VERDE RESOURCES, INC. 10-K

Item 8. Financial Statements and Supplementary Data VERDE RESOURCES, INC. INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2023 Page Reports of Independent Registered Accounting Firm - J&S Associate PLT (PCAOB ID: 6743 ) F-2 Consolidated Balance Sheets F-3 Consolidated Statements of Operations and Comprehensive Loss F-4 Consolidated Statements of Cash Flows F-5 Consolidated Statements of Changes in Stockholders’ Equity F-6 Notes to Consolidated Financial Statements F-7 F-1 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors and Stockholders of VERDE RESOURCES, INC. Opinion on the Financial Statement We have audited the accompanying consolidated balance sheet of Verde Resources, Inc. and its subsidiaries (the ‘Company’) as of June 30, 2023, and the related consolidated statement of operations and comprehensive income, stockholders’ equity (deficit), and cash flows for the years ended June 30, 2023,, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2023, and the results of its operations and its cash flows for the years ended June 30, 2023, in conformity with accounting principles generally accepted in the United States of America. Substantial Doubt about the Company’s Ability to Continue as a Going Concern The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3, the Company has generated recurring losses and suffered from an accumulated deficit of $10,292,430 as of June 30, 2023. These matters raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans with regards to these matters are also described in Note 3 to the financial statements. These financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion. Critical Audit Matters Critical audit matters are matters arising from the current year audit of the financial statements that were communicated or are required to be communicated to the audit committee, or in their absence, the directors, and that: (1) relate to accounts or disclosures that are material to the financial statements, and (2) involved especially challenging, subjective, or complex judgements. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Assessment for impairment of Intellectual Properties As described in Note 2 to the consolidated financial statements, the intangible assets acquired from third parties are measured initially at fair value with an infinite live that are not being amortized. The Company annually evaluates the recoverability of the infinite-lived intangible assets for possible impairment whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable. The recoverability of these assets is measured by a comparison of the carrying amounts to the future discounted cash flows the assets are expected to generate. If such a review indicates that the carrying amount of intangible assets is not recoverable, the carrying amount of such assets is reduced to fair value. Our key considerations for the determination the fair value of the intangible assets, comprising Intellectual Properties (“IP”) as a critical audit matter was due to the high degree of judgement involved in the assessment of the assumptions used in deriving the future discounted cash flows as included in the worksheets presented to us to justify their carrying values of the IP. These were assessed by: i) Critically evaluating management’s assessment for their rationale and justification of the assumptions used; ii) Discussions with the key management and operational personnel of the Company to understand the future plans, their assumptions and expected income to be derived; ii) Obtained necessary supporting information and published reports to support the forecast demand and productions and prices used in the worksheets; ii) Ascertaining formulas and linkages in the worksheets were properly set up; iii) Performing stress tests by reducing assumed demand and production to determine impact on cash flows and carrying values. /s/ J&S Associate PLT Certified Public Accountants Firm ID: 6743 We have served as the Company’s auditor since 2022. Kuala Lumpur, Malaysia October 13, 2023 F-2 Table of Contents VERDE RESOURCES, INC. CONSOLIDATED BALANCE SHEETS (Currency expressed in United States Dollars (“US$”), except for number of shares) As of June 30, 2023 2022 ASSETS Current asset: Cash and cash equivalents $ 200,409 $ 418,917 Accounts receivable 12,071 21,028 Inventories 96,036 87,035 Amounts due from related party 100 - Deposits and prepayments 569,675 119,238 Other receivables 9,641 - Total current assets 887,932 646,218 Non-current assets: Property, plant and equipment, net 4,009,090 1,048,893 Right of use assets, net 633,109 685,714 Mining rights - 27,088 Intangible assets 33,191,991 - Security deposit 80,000 240,000 Deposit paid for