VERDE RESOURCES, INC. 10-K/A

ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion should be read in conjunction with our consolidated financial statements and the related notes contained elsewhere in this Annual Report and in our other Securities and Exchange Commission filings. The following discussion may contain predictions, estimates, and other forward-looking statements that involve a number of risks and uncertainties, including those discussed under “Risk Factors” and elsewhere in this Annual Report on Form 10-K/A. These risks could cause our actual results to differ materially from any future performance suggested below. Our audited financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles. Overview We are a road construction and building materials company offering proprietary, environmentally sustainable materials and seeking to redefine our industry with a clear mission: enabling the “Transition to Zero.” Our proprietary product BioAsphalt™ incorporates biochar , a powerful carbon sequestering material, into infrastructure with the goal of reducing emissions, improving performance, and lowering overall costs. We also offer a licensed proprietary cold mix biochar asphalt emulsifying agent, which we call “ Verde V24 ”. Further, we expect to generate revenues from the generation by our products, and our subsequent sale, of carbon removal credits . We believe our proprietary products, know-how and business plan place us at the forefront of sustainable innovation in the construction and building materials sector, an industry we believe is long overdue for transformation. Our strategic roadmap for achieving net-zero emissions—what we call the Verde Net Zero Blueprint —has achieved the following significant milestones: ● The issuance to our company in April 2025 of the world’s first carbon removal credit from asphalt production and application, certified by Puro.earth, the leading global registry for engineered carbon removal. ● Technological validation of our BioAsphalt™ by the National Center for Asphalt Technology (NCAT), including receipt of preliminary performance results from NCAT in July 2025 that demonstrated consistent durability, particularly under low-volume roadway conditions. Most recently, in September 2025, NCAT’s latest evaluation of our cold recycling mix using 100% reclaimed asphalt pavement (“RAP”) from laboratory testing demonstrated that our cold-recycled mix not only meets but exceeds industry specifications for cold-recycled asphalt. These results showed superior cohesion, high tensile strength ratio (“TSR”), and retained stability compared to standard cold mix benchmarks, validating its strength, durability, and moisture resistance. Our Verde Net Zero Blueprint is comprised of our portfolio of validated technologies that enable the production of sustainable infrastructure materials with the integrated ability to generate certified carbon removal credits. This positions carbon sequestration not just as an environmental co-benefit, but as a monetizable feature embedded in our business plan. 34 Table of Contents As the rise of artificial intelligence accelerates data center energy consumption, which is now projected to account for a growing share of global electricity use, enterprises worldwide are facing increasing pressure to offset their carbon footprints. This is driving up demand for high-integrity, verifiable carbon credits. Our model presents a novel combination of infrastructure performance with measurable climate impact, establishing us as a first mover in scalable Net Zero solutions, which we believe positions us well to meet the demands of a rapidly decarbonizing, carbon-constrained economy. With key third-party validations from groups such as NCAT and Puro.earth in place, we are now focused on commercializing our solutions in the United States, our most strategic market. To this end, we recently entered into an exclusive licensing agreement with Ergon Asphalt & Emulsions, Inc. (“Ergon”), an industry leader in asphalt innovation and supply and one of the largest liquid asphalt and emulsion marketers in North America, for the production of asphalt surface course material containing our proprietary solution across North America. As our domestic operations scale through Ergon, we plan to license the Verde Net Zero Blueprint globally, targeting infrastructure and materials companies in countries aligned with the Paris Climate Agreement and pursuing Net Zero by 2050. To fully focus on this transition, we have exited all of our company’s legacy business lines unrelated to sustainable infrastructure technologies, including: ● The sale of our Malaysian mining subsidiary Champmark Sdn Bhd (“CSB”), which was completed on April 20, 2023; and ● The discontinuation of our CBD business following the expiration of our supply agreement with MRX Xtractors, LLC on July 6, 2024. We plan to expand operations and generate and grow revenue over the next twelve (12) months primarily through marketing and selling our proprietary road technologies through Ergon exclusively in North