Item 7. Management’s Discussion and Analysis
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion should be read in conjunction with our audited financial statements and the related notes that appear elsewhere in this annual report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to those discussed below and elsewhere in this annual report, particularly in the section entitled “Risk Factors” of this annual report.
Our audited financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.
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Results of Operations
The following table provides selected financial data about our company for the year ended June 30, 2021 and June 30, 2020.
Statement of Operation
June 30,
June 30,
2021
2020
Change
USD
USD
USD
%
Revenue
$ -
$ -
$ -
Cost of revenue
-
-
-
Gross Profit
-
-
-
Operating Expenses
(574,174 )
(309,402 )
(264,772 )
85.6 %
Loss from operation
(574,174 )
(309,402 )
(264,772 )
85.6 %
Interest expense
(245,392 )
-
(245,392 )
N/A
Other income
26,559
-
26,559
N/A
Net loss before income tax
(793,007 )
(309,402 )
(483,605 )
156.3 %
Provision of Income Tax
-
-
-
N/A
Net loss
(793,007 )
(309,402 )
(483,605 )
156.3 %
Net loss attributable to non-controlling interests
18,158
10,745
7,413
69 %
Net loss attributable to shareholders of the group
$ (774,849 )
$ (298,657 )
(476,192 )
(159.4 )%
Revenue
The revenue derived from the sales of gold mineral to customers in Malaysia. We have generated $0 and $0 revenues for the year ended June 30, 2020 and 2021, respectively, and have recorded a gross profit of $0 and $0 for the year ended June 30, 2020 and 2021. The Company did not generate any revenue for the year ended June 30, 2021 and 2020.
Cost of revenue
The cost of revenue was remain $nil mainly due to no revenue during the year ended June 30, 2021.
Operating Expenses
Operating expenses comprised mainly of salaries, office costs, legal and professional fees and travelling expenses. We have incurred $309,402 and $574,174 in operating expenses through June 30, 2020 and June 30, 2021. Operating expenses increased by 85.6%, or $264,772, primarily due to increase of professional fees charged for the potential acquisition and increase of directors’ emolument for the year ended June 30, 2021.
Interest expense
In May 2021, we issued the promissory notes for the acquisition of Bio Resources Limited. The Company recorded $245,392 and $nil interest expense on the promissory notes for the year ended June 30, 2021 and 2020, respectively.
Other income We have other income $0 and $26,559 for the year ended June 30, 2020 and 2021. We generated other income from the sales of wash sand to customers in Malaysia since January 2021.
Plan of Operation
Our Industry and Principal Markets
The report by BMI Research states that global gold mine output growth will pick up in the next few years, supported by higher gold prices and solid projects in key countries. BMI Research forecasts global gold production to increase from 105moz in 2018 to 125moz by 2026, averaging 2.3% annual growth. While a steady pace of growth, this represents a slight deceleration in growth rate compared with the previous eight-year average of 3.1%.
Subcontractor
In an effort to enhance the efficiency of mine operations at the Merapoh Gold Mine, Champmark Sdn Bhd (“CSB”) entered into an Operation Term Sheet (“OTS”) agreement in July 2013, to outsource the exploitation works of alluvial gold resources at Site IV-1 of the Merapoh Gold Mine to a third party subcontractor Borneo Oil & Gas Corporation Sdn Bhd (“BOG”).
BOG has the experience and local knowledge in managing the exploitation of alluvial gold at the Merapoh Gold Mine. The Company currently intends to continue to outsource the exploitation of alluvial gold at our mine site to BOG as our third party subcontractor. The Company will provide necessary disclosure when any significant agreements have been made with the sub-contractor in the future.
BOG became the Company’s shareholder in January 29, 2014, and was no longer a third party subcontractor.
Expansion Plans
The Company is in the process of negotiating with Malaysia state agency PKNP on a 2-year lease for a new mining location that is about 5 km from the current Merapoh mine site. The leasing premium has been paid but the mining lease certificate will only be issued upon clearance from the Malaysia Forest Department, which is expected in early 2022 subject to review on COVID-19 “Movement Control Order” by the Malaysian government.
For the current Site IV-1 of the Merapoh Gold Mine, our mining operation would focus on mining other resources such as limestones.