acquisition of subsidiaries 21,423 25,935,550 Deposit paid for acquisition of property, plant and equipment - 5,080,000 Total non-current assets 37,935,613 33,017,245 TOTAL ASSETS $ 38,823,545 $ 33,663,463 LIABILTIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 73,171 $ 18,211 Accrued liabilities and other payables 651,480 283,656 Finance lease liabilities 172,184 75,224 Operating lease liabilities 20,768 - Bank loan 191,000 - Promissory notes - 18,484,028 Amount due to director 9,660 - Amounts due to related parties 359,018 555,527 Total current liabilities 1,477,281 19,416,646 Non-current liabilities: Finance lease liabilities 608,455 97,900 Operating lease liabilities 29,483 - Promissory notes 487,790 - Total non-current liabilities 1,125,728 97,900 TOTAL LIABILITIES 2,603,009 19,514,546 Commitments and contingencies STOCKHOLDERS’ EQUITY Preferred stock, $ 0.001 par value, 50,000,000 shares authorized, none issued and outstanding - - Common stock, $ 0.001 par value; 10,000,000,000 shares authorized; 1,176,200,278 and 819,188,055 issued and outstanding as of June 30, 2023 and 2022 1,176,200 819,188 Additional paid-in capital 45,415,958 22,945,190 Accumulated other comprehensive income ( 79,192 ) 742,459 Accumulated deficit ( 10,292,430 ) ( 10,357,920 ) 36,220,536 14,148,917 Non-controlling interest - - Stockholders’ equity 36,220,536 14,148,917 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 38,823,545 $ 33,663,463 See accompanying notes to consolidated financial statements. F-3 Table of Contents VERDE RESOURCES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME (Currency expressed in United States Dollars (“US$”)) Years ended June 30, 2023 2022 Revenue, net $ 158,098 $ 38,169 Cost of revenue ( 238,153 ) ( 145,356 ) Gross loss ( 80,055 ) ( 107,187 ) Operating expenses: Selling, general and administrative expenses ( 3,216,022 ) ( 1,905,301 ) Goodwill impairment - ( 4,879 ) Total operating expenses ( 3,216,022 ) ( 1,910,180 ) LOSS FROM OPERATION ( 3,296,077 ) ( 2,017,367 ) Other (expense) income: Interest expense ( 1,918,572 ) ( 1,949,151 ) Other income 1,215,689 12,104 Total other expense, net ( 702,883 ) ( 1,937,047 ) LOSS BEFORE INCOME TAXES ( 3,998,960 ) ( 3,954,414 ) Income tax expense - - NET LOSS ( 3,998,960 ) ( 3,954,414 ) Net loss attributable to noncontrolling interest - ( 6,979 ) Net loss attributable to Verde Resources Inc., shareholders ( 3,998,960 ) ( 3,947,435 ) $ ( 3,998,960 ) $ ( 3,954,414 ) Other comprehensive (loss): - Foreign currency adjustment income (loss) ( 821,651 ) 83,504 Less: other comprehensive loss attributable to non-controlling interest - 12,750 Add: other comprehensive (loss) income attributable to Verde Resources Inc., shareholders ( 821,651 ) 96,254 COMPREHENSIVE LOSS $ ( 4,820,611 ) $ ( 3,870,910 ) Net loss per share $ ( 0.00 ) $ ( 0.00 ) - Basic $ ( 0.00 ) $ ( 0.00 ) - Diluted Weighted average common shares outstanding - Basic 1,019,752,220 812,847,811 - Diluted 1,019,752,220 812,847,811 See accompanying notes to consolidated financial statements. F-4 Table of Contents VERDE RESOURCES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Currency expressed in United States Dollars (“US$”)) Years ended June 30, 2023 2022 Cash flows from operating activities: Net loss $ ( 3,998,960 ) $ ( 3,954,414 ) Adjustments to reconcile net loss to net cash used in operating activities Depreciation of property, plant and equipment 254,852 24,792 Amortization 124,688 65,065 Goodwill - 4,879 Stock-based compensation 519,671 355,569 Finance cost interest element of promissory notes (non-cash) 1,877,739 1,948,086 Fair value adjustment on convertible promissory notes ( 194,865 ) - Gain on disposal of a subsidiary ( 980,714 ) - Gain on disposal of property and equipment ( 600 ) - Lease interest expense 36,765 1,065 Change in operating assets and liabilities: Accounts receivable 7,785 ( 21,029 ) Other deposits and prepayments ( 103,624 ) ( 113,458 ) Extractive activities mining - ( 1,229 ) Other receivables ( 846 ) 24,809 Inventories ( 13,850 ) ( 87,035 ) Accounts payables 75,768 15,710 Accrued liabilities and other payables 403,259 120,281 Advanced from director ( 12,877 ) - Advanced from related parties 348,913 20,948 Net cash used in operating activities ( 1,656,896 ) ( 1,595,961 ) Cash flows from investing activities: Proceeds from disposal of property, plant and equipment 23,000 - Deposit paid for acquisition of subsidiary ( 21,423 ) - Net inflow from disposal of subsidiary 106,647 - Net inflow on acquisition of subsidiary 1,140 - Deposit paid for acquisition and property, plant and equipment - ( 240,000 ) Acquisition of equity interest from non-controlling interests - ( 35,670 ) Purchase of property, plant and equipment ( 497,302 ) ( 1,073,153 ) Net cash used in investing activities ( 387,938 ) ( 1,348,823 ) Cash flows from financing activities: Repayment to lease liabilities ( 102,234 ) ( 9,341 ) Drawdown of bank loan 301,000 - Repayment of bank loan ( 110,000 ) - Lease interest paid ( 36,765 ) ( 1,065 ) Proceeds from issuance of common stock 1,576,280 1,000,000 Net cash provided by financing activities 1,628,281 989,594 Net change in cash and cash equivalent ( 416,553 ) ( 1,955,190 ) Foreign currency translation adjustment 198,045 256,485 Net change in cash and cash equivalents ( 218,508 ) ( 1,698,705 ) BEGINNING OF YEAR 418,917 2,117,622 END OF YEAR $ 200,409 $ 418,917 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for income taxes $ - $ - Cash paid for interest $ - $ - NON-CASH INVESTING AND FINANCING ACTIVITIES: Issuance of common stock - Deposit paid for acquisition of property and equipment $ - $ 930,000 See accompanying notes to consolidated financial statements. F-5 Table of Contents VERDE RESOURCES, INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT) FOR THE YEARS ENDED JUNE 30, 2023 AND 2022 (Currency expressed in United States Dollars (“US$”), except for number of shares) Common stock No. of shares Amount Common stock to be issued Additional paid-in capital Accumulated other comprehensive income (loss) Accumulated deficit Non-controlling interest Total stockholders’ equity Balance as of July 1, 2021 779,742,109 $ 779,742 $ - $ 20,699,067 $ 646,205 $ ( 5,913,255 ) $ ( 441,834 ) $ 15,769,925 Shares issued for acquisition 31,000,000 31,000 - 899,000 - - - 930,000 Stock based compensation - - - 355,569 - - - 355,569 Shares to be issued for private placement 8,445,946 - 8,446 991,554 - - - 1,000,000 Accretion of interest - - - - - ( 497,230 ) 461,563 ( 35,667 ) Net loss for the year - - - - - ( 3,947,435 ) ( 6,979 ) ( 3,954,414 ) Foreign currency translation adjustment - - - - 96,254 - ( 12,750 ) 83,504 Balance as of June 30, 2022 819,188,055 $ 810,742 $ 8,446 $ 22,945,190 $ 742,459 $ ( 10,357,920 ) $ - $ 14,148,917 Balance as of July 1, 2022 819,188,055 $ 810,742 $ 8,446 $ 22,945,190 $ 742,459 $ ( 10,357,920 ) $ - $ 14,148,917 Shares issued to service provider 5,315,000 5,315 - 870,185 - - - 875,500 Stock issued for previously committed private placement - 8,446 ( 8,446 ) - - - - - Shares issued for private placement 18,554,834 18,555 - 1,578,725 - - - 1,597,280 Shares issued arising from conversion of promissory notes 333,142,389 333,142 - 20,021,858 - - - 20,355,000 Fair value adjustment on conversion of promissory notes - - - - - 4,064,450 - 4,064,450 Net loss for the year - - - - - ( 3,998,960 ) - ( 3,998,960 ) Foreign currency translation adjustment - - - - ( 12,631 ) - - ( 12,631 ) Cumulative translation adjustment transferred to profit/loss - - - - ( 809,020 ) - - ( 809,020 ) Balance as of June 30, 2023 1,176,200,278 $ 1,176,200 $ - $ 45,415,958 $ ( 79,192 ) $ ( 10,292,430 ) $ - $ 36,220,536 See accompanying notes to consolidated financial statements. F-6 Table of Contents VERDE RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 2023 AND 2022 (Currency expressed in United States Dollars (“US$”), except for number of shares) NOTE 1 - ORGANIZATION AND BUSINESS BACKGROUND Verde Resources, Inc. (the “We” or “Company” or “VRDR”) was incorporated on April 22, 2010, in the State of Nevada, U.S.A.. We currently operate in the distribution of THC-free cannabinoid (CBD) products, production and distribution of renewable commodities and real property holding. However, the Company has been undergoing a restructuring exercise to shift its focus towards renewable energy and sustainability development with the world faced with challenges of climate change and environmental dehydration. As of June 30, 2023, the Company has the following subsidiaries:- Name of subsidiary Place of incorporation Principal activities and place of operation Effective interest held Verde Resources Asia Pacific Limited (“VRAP”) British Virgin Islands Investment holding 100 % Verde Resources (Malaysia) Sdn Bhd (“Verde Malaysia”) Malaysia Provision of consultation service and distribution of renewable agricultural commodities 100 % Verde Renewables, Inc. (“VRI”) State of Missouri, U.S.A. Management of a processing and packaging facility 100 % Verde Life Inc. (“VLI”) State of Oregon, U.S.A. Distribution of THC-free cannabinoid (CBD) products 100 % The Wision Project Sdn Bhd (“Wision”) Malaysia Digital innovation, marketing & consulting firm provides PR, Branding, influencer marketing, event management and media relations services 100 % Verde Estates LLC (“VEL”) State of Missouri, U.S.A. Holding real property 100 % Bio Resources Limited (“BRL”) Labuan, Malaysia Provision of proprietary pyrolysis