America, with an initial focus on the United States. Production planning of our materials has already commenced, with distribution anticipated to occur through the Ergon’s established sales channels, reaching asphalt mixing plants across the United States, Canada and Mexico for blending and placement. Embedding our technology into Ergon’s nationwide business footprint would enable immediate scalability and near-term revenue generation. We believe our asset light business model enables scalable growth while minimizing capital intensity, creating recurring revenue streams through licensing, sales, royalties, carbon monetization, and strategic partnerships. We operate through our primary U.S. subsidiary, Verde Renewables, Inc., headquartered in St. Louis, Missouri. Recent Developments Ergon License On October 10, 2025, Verde Renewables, Inc. (“Verde Renewables”), our wholly owned subsidiary, entered into a license agreement with Ergon (the “Ergon License”), pursuant to which we have granted Ergon an exclusive, non-transferable license to use, manufacture, commercialize, market, sell and distribute any product that contains or is manufactured or formed by Ergon using our proprietary cold mix biochar asphalt emulsifying agent, which we call “Verde V24”, in the United States (including its territories), Canada and Mexico, in exchange for Ergon agreeing to purchase Verde V24 from us at a fixed price (which is inclusive of all fees associated with the license, but subject to consumer price index adjustments) for use in Ergon’s asphalt road materials products. Ergon, the largest asphalt marketer in North America, is a subsidiary of Ergon, Inc., a diversified global organization engaged in multiple industries. The privately held Ergon is an industry pioneer in asphalt innovation and supply, employing more than 4,000 people and serving customers and partners in over 90 countries worldwide. We have agreed with Ergon to an initial fifteen (15) month “go-to-market period”, during which there will be no minimum purchase requirements for Ergon’s purchases of Verde V24. For each calendar year beginning January 1, 2027, Ergon has agreed to negotiate with us in good faith towards the establishment of possible minimum purchase amounts based on certain customary factors. We have also agreed with Ergon that if minimum purchase amounts are agreed to for any given calendar year, we and Ergon will agree in good faith to new minimum purchase amounts for each subsequent year, subject to consideration of customary factors, We have also agreed to provide Ergon with forty percent (40%) of our share of the carbon removal credits generated from the mixing of the final carbon sequestering BioAsphalt™ surface material, so long as (a) the carbon removal credits are generated from bulk mixing or packaged mixed product, and (b) the mixing of the final BioAsphalt™ surface material includes biochar purchased from us. The Ergon License additionally grants Ergon the right to use our trademarks and access to ongoing technical services to facilitate the monitoring, reporting, and verification process of each ton of carbon dioxide sequestered. 35 Table of Contents The term of the Ergon License is ten (10) years, with an automatic renewal for additional ten (10) year periods, subject to a minimum of six (6) months’ notice of cancellation prior to renewal. The Ergon License may be terminated in the event of non-payment of amounts due, initiation of bankruptcy proceedings, or under other customary terms. Additionally, Ergon may terminate the Ergon License upon sixty (60) days’ prior written notice in the event that our Chief Executive Officer, Jack Wong, or our Chief Operating Officer, Eric Bava, are removed from their respective positions with the Company for reasons other than termination for cause or voluntary resignation. The Ergon License additionally contains provisions regarding confidentiality, indemnification, and representations and warranties of the parties that are customary for such an agreement. The foregoing description of the Ergon License is not complete and is qualified in its entirety by reference to the full text of the Ergon License, a copy of which is filed as Exhibit 10.1 to this Annual report. Key Factors that Affect Our Results of Operations We believe the following key factors may affect our financial condition and results of operations: ● Ergon License : Our entry into the Ergon License is expected to drive long-term revenue growth through product sales of Verde V24 and related proprietary materials. The Ergon License establishes Ergon as the exclusive licensee for Verde V24 in the United States, Canada and Mexico, enabling large-scale commercialization of our Verde V24 technology while allowing us to expand our business without the capital demands of direct manufacturing or distribution. ● Adoption of Biochar-Asphalt Technology : Market acceptance of the Verde Net Zero Blueprint technologies by contractors, state Departments of Transportation, and private sector customers will influence royalty streams and future expansion