “Revenue from Contracts with Customers”, the Company recognizes revenue when persuasive evidence of an arrangement exists, transfer of title has occurred or services have been rendered, the selling price is fixed or determinable and collectibility is reasonably assured.
The Company derives revenues primarily from the sales of gold mineral or other minerals to registered gold trading companies or other customers in Malaysia. The Company generally recognizes its revenues 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.
Income Taxes
The provision for income taxes is determined in accordance with the provisions of ASC Topic 740, “Accounting for Income Taxes” (“ASC 740”). Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Any effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
ASC 740 prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their financial statements uncertain tax positions taken or expected to be taken on a tax return. Under ASC 740, tax positions must initially be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions must initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts. As of June 30, 2021 and June 30, 2020, the Company did not have any significant unrecognized uncertain tax positions.
Recent Accounting Pronouncements
Recent Adopted Accounting Standards
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements for Level 1, Level 2 and Level 3 instruments in the fair value hierarchy. The guidance is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted for any eliminated or modified disclosures. The Company applied the new standard beginning January 1, 2020. The adoption of this standard did not have an impact on the Company’s consolidated financial position, results of operations and cash flows.
Recently issued accounting pronouncements not yet adopted
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326), which requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost. Adoption of the ASUs is on a modified retrospective basis. As a smaller reporting company, the standard will be effective for the Company for interim and annual reporting periods beginning after December 15, 2022. The Company is currently evaluating the impact that the standard will have on our consolidated financial statements and related disclosures.
In January 2017, the FASB issued ASU No. 2017-04, simplifying the Test for Goodwill Impairment. The guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The guidance should be adopted on a prospective basis. As a smaller reporting company, the standard will be effective for the Company for interim and annual reporting periods beginning after December 15, 2022, with early adoption permitted. The Company is currently evaluating the impact of adopting this standard on our consolidated financial statements.
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistent application among reporting entities. The guidance is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years, with early adoption permitted. Upon adoption, we must apply certain aspects of this standard retrospectively for all periods presented while other aspects are applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. The Company is evaluating the impact this update will have on our financial statements.
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) (“ASU 2020-04”). ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. The Company continues to evaluate the impact of the guidance and may apply the elections as applicable as changes in the market occur.
In August 2020, the FASB issued 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 (“ASU 2020-06”), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity. This ASU (1) simplifies the accounting for convertible debt instruments and convertible preferred stock by removing the existing guidance in ASC 470-20, Debt: Debt with Conversion and Other Options, that requires entities to account for beneficial conversion features and cash conversion features in equity, separately from the host convertible debt or preferred stock; (2) revises the scope exception from derivative accounting in ASC 815-40 for freestanding financial instruments and embedded features that are both indexed to the issuer’s own stock and classified in stockholders’ equity, by removing certain criteria required for equity classification; and (3) revises the guidance in ASC 260, Earnings Per Share, to require entities to calculate diluted earnings per share (EPS) for convertible instruments by using the if-converted method. In addition, entities must presume share settlement for purposes of calculating diluted EPS when an instrument may be settled in cash or shares.
For SEC filers, excluding smaller reporting companies, ASU 2020-06 is effective for fiscal years beginning after December 15, 2021 including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. For all other entities, ASU 2020-06 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Entities should adopt the guidance as of the beginning of the fiscal year of adoption and cannot adopt the guidance in an interim reporting period. The Company is currently evaluating the impact that ASU 2020-06 may have on its consolidated financial statements and related disclosures.
NOTE 3 - CASH AND CASH EQUIVALENT
The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. As of June 30, 2021 and June 30, 2020 cash and cash equivalents consisted of bank deposits in banks in Malaysia and petty cash on hands.