technology and investment holding 100 %* * The acquisition of BRL was completed on October 12, 2022. The Company and its subsidiaries are hereinafter referred to as (the “Company”). F-7 Table of Contents VERDE RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 2023 AND 2022 (Currency expressed in United States Dollars (“US$”), except for number of shares) During the years ended June 30, 2023, and 2022, there are the major transactions, as below: 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 various unrelated third parties being Taipan International Limited, The Wision Project Limited, and other individuals, for a consideration of $ 30,000,000 by way of an 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 . The acquisition of Bio Resources Limited was subsequently closed on October 12, 2022. BRL owns the intellectual property known as “Catalytic Biofraction Process”, 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 degree Celsius to 500 degree Celsius to yield commercially valuable bio products: bio-oil, wood vinegar (pyroligneous acid), biochar and bio-syngas. The intellectual property is a second-generation pyrolysis process where non-food feedstock like the palm biomass wastes is used as feedstock. On March 23, 2022, the Company, through Verde Malaysia, entered into a Sale of Shares Agreement (“SSA”) with The Wision Project Sdn Bhd (“Wision”), a company incorporated under the laws of Malaysia, and its sole shareholder Jack Wong, to acquire the one hundred percent ( 100 %) of the issued and paid up ordinary shares in Wision from Mr. Wong. Under the terms of the SSA, the consideration for the acquisition shall be satisfied by the payment of MYR 1 ($ 0.23 ) upon the execution of the SSA. Wision is a digital development, marketing and consulting firm that provides public relations, branding, profile building, influencer marketing, event management and media relations services to the Company. F-8 Table of Contents VERDE RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 2023 AND 2022 (Currency expressed in United States Dollars (“US$”), except for number of shares) On March 13, 2023, the Company through its wholly-owned subsidiary Verde Resources Asia Pacific Limited (“VRAP”), a company incorporated under the laws of the British Virgin Islands, entered into a Share Sale Agreement (the “SSA Agreement”) with Jusra Mining Merapoh Sdn Bhd (“JMM”), a company incorporated under the laws of Malaysia, to sell the entire issued and paid-up share capital of Champmark Sdn Bhd (“CSB”), an indirect wholly-owned subsidiary of the Company engaged in the mining business. Under the terms of the SSA Agreement, the consideration for the sale of the entire issued and paid-up share capital of CSB shall be satisfied in full by the payment of Malaysia Ringgit MYR 500,000. The Company has been undergoing a restructuring exercise to shift its focus towards renewable energy and sustainability development with the world faced with challenges of climate change and environmental dehydration. The disposition of the mining business via the sale of the entire issued and paid-up share capital of CSB is in line with the Company’s restructuring effort to focus on renewable energy and sustainability. The disposition of Champmark Sdn Bhd (“CSB”) was completed on April 20, 2023. F-9 Table of Contents VERDE RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 2023 AND 2022 (Currency expressed in United States Dollars (“US$”), except for number of shares) Effective March 30, 2023, Carl Craven voluntarily resigned from his position as Director of the Company. By resolution of the Board of Directors, Jack Wong was appointed Director of the Company for a one (1) year term, effective March 30, 2023. Jack Wong will hold the Board position formerly held by Carl Craven. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying consolidated financial statements reflect the application of certain significant accounting policies as described in this note and elsewhere in the accompanying consolidated financial statements and notes. · Basis of Presentation These accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”). · Use of Estimates and Assumptions 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. In preparing these consolidated financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheet and revenues and expenses during the years reported. Actual results may differ from these estimates. · Basis of Consolidation The consolidated financial statements include the financial statements of Verde Resources, Inc. and its subsidiaries. All significant inter-company balances and transactions within the Company and its subsidiaries have been eliminated upon consolidation. The Company