opportunities. ● Carbon Credit Monetization : The issuance, pricing, and sales of certified carbon removal credits tied to our biochar-based asphalt applications will be a key driver of financial performance. ● Operational and Integration Costs : Expenses related to technology transfer, compliance monitoring, and integration into licensee production systems will impact near-term margins. ● Regulatory and Environmental Policies : Federal and state infrastructure spending, emissions reduction mandates, and climate policies may accelerate the adoption of our technology and corresponding revenue growth. ● Continuous Improvement and Innovation: Continuous improvement and innovation on our core technologies to enhance performance, durability, and environmental benefits. ● Maintaining the Quality of our Products: Maintain robust quality assurance and measurement systems to confirm that all licensed products consistently meet our technical specifications and industry standards. 36 Table of Contents Results of Operations The following table provides selected financial data about our company for the years ended June 30, 2025, and June 30, 2024. Statement of Operation June 30, 2025 2024 Change USD USD USD % Revenue $ 133,202 $ 96,584 36,618 $ 37.9 % Cost of revenue 51,789 62,978 11,189 17.8 % Gross profit 81,413 33,606 47,807 142.3 % Selling, general and administrative expenses 5,889,024 2,882,376 3,006,648 104.3 % Other operating expenses 214,410 237,047 22,637 9.5 % Loss from operation (6,022,021 ) (3,085,817 ) (2,936,204 ) 95.2 % Interest expense (102,703 ) (176,483 ) 73,780 (41.8 )% Other income 1,341,711 74,638 1,267,073 1,697.6 % Net loss before income tax (4,783,013 ) (3,187,662 ) (1,595,351 ) 50.0 % Provision of income tax - (112 ) 112 (100 )% NET LOSS $ (4,783,013 ) $ (3,187,774 ) (1,595,239 ) 50.0 % Revenue We have generated $133,202 in revenue for the year ended June 30, 2025, representing an increase of $36,618, or 37.9%, compared to revenue of $96,584 in the prior year. The increase was primarily attributable to a shift in product mix, with greater sales of our higher-margin Biochar Asphalt Premix, which became the predominant revenue driver in 2025. In contrast, revenue in 2024 also included sales of raw biochar, which carries lower margins and contributed a larger share of revenue in that year. Cost of revenue Cost of revenue in 2025 comprised the cost of Biochar Asphalt products sold whereas the cost for the year ended June 30, 2024 also included cost of biochar produced. Consequently, cost of revenue decreased by $11,189 or 17.8%, from $62,978 in the year ended June 30, 2024, to $51,789 during the year ended June 30, 2025. The decrease was primarily due to a change in the composition of products sold. During fiscal 2024, the cost of revenue included the production costs associated with raw biochar, which carried higher relative production and handling costs. Gross Profit (Loss) Gross profit for the year ended June 30, 2025 was $81,413, an increase of $47,807, or 142.3%, compared to gross profit of $33,606 in 2024. The improvement in gross profit was driven not only by increased revenues but also by a favorable product mix, as the Biochar Asphalt Premix that was our primary product sold in 2025 has significantly higher gross margins than raw biochar, which was a primary driver in 2024. 37 Table of Contents Selling, General and Administrative Expenses Selling, general and administrative expenses comprised mainly of salaries, office costs, legal and professional fees, consultancy fee, research and development cost and travelling expenses. We have incurred $5,889,024 and $2,882,376 in selling, general and administrative expenses through the years ended June 30, 2025 and 2024, respectively. Selling, general and administrative expenses increased year over year by 104.3%, or $3,006,648, primarily due to a special bonus of $1.25 million to Jack Wong, our Chief Executive Officer, in recognition of his contributions in transforming the Company into a pioneer in the Net Zero building materials and carbon removal industry, increase of consultancy fees (share-based compensation to nonemployees of $1,341,373) as the new agreements were entered into in the last 2 months of the previous financial year, share based compensation to an employee and a director of $432,246 and $5,534 respectively, accrued professional fees of $110,000 in relation to the planned uplisting to NASDAQ, and research and development cost of $300,000 payable to C-Twelve pursuant to the C-Twelve Agreement. Other Operating Expenses Total other operating expenses for the year ended June 30, 2025 was $214,410, a decrease of $22,637, or 9.5%, compared to $237,047 for the year ended June 30 2024. Other operating expenses comprised of expenditure related to the maintenance of the plant for the production and distribution of renewable commodities which was operating at reduced capacity due to strategic decisions of the Company. The decrease was mainly attributable to the reduction in the direct labor cost related to the plant from $31,526 to $7,408 for the years