NOTE 4 - OTHER RECEIVABLE, AND ADVANCED TO RELATED PARTIES -
Other receivables
Other receivables at June 30, 2021 and June 30, 2020 consist of the following items:
|
|
|
June 30
|
|
|
June 30
|
|
|
|
|
2021
|
|
|
2021
|
|
|
|
|
|
|
|
|
|
|
Other receivable
|
|
$
|
26,338
|
|
|
$
|
-
|
|
|
Less: allowance for doubtful debts
|
|
|
-
|
|
|
|
-
|
|
|
|
|
$
|
26,338
|
|
|
$
|
-
|
|
Advanced to related parties
Advanced from related parties at June 30, 2021 and June 30, 2020 consist of the following items:
|
|
|
June 30,
2021
|
|
|
June 30,
2020
|
|
|
Advanced to Global Renewable Sdn Bhd (#1) (note 1)
|
|
$
|
6,691
|
|
|
$
|
-
|
|
______________
(#1) Balakrishnan B.S. Muthu is the common director of Global Renewable Sdn Bhd and the Company. The advances are related to ordinary business transactions and bear no interest or collateral, repayable and renewable under normal business advancement terms.
NOTE 5 - OPERATING LEASE
As of June 30, 2021, the Company leases minings space under a non-cancelable operating lease, with terms of two years. Lease expense for lease payment is recognized on a straight-line basis over the lease term.
On June 14 2021, a lump sum payment of RM260,500 ($62,754) was made upfront to rent 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.
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.
|
|
|
June 30,
2021
|
|
|
Balance as at the beginning of period
|
|
$
|
-
|
|
|
Addition
|
|
|
62,754
|
|
|
Amortization charge for the year
|
|
|
(2,636
|
)
|
|
Foreign exchange adjustment
|
|
|
13
|
|
|
Balance as of June 30, 2021
|
|
$
|
60,131
|
|
Amortization charge of rights of use lease assets was $2,636 and $nil for the years ended June 30, 2021 and 2020.
|
Lease term and discount rate
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2021
|
|
|
Weighted-average remaining lease term - years
|
|
|
1.96
|
|
NOTE 6 - DEPOSIT AND PREPAYMENT
At June 30, 2021 and June 30, 2020 deposit and prepayment consists of the following:
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
Deposits paid for acquisition of subsidiaries
|
|
|
|
|
|
|
|
- Bio Resources Limited (#1)
|
|
$
|
25,935,550
|
|
|
$
|
-
|
|
|
- Champmark Sdn Bhd (#2)
|
|
|
36,130
|
|
|
$
|
-
|
|
|
|
|
$
|
25,971,680
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits paid for acquisition of property, plant and equipment
|
|
|
|
|
|
|
|
|
|
- Intellectual property license (#3)
|
|
|
4,070,000
|
|
|
|
-
|
|
|
- Factory site (#4)
|
|
|
800,000
|
|
|
|
-
|
|
|
|
|
$
|
4,870,000
|
|
|
$
|
-
|
|
___________
(#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 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 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 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. 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 auditing and due diligence exercise to ascertain the valuation of Bio Resources Limited. The consideration shall be refundable if the transaction fails to complete.
(#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. 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 auditing and due diligence exercise to ascertain the valuation of 15% of the issued and paid-up share capital of CSB. A deposit of MYR 150,000 ($36,130) was paid to LGL on June 21, 2021. The consideration shall be refundable if the transaction fails to complete.
(#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 (“Segaman 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 Segaman Ventures on June 10, 2021. 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 factory site. The consideration shall be refundable if the transaction fails to complete.