The Company believes that there are excellent growth opportunities for its business outside Malaysia. We are constantly exploring for potential acquisition of mining projects in other parts of the world.
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As our business is affected by the fluctuations of gold prices, the Company intends to diversify its product line by acquiring mining projects with potential for different mineral resources other than gold. We continue to hold discussions with other mining companies for potential collaboration to carry out exploration and exploitation works on other mineral resources in Southeast Asia regions. Apart from the mining industry, the Company is taking steps to look into investment opportunities in the non-mining areas that include the bioenergy industry and the food & beverage sector.
The Company is diversifying into the green industry with its acquisition of Bio Resources Ltd (“BRL”), the beneficial and/or registered proprietor of the intellectual property known as “Catalytic Biofraction Process”, which is a slow pyrolysis process using a proprietary catalyst to depolymerise palm biomass wastes (empty fruit bunches or palm kernel shells) in temperature range of 350 degC to 500 degC to yield commercially valuable bio products: bio-oil, wood vinegar (pyroligneous acid), biochar and bio-syngas. The intellectual property is a second-generation pyrolysis process where non-food feedstock like the palm biomass wastes is used as feedstock. The success of venturing into the green industry is dependent on the completion of the acquisition subject to auditing and due diligence exercise to ascertain the valuation of BRL.
Apart from the green industry, the Company is also working on 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.
Limited Operating History; Need for Additional Capital
There is limited historical financial information about us upon which to base an evaluation of our performance. We cannot guarantee we will be successful in our business operations. Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources, 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
The following table provides selected cash flow data about our company for the year ended June 30, 2021 and 2020.
Cash Flow Date
June 30,
2021
June 30,
2020
Net Cash Used in operating activities
$ (126,011 )
$ (213,763 )
Net Cash Used in investing activities
$ (905,575 )
$ (828 )
Net Cash Generated from financing activities
$ 3,100,000
$ 11,810
Effect of exchange rate changes on cash and cash equivalents
$ 25,181
$ 216,146
Net increase in cash and cash equivalents
$ 2,093,595
$ 13,365
Cash and cash equivalents at beginning of year
$ 24,027
$ 10,662
Cash and cash equivalents at end of year
$ 2,117,622
$ 24,027
For the year ended June 30, 2021, the Company had incurred net loss from operation of $793,007 which posted a negative impact to the company’s cash flow. The reconciliation on non-cash items such as share base compensation, interest expenses, depreciation and amortization provides positive impact on cash.
The net cash used by operating activities decreased from $213,763 to $126,011 for the years ended June 30, 2020 and 2021, respectively. The operation loss of $793,007 was partially offset by the noncash expenses such as $170 in depreciation, $2,636 in amortization, $175,431 in stock-based compensation and $245,392 in interest expenses on promissory notes. In the operating assets and liabilities, the net increase in current assets resulted from increase of other receivables at $26,559, net off with a decrease of $11,700 on other deposit and prepayment whereas the net increase in current liabilities resulted from $265,930 increase from advances from sub-contractor & related parties offset by $7,701 decrease of accrued liabilities and other payables.
The net cash used by investing activities increased from $828 to $905,575 for the years ended June 30, 2020 and 2021, respectively. There was a negative cash flow of $905,575 from the payment of acquisition of equity interest, right of use assets, and fixed assets, and advanced to related parties was $6,691 for the year ended June 30, 2021,
There was a positive cash flow of $3,100,000 from the issuance of common stock for the year ended June 30, 2021, compared to $12,000 proceeds from the issuance of common stock offset by $190 repayments of bank loans end up with a positive cash flow of $11,810 for the year ended June 30, 2020. The overall cash flow effect was positive.
The cash and cash equivalents at the end of June 30, 2021, was increased by $2,093,595 with $2,117,622 as ending balance.
The cash flow situation will not allow for operations in the coming next 12 months by self-generated cash provided from operating activities. The Company needs to increase cash flow supplies with a long term plan until the Company makes sustainable profits and has a positive cash flow. Otherwise, loans from related parties may be a temporary solution, although we have no written loan agreements. There is no guarantee that we will be able to secure adequate financing. If we fail to secure sufficient funds, our business activities may be curtailed, or we may cease to operate.
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.
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.
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