ended June 30, 2024 and 2025, respectively. Interest expense Total interest expense for the year ended June 30, 2025 was $102,703, a decrease of $73,780, or 41.8%, compared to $176,483 for the year ended June 30, 2024.The Company recorded interest expense of $86,456 and $116,916 for the years ended June 30, 2025, and 2024, respectively, on certain promissory notes issued to a related party as discussed in more detail in “Note 13 – Promissory Note to Related Party” to our audited financial statements. Lease interest expenses amounted to $5,368 and $45,926 for the years ended June 30, 2025, and 2024, respectively. Bank loan interest amounted to $10,879 and $13,640 for the years ended June 30, 2025, and 2024, respectively. The decrease in interest expenses is mainly due to settlement of lease liabilities associated with the disposal of an asset held for sale and certain property, plant and equipment which were under financing arrangements, and the early conversion of promissory notes with a principal amount of $675,888 on August 16, 2024. Other income We have other income of $1,341,711 for the year ended June 30, 2025, an increase of $1,267,073, or 1,697.6%, compared to $74,638 for the year ended June 30, 2024. The significant increase in other income was primarily driven by gain on insurance claim of $481,513, gain from disposal of property, plant and equipment of $164,624, interest income from placement of deposit with bank of $70,650 and unrealized foreign exchange gain of $582,034. The remaining balance of other income mainly represented rental income earned. Net loss As a result of the above factors, the Company incurred a net loss of $4,783,013 for the year ended June 30, 2025, representing an increase in net loss of $1,595,239, or 50%, compared to a net loss of $3,187,774 for the years ended June 30, 2025, and 2024, respectively. 38 Table of Contents Need for Additional Capital We cannot guarantee we will be successful in our business operations and we have historically financed our operating activities through the sale of our equity securities. Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources, uncertain revenue streams, customer concentration, possible delays in the exploration of our properties, and possible cost overruns due to price and cost increases in services. We have no assurance that future financing will be available to us on acceptable terms. If financing is not available on satisfactory terms, we may be unable to continue, develop or expand our operations. Equity financing could result in additional dilution to existing shareholders. Liquidity and Capital Resources Our primary sources of liquidity are cash generated from private placements of our Common Stock. Cash generated from operations is highly dependent on the sale of our products. Cash and cash equivalents totaled $1 million as of June 30, 2025, and $0.3 million as of June 30, 2024. The following table provides selected cash flow data about our Company for the years ended June 30, 2025, and 2024. Cash Flow Date June 30, 2025 June 30, 2024 Net cash used in operating activities $ (3,410,771 ) $ (2,087,990 ) Net cash provided by (used in) investing activities 3,182,138 (2,016,646 ) Net cash provided by financing activities 979,420 4,127,646 Effect of exchange rate changes on cash and cash equivalents (8,812 ) 55,718 Net increase in cash and cash equivalents $ 741,975 $ 78,728 Cash and cash equivalents at beginning of year 279,137 200,409 Cash and cash equivalents at end of year $ 1,021,112 $ 279,137 Net Cash Used in Operating Activities. Cash used in operating activities reflects net loss adjusted for certain non-cash items, including depreciation expense, amortization of right of use assets and stock-based compensation, and the effects of changes in operating assets and liabilities. Our net cash used in operating activities increased $1,322,781, or 63.4%, from $2,087,990 for the fiscal year ended June 30, 2024, to $3,410,771 for the fiscal year ended June 30, 2025. The increase in cash used in operating activities for the year ended June 30, 2025, as compared to 2024 was primarily due to operational loss of $4,783,013 offset by non-cash movements of $1,176,720 and net increase in working capital of $195,522. The noncash expenses comprised $248,940 in depreciation, $102,857 in amortization, $1,341,373 in share based compensation to nonemployee, $432,246 in share-based compensation to employees, $5,534 in share-based compensation to a director, $84,718 in interest expenses on promissory notes, loss on disposal of assets held for sale of $2,877, impairment of property, plant and equipment of $137,632, impairment of asset held for sale of $5,866, operating lease expense of $42,848 and offset by unrealized foreign exchange gain of $582,034, gain from insurance claim of $481,513 and gain on disposal of property, plant and equipment of $164,624. The net increase in working capital was generated from amount due to director, receivables from sale of inventories, other receivables, deposits and prepayments, and accrued liabilities