NOTE 7 - ACCOUNTS PAYABLE AND ADVANCED FROM RELATED PARTIES
Accounts Payable
Accounts payable at June 30, 2021 and June 30, 2020 consist of the following items:
|
|
|
June 30,
2021
|
|
|
June 30,
2020
|
|
|
Due to Beijing Changxin Wanlin Technology Co., Ltd. (*)
|
|
$
|
-
|
|
|
$
|
1,504,469
|
|
|
Other accounts payable
|
|
|
2,655
|
|
|
|
2,789
|
|
|
|
|
$
|
2,655
|
|
|
$
|
1,507,258
|
|
______________
(*) Due to Beijing Changxin Wanlin Technology Co., Ltd. are accounts payable derived from ordinary business transactions. One of the directors of Beijing Changxin Wanlin Technology Co., Ltd., Mr. Wu Ming Ding, has resigned as director of VRDR (on February 20, 2016), GBL (as of February 11, 2016) and CSB (on February 17, 2016). This accounts payable bears no interest or collateral, repayable and renewable under normal business accounts payable terms.
On June 9, 2021, the Company entered into a Settlement of Debt Agreement (the “Debt Settlement Agreement”) with Beijing Changxin Wanlin Technology Co., Ltd. to convert a total of USD1,602,631 of the Company’s accounts payable to the creditor as of December 31, 2020 into equity by means of a subscription for 53,421,033 new restricted shares of the Company’s common stock at a subscription price of $0.03 per share.
Advanced from related parties
Advanced from related parties at June 30, 2021 and June 30, 2020 consist of the following items:
|
|
|
June 30,
2021
|
|
|
June 30,
2020
|
|
|
Advanced from BOG (#1)
|
|
$
|
579,783
|
|
|
$
|
319,455
|
|
|
Advanced from Federal Mining Resources Limited(#2)
|
|
$
|
-
|
|
|
$
|
173,465
|
|
|
Advanced from Federal Capital Investment Limited (#3)
|
|
$
|
6,000
|
|
|
$
|
136,000
|
|
|
Advanced from Yorkshire Capital Limited (#4)
|
|
$
|
-
|
|
|
$
|
27,000
|
|
|
|
|
$
|
585,783
|
|
|
$
|
655,920
|
|
______________
(#1) Borneo Oil and Gas Corporation SDN (“BOG”) is a wholly owned subsidiary of Borneo Oil Berhad (“BOB”) (holding 20.0% and 23.0% of the Company’s issued and outstanding common stock as of June 30, 2021 and November 10, 2021, respectively). BOG is one of the shareholders of the Company and did not own any shares of the Company since April 28, 2017. The advances are related to ordinary business transactions and bear no interest or collateral, repayable and renewable under normal business advancement terms.
(#2) One of the directors of Federal Mining Resources Limited, Mr. Chen Ching, has been appointed as director of the Company effective on February 20, 2016. Another director of Federal Mining Resources 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 Mining Resources Limited, to convert a total of USD 173,465 of the Company’s accounts payable to the creditor as of December 31, 2020 into equity by means of a subscription for 5,782,167 new restricted shares of the Company’s common stock at a subscription price of $0.03 per share.
(#3) 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.
(#4) One of the directors of Yorkshire Capital Limited, Mr. Lai Kui Shing, Andy, has resigned as director of CSB effective on February 17, 2016. The advances are related to ordinary business transactions and bear no interest or collateral, repayable and renewable under normal business advancement terms.
On June 9, 2021, the Company entered into a Settlement of Debt Agreement (the “Debt Settlement Agreement”) with its creditor Yorkshire Capital Limited, to convert a total of USD 27,000 of the Company’s accounts payable to the creditor as of December 31, 2020 into equity by means of a subscription for 900,000 new restricted shares of the Company’s common stock at a subscription price of $0.03 per share.
NOTE 8 - PROPERTY, PLANT AND EQUIPMENT
Property and equipment at June 30, 2021 and June 30, 2020, are summarized as follows:
|
|
|
June 30,
2021
|
|
|
June 30,
2020
|
|
|
Land and Building
|
|
$
|
947,292
|
|
|
$
|
917,831
|
|
|
Plant and Machinery
|
|
|
16,399
|
|
|
|
15,889
|
|
|
Office equipment
|
|
|
18,968
|
|
|
|
18,378
|
|
|
Project equipment
|
|
|
653,374
|
|
|
|
633,054
|
|
|
Computer
|
|
|
11,170
|
|
|
|
10,825
|
|
|
Motor Vehicle
|
|
|
35,710
|
|
|
|
34,599
|
|
|
Accumulated depreciation
|
|
|
(1,682,358
|
)
|
|
|
(1,629,871
|
)
|
|
|
|
$
|
555
|
|
|
$
|
705
|
|
The depreciation expenses charged for the year ended June 30, 2021 and 2020 were $170 and $126 respectively.
NOTE 9 - 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 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 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 is repayable by May 12, 2023, and bearing zero coupon interest.
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
|
|
|
|
|
2021
|
|
|
2020
|
|
|
Balance at the beginning of period
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Promissory notes issued to unrelated third parties at fair value
|
|
|
16,290,550
|
|
|
|
-
|
|
|
Interest expense
|
|
|
245,392
|
|
|
|
-
|
|
|
Balance at the end of period
|
|
$
|
16,535,942
|
|
|
$
|
-
|
|
The Company recorded $245,392 and nil interest expense for the year ended June 30, 2021 and 2020, respectively.
NOTE 10 - INCOME TAX
The Company and its subsidiaries are subject to income taxes on an entity basis on income arising in, or derived from, the tax jurisdiction in which they operate. The Company is a Nevada incorporated company and subject to United State Federal Income Tax. The Tax Cuts and Jobs Act of (“TCJ Act”) was signed into law in December 2017, and among its many provisions, it imposed a mandatory one-time transition tax on undistributed international earnings and reduced the U.S. corporate income tax rate to 21%, effective January 1, 2018. No provision for income taxes in the United States has been made as the Company had no taxable income for the periods ended June 31, 2021 and 2020. GBL is a British Virgin Islands incorporated company and not required to pay income tax on corporate income. CSB is a Malaysia incorporated company and required to pay corporate income tax at 25% of taxable income.
A reconciliation between the income tax computed at the relevant statutory rate and the Company’s provision for income tax is as follows:
|
|
|
For the year
ended
|
|
|
For the year
ended
|
|
|
|
|
June 30,
2021
|
|
|
June 30,
2020
|
|
|
|
|
%
|
|
|
%
|
|
|
Loss before income taxes
|
|
|
21
|
|
|
|
21
|
|
|
Non-deductible items/non-taxable income
|
|
|
(10
|
)
|
|
|
(16
|
)
|
|
Tax effect of tax exempt entity
|
|
|
(3
|
)
|
|
|
-
|
|
|
Share based payments
|
|
|
(5
|
)
|
|
|
-
|
|
|
Changes in valuation allowances
|
|
|
(3
|
)
|
|
|
(5
|
)
|
|
Effect of different tax rate of subsidiaries operating in other jurisdictions
|
|
|
-
|
|
|
|
-
|
|
|
Effective tax rate
|
|
|
-
|
|
|
|
-
|
|
Summary of the Company’s net deferred tax liabilities and assets are as follows:
|
|
|
June 30,
2021
|
|
|
June 30,
2020
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
Tax attribute carry forwards
|
|
$
|
86,013
|
|
|
$
|
16,795
|
|
|
Valuation allowances
|
|
|
(86,013
|
)
|
|
|
(16,795
|
)
|
|
Total
|
|
$
|
-
|
|
|
$
|
-
|
|
The Company has recorded valuation allowances for certain tax attribute carry forwards and other deferred tax assets due to uncertainty that exists regarding future realizability. If in the future the Company believes that it is more likely than not that these deferred tax benefits will be realized, the majority of the valuation allowances will be recognized in the consolidated statement of operations. The Company did not have any interest and penalty provided or recognized in the income statements for years ended June 30, 2021 and June 30, 2020 or balance sheet as of June 30, 2021 and June 30, 2020. The Company did not have uncertainty tax positions or events leading to uncertainty tax position within the next 12 months.