and other payables, offset against decrease of working capital from inventories, accounts payable, related parties and repayments on leases. Net Cash Provided by (Used in) Investing Activities. The net cash provided by investing activities for the year ended June 30, 2025 was $3,182,138, representing an increase of $5,198,784, or 257.8%, compared to net cash used by investing activities of $2,016,646 for the year ended June 30, 2024. The significant increase was due to proceeds from disposal of assets held for sale of $943,300, proceeds from disposal of property, plant and equipment of $947,995, proceeds from insurance recoveries of $541,221 and withdrawal of deposit in bank of $750,000, offset with purchase of property, plant and equipment of $378 for the year ended June 30, 2025. Meanwhile, during year ended June 30, 2024, the net cash used by investing activities of $2,016,646 resulted from purchase of property, plant and equipment of $16,646 and placement of deposit in bank of $2,000,000, representing a strategic allocation of surplus cash from private placements completed during the year, and is intended to support future operational or investment initiatives. 39 Table of Contents Net Cash Provided by Financing Activities. The net cash provided by financing activities was $979,420, representing a decrease of $3,148,226, or 76.3%, compared to net cash provided by financing activities of $4,127,646. The decrease due to reduction of proceeds from shares issued and to be issued of $1,983,000 in 2025 compared to $4,108,379 in 2024, set off partially by repayment of bank loan of $211,440, refund from cancellation of Common Stock of $80,000 and repayments to lease liabilities of $712,140 for the year ended June 30, 2025. Meanwhile, for the year ended June 30, 2024, the net cash provided by financing activities of $4,127,646 resulted from proceeds from shares issued and shares to be issued of $4,108,379, proceeds from bank loan of $50,000 and advance from other payables of $136,983 set off partially by repayment of bank loan of $29,560 and repayments to lease liabilities of $138,156. The Company generated a net cash inflow of $741,975 for the year ended June 30, 2025. Critical Accounting Estimates The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires management to make judgments, assumptions, and estimates that affect the amounts reported in the consolidated financial statements and accompanying notes. Note 2, “Summary of Significant Accounting Policies,” to the consolidated financial statements describes the significant accounting policies and methods used in the preparation of the consolidated financial statements. The accounting policies described below are significantly affected by critical accounting estimates. Such accounting policies require significant judgments, assumptions, and estimates used in the preparation of the consolidated financial statements, and actual results could differ materially from the amounts reported based on these policies. 1. Useful Lives and Depreciation of Property, Plant and Equipment The Company’s property, plant and equipment are stated at cost, net of accumulated depreciation and impairment losses, if any. We depreciate our property, plant and equipment on a straight-line basis over their estimated useful lives, which range from 3 to 27.5 years for land and buildings, 5 to 10 years for plant and machinery, and 3 to 10 years for other asset categories, including office equipment, computers, motor vehicles, furniture and fittings, and renovations. The depreciation method and estimated useful lives reflect management’s judgment based on historical experience, the nature of the assets, their anticipated use, and technological and economic factors. The estimation of useful lives is a critical accounting estimate because it requires significant management judgment and has a material impact on our consolidated financial statements. Changes in the estimated useful lives of our assets could significantly affect the timing of depreciation expense recognized in future periods. For the fiscal years ended June 30, 2025 and 2024, depreciation expense totaled $248,940 and $417,517, respectively. We periodically review the estimated useful lives of our assets and revise them when events or changes in circumstances indicate that the current estimates are no longer appropriate. We also review our assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. 