NOTE 11 - COMMITMENTS AND CONTINGENCIES
As of June 30, 2021, the Group had the following contracted capital commitments:
|
|
|
June 30,
2021
|
|
|
June 30,
2020
|
|
|
|
|
|
|
|
|
|
|
For purchase of property, plant and equipment
|
|
$
|
1,730,000
|
|
|
$
|
-
|
|
|
For acquisition of subsidiary
|
|
|
6,023
|
|
|
|
|
|
|
Total
|
|
$
|
1,736,023
|
|
|
$
|
-
|
|
NOTE 12 - LOSS PER SHARE
The Company has adopted ASC Topic No. 260, “Earnings Per Share,” (“EPS”) which requires presentation of basic and diluted EPS on the face of the income statement for all entities with complex capital structures, and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. In the accompanying financial statements, basic earnings (loss) per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the year.
The following table sets forth the computation of basic and diluted earnings per share:
|
|
|
Year Ended June 30,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(793,007
|
)
|
|
$
|
(309,402
|
)
|
|
Less: Net loss attributable to non-controlling interests
|
|
|
18,158
|
|
|
|
10,745
|
|
|
Net loss attributable to shareholders of Verde Resources, Inc.
|
|
|
(774,848
|
)
|
|
|
(298,657
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares used in basic and diluted computation
|
|
|
191,278,280
|
|
|
|
115,082,625
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share (Basic and Diluted)
|
|
$
|
(0.00
|
)*
|
|
$
|
(0.00
|
)*
|
*Less than $0.01 per share
The Company has no potentially dilutive securities, such as options or warrants, currently issued and outstanding.
NOTE 13 - CAPITAL STOCK
Authorized Stock
The Company has authorized 10,000,000,000 common shares and 50,000,000 preferred shares, both with a par value of $0.001 per share. Each common share entitles the holder to one vote, in person or proxy, on any matter on which action of the stockholders of the corporation is sought.
Effective February 2, 2018, the Company’s Articles of Incorporation were amended to increase the authorized shares of the Company from 250,000,000 shares of common stock to 10,000,000,000 shares of common stock. A copy of the Certificate of Amendment was filed with the Nevada Secretary of State. The Form 8K announcing the increase of the authorized shares of the Company was filed with SEC on February 6, 2018.
Share Issuance
On 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 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. 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 auditing and due diligence exercise to ascertain the valuation of Bio Resources Limited.
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, who Borneo Oil Berhad and Victor Subbrayan Paul 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 issued to their nominee Internet.com Ltd on June 9, 2021.
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 a consultant 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 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.
There were 779,742,109 and 116,038,909 common shares issued and outstanding at June 30, 2021 and June 30, 2020 respectively.
There are no preferred shares outstanding. The Company has issued no authorized preferred shares. The Company has no stock option plan, warrants, or other dilutive securities.
NOTE 14 - RELATED PARTY TRANSACTIONS
|
Related party transaction
|
|
For the Year ended
|
|
|
|
|
June 30,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
Other income - Sales of wash sand to:
|
|
|
|
|
|
|
|
Jusra Mining Merapoh Sdn Bhd (#1)
|
|
$
|
26,559
|
|
|
$
|
-
|
|
|
Professional services provided by:
|
|
|
|
|
|
|
|
|
|
Federal Capital Investment Limited (#2)
|
|
|
24,000
|
|
|
|
-
|
|
|
Related party balances
|
|
|
|
|
|
|
June 30,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
Deposits paid for acquisition of property, plant and equipment
|
|
|
|
|
|
|
|
- Intellectual property license of Borneo Energy Sdn Bhd (#3) (note 6)
|
|
$
|
4,070,000
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Other receivable
|
|
|
|
|
|
|
|
|
|
Jusra Mining Merapoh Sdn Bhd (#1)
|
|
$
|
26,338
|
|
|
$
|
-
|
|
(#1) Lamax Gold Limited (“LGL”) holding 15% equity interests of GBL was the major shareholder of Jusra Minging 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 Energy Sdn Bhd and holding 20.0% and 23.0% of the Company’s issued and outstanding common stock as of June 30, 2021 and November 10, 2021, respectively.