2. Impairment of Long-Lived Assets and Intangible Assets We assess long-lived assets, including property, plant and equipment, and indefinite-lived intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable and, for indefinite-lived intangible assets, at least annually. Recoverability of long-lived assets is measured by comparing the carrying value to the estimated undiscounted future cash flows expected from the asset or asset group. If the carrying value exceeds the expected undiscounted cash flows, an impairment loss is measured as the excess of the carrying amount over fair value. Fair value is generally determined using valuation techniques that incorporate significant estimates and assumptions, including projected future revenues, operating margins, and discount rates. Our indefinite-lived intangible assets primarily consist of technology-related intellectual property associated with our carbon-negative technology platform, which we expect to generate economic benefits over an indefinite period. Assessment Methodology We perform our annual impairment assessment for indefinite-lived intangible assets in the fourth quarter of each fiscal year in accordance with ASC 350-30-35. We may first perform a qualitative assessment to determine whether it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying amount. If the qualitative assessment indicates potential impairment, or if we elect to bypass it, we perform a quantitative impairment test. 40 Table of Contents For the fiscal year ended June 30, 2025, management performed a qualitative assessment. This assessment considered a range of factors, including macroeconomic conditions, industry and market trends, cost factors, regulatory and legal developments, overall financial performance, and internal reporting relative to management’s plans. In connection with this assessment, management developed projections of expected future performance, including anticipated commercialization and scale-up activities associated with a key customer contract executed prior to the issuance of the financial statements. These projections incorporated management’s expectations regarding pricing, production capabilities, and the Company’s ability to fulfill contractual obligations. Key Assumptions and Estimates Although a quantitative impairment test was not required for the fiscal year ended June 30, 2025, the qualitative assessment required the use of significant estimates and assumptions that are consistent with those that would be used in a quantitative analysis. The key assumptions that drive the estimated fair value of our indefinite-lived intangible assets include: ● projected pricing and demand for carbon removal credits; ● expected commercialization timelines associated with key customer agreements; ● projected revenue growth rates associated with scaling our carbon-negative technology platform; ● anticipated operating margins and cost structure as commercialization progresses; and ● regulatory developments and market conditions affecting the carbon removal industry. These assumptions are inherently uncertain and are based on management’s judgment regarding future business performance and market conditions. Changes in Assumptions Year Over Year During the fiscal year ended June 30, 2025, management updated its assumptions and projections to reflect current contractual developments, including the execution of a new customer agreement, as well as changes in expected commercialization timing and near-term growth expectations. These updates resulted in a revised outlook for projected future cash flows compared to prior periods. For context, in the fiscal year ended June 30, 2024, we performed a quantitative impairment assessment that included key valuation inputs such as a discount rate of approximately 9% and long-term inflation assumptions of approximately 2%, along with production capacity and expansion assumptions tied to anticipated plant development. These assumptions were based on management’s expectations at that time regarding market adoption, pricing, and operating performance. Sensitivity of Key Assumptions Although a quantitative impairment test was not required for the fiscal year ended June 30, 2025, management considered the sensitivity of key assumptions underlying its qualitative assessment. Changes in key inputs, such as decreases in projected revenue growth rates, delays in commercialization timelines, or adverse changes in carbon credit pricing, could reduce expected future cash flows and, in turn, the estimated fair value of the indefinite-lived intangible assets, potentially resulting in the carrying value exceeding estimated fair value. Similarly, increases in discount rates, if a quantitative analysis were performed, would reduce the present value of projected cash flows and decrease estimated fair value. Adverse changes in market or regulatory conditions, including reduced demand for carbon credits, could also negatively impact projected cash flows and fair value. While management did not perform a quantitative sensitivity analysis for the 2025 assessment, it evaluated whether reasonably possible changes in key assumptions would indicate that it is more likely than not that the fair value of the assets is less than their carrying amount. However, if actual results differ from these assumptions, such changes could result in the recognition of a non-cash impairment charge and a corresponding reduction in the carrying value of intangible assets on the Company’s consolidated balance sheet. Events That Could Impact Future Valuations Future events that could result in a quantitative impairment test or an impairment charge include, among others: ● significant adverse changes in expected commercialization timelines under key customer contracts; ● substantial declines in expected pricing or demand for carbon removal credits; ● material increases in costs that negatively affect projected profitability; ● inability to fund contractual or operational commitments; and ● adverse regulatory or market developments affecting our carbon-negative technologies. 41 Table of Contents Conclusion Based on the qualitative assessment performed for the fiscal year ended June 30, 2025, management concluded that it was not more likely than not that the fair value of its indefinite-lived intangible assets was less than their carrying amount. Accordingly, no quantitative impairment test was required and no impairment was recognized for these assets during the period. Impairment and Write-Offs of Plant and Machinery ● Impairment losses for the fiscal years ended June 30, 2025 and 2024: $137,632 and $134,042, respectively ● Write-offs for the fiscal years ended June 30, 2025 and 2024: $0 and $3,979, respectively 3. Allowance for Expected Credit Losses We maintain an allowance for expected credit losses on accounts receivable and other financial instruments based on a current expected credit loss (CECL) model under ASC 326. The allowance is estimated using a combination of quantitative and qualitative factors, including historical loss experience, current economic conditions, customer-specific credit risk, and reasonable and supportable forecasts of future conditions. Significant judgment is involved in identifying relevant risk factors, evaluating the impact of macroeconomic variables (e.g., inflation, interest rates, geopolitical instability), and determining the appropriate loss rates. A change in these factors could materially affect the timing and amount of credit loss provisions. As of June 30, 2025, and 2024, the allowance for expected credit losses on accounts receivable was $0 and $27,481, respectively. 4. Revenue Recognition and Principal vs. Agent Determination We recognize revenue in accordance with ASC 606 by identifying performance obligations in contracts, determining the transaction price, and allocating the price to each performance obligation. Significant estimates and judgments are involved in determining the point in time when control of a product transfers to the customer and whether we act as principal or agent in arrangements involving third-party contributions to the delivery of goods. These judgments affect the timing and amount of revenue recognized. Factors considered include our role in the transaction, control of inventory before transfer, and pricing discretion. Incorrect judgments could materially impact reported revenue and profitability. 5. Stock-Based Compensation We account for stock-based compensation in accordance with Accounting Standards Codification (“ASC”) Topic 718-10, Compensation—Stock Compensation, which requires all share-based payment arrangements with employees, directors, and nonemployees to be measured and recognized in the financial statements based on the fair value of the equity instruments granted. We consider the accounting for stock-based compensation to be a critical accounting estimate due to the significant judgment and assumptions involved in determining the grant date, estimating the fair value of the awards, and the timing and recognition of related expenses. These estimates have a material impact on our results of operations. For both employee and nonemployee awards, the grant date is determined based on the date of final Board approval of the award, in accordance with ASC 718. The fair value of stock awards is generally determined based on the market price of our Common Stock on the grant date. For awards where the grant date has not yet been established but the service inception date has commenced, we accrue compensation expense based on the estimated fair value of our Common Stock at the end of each reporting period, which may introduce variability in the reported compensation expense. As of the years ended June 30, 2025 and 2024, we recorded accrued compensation costs related to these arrangements of $89,165 and $274,870, respectively. 42 Table of Contents In certain instances, we issue share-based awards to nonemployees that are fully vested and nonforfeitable upon issuance, including awards issued in advance of receiving goods or services. In such cases, we recognize prepaid share-based compensation in accordance with ASC 718-10-45-3, which is recorded as an asset upon issuance and expensed as the related goods or services are received. The fair value of such awards is determined at the grant date based on the market price of our Common Stock. These awards are legally issued, fully vested and nonforfeitable upon issuance, and the recipients obtain the same ownership rights as all other holders of the Company’s Common Stock. Accordingly, the shares are recorded within stockholders’ equity upon issuance, while the related prepaid share-based compensation is recognized as an asset and amortized over the applicable service period, in accordance