NOTE 15 - GOING CONCERN AND LIQUIDITY CONSIDERATIONS
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. As of June 30, 2021, the Company has suffered recurring net losses and records an accumulated deficit of $5,913,255. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The Company intends to fund operations through debt and equity financing arrangements.
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 stock holders, in the case of equity financing.
In March 2020, the World Health Organization declared the outbreak of COVID-19 as a global pandemic, which continues to spread around the world. There is significant uncertainty around the breadth and duration of business disruptions related to COVID-19, as well as its impact on the Malaysia’s and global economy. While it is difficult to estimate the financial impact of COVID-19 on the Company’s operations, management believes that COVID-19 could have a material impact on its financial results at this time.
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 16 - SUBSEQUENT EVENTS
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 (“BESB”) 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. On August 6, 2021, the Company and BESB entered into a supplementary agreement to vary the completion date. 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.
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 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 for the amount of $20,355,000. On November 11, 2021, the Company and Taipan International Limited, The Wision Project Limited (formerly known as “Borneo Resources Limited”) and other individuals unrelated third parties entered into an supplementary agreement to vary the completion date. This acquisition is currently in progress and and the completion of the S&P Agreement is subject to all such acts necessary, including but not limited to auditing and due diligence exercise to ascertain the valuation of the assets. The consideration shall be refundable if the transaction fails to complete.
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 (“Segaman Ventures”) 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 Segaman Ventures on June 10, 2021. On September 8, 2021, GBL and Segaman Ventures entered into an supplementary agreement to vary the completion date. 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. The consideration shall be refundable if the transaction fails to complete.
On June 17, 2021, the Company through its indirect subsidiary Bio Resources Limited (“BRL”), a company incorporated under the laws of the Labuan, entered into a Shares Sale Agreement with Hermalis Binti Mohamad Tahir (“Hermaliss”), a company incorporated under the laws of the Malaysia, to acquire the entire issued and paid-up share capital of Global Renewables. Under the terms of the Shares Sale Agreement, the consideration for the acquisition shall be satisfied in full by the payment of Malaysia Ringgit MYR25,000 upon the execution of the Shares Sale Agreement. On June 30, 2021, BRL and Global Renewables entered into an supplementary agreement to vary the completion date. The acquisition of Global Renewables was subject to the successful completion of the acquisition of the entire issued and paid-up share capital of BRL. Therefore, the acquisition of Global Renewables will dependent upon the successful acquisition of BRL.
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 MYR 150,000 upon the execution of the Shares Sale Agreement. On June 30, 2021, GBL and LGL entered into an supplementary agreement to vary the completion date. 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 auditing and due diligence exercise to ascertain the valuation of 15% of the issued and paid-up share capital of CSB. A deposit of MYR 150,000 ($36,130) was paid to LGL on June 21, 2021. The consideration shall be refundable if the transaction fails to complete.
On July 7, 2021, the Company issued a Press Release announcing a partnership with MRX Technologies, a market leader in commercial extraction systems for cannabis and hemp. The partnership includes an agreement for Verde Resources to white-label THC-free CBD products from MRX Technologies. The Company will distribute non-psychoactive, THC-free CBD products in Europe, Hong Kong and the United States.
On August 10, 2021, the Company formed a wholly owned subsidiary, Verde Renewables, Inc., for the purpose of conducting business in Missouri (using palm waste to create biochar and related products). Another entity, Verde Estates, LLC, was also formed on August 10, 2021 to own property in Missouri. Verde Estates, LLC is a wholly owned subsidiary of Verde Renewables, Inc.
The Company has evaluated subsequent events from the balance sheet date through the date the financial statements were issued and determined that there are no additional significant or material items to be required to disclose except the above mentioned matters.