with ASC 718, as the related services are received. If the related services are not completed, we will evaluate the remaining unamortized prepaid share-based compensation and will reverse amounts associated with unperformed services through additional paid in capital (APIC). In such circumstances, we shall seek to negotiate the voluntary cancellation of shares previously issued; however, such shares are not subject to contractual forfeiture, repurchase, or automatic cancellation provisions. If a cancellation agreement is executed, the related Common Stock and APIC associated with the cancelled shares are reversed. During the fiscal years ended June 30, 2025 and 2024, we recognized total share-based compensation expense as follows: For the year ended June 30, 2025 2024 Nonemployees $ 1,341,373 $ 252,369 Employees 432,246 135,679 Director 5,534 - Total $ 1,779,153 $ 388,048 The fair value of our Common Stock, particularly in periods of volatility, is a key source of estimation uncertainty. Changes in assumptions or market conditions could significantly impact the fair value of awards and the related compensation expense. 6. Deferred Taxes and Valuation Allowances We assess the realizability of deferred tax assets by evaluating both positive and negative evidence, including future taxable income, tax planning strategies, and recent financial performance. If it is more likely than not that some or all of the deferred tax assets will not be realized, a valuation allowance is recorded. Judgment is required to estimate future taxable income and assess the impact of economic trends or changes in tax law. Adjustments to valuation allowances could materially impact our income tax expense or benefit. We believe the estimates and assumptions used in preparing our consolidated financial statements are reasonable and appropriate. However, actual results could differ materially from those estimates, which could have a significant impact on our financial condition, results of operations, and cash flows. 43 Table of Contents Working Capital As of June 30, 2025 and 2024, we had cash and cash equivalent of $1,021,112, representing an increase of $741,975, or 265.8%, compared to $279,137 as of June 30, 2024, respectively. Deposits with banks decreased by $723,516, or 36%, from $2,000,000 as of June 30, 2024, to $1,276,484 as of June 30, 2025. The Company’s accumulated operating losses increased by $4,782,977, or approximately 35%, from $13,480,204 as of June 30, 2024 to $18,263,181 as of June 30, 2025. Related Party Transactions On March 13, 2023, the Company and its former indirect wholly-owned subsidiary Champmark Sdn Bhd (“CSB”) entered into a Settlement of Debts Agreement (the “SDA Agreement”) for the settlement in full of CSB’s account payable to a related party, Borneo Oil Corporation Sdn Bhd (“BOC”) by way of the issuance of a two year term Promissory Note with the face value (principal) amount of $675,888, and bearing 2% coupon interest. The Note was repayable by May 12, 2025, either in cash or by the issuance of the Company’s restricted Common Stock priced at $0.07 per share at the discretion of the holder of the Promissory Note. A total of 9,655,542 shares of the Company’s restricted Common Stock were issued on August 16, 2024, to Borneo Oil Berhad, the appointed nominee of the Creditor, to settle in full the total of $675,888 of CSB’s account payable to the Creditor. This transaction allowed us to eliminate the outstanding debt without the use of cash and resulted in a corresponding increase in stockholders’ equity. The reacquisition price of the debt was at the fair value of the Company’s Common Stock represented by the closing quoted market price of $0.29 per share on its issuance date, August 16, 2024. The Company accounted for this transaction as a capital transaction which represented a distribution to an equity holder and therefore was not charged to earnings. Accordingly, no gain or loss was recognized in the consolidated statements of operations. We believe this transaction strengthens our balance sheet and improves our liquidity position by reducing liabilities through equity-based financing. Off-Balance Sheet Arrangements We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material to investors. Trend Information Other than as disclosed elsewhere in this Annual Report, we are not aware of any trends, uncertainties, demands, commitments, or events that are reasonably likely to have a material effect on our net revenues, income from operations, profitability, liquidity or capital resources, or that would cause reported financial information not necessarily to be indicative of future operating results or financial condition. ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk. As a “smaller reporting company”, we are not required to provide the information required by this Item. 44 Table of Contents ITEM 8. Financial Statements and Supplementary Data The financial statements begin on page F-1 and are incorporated in their entirety into this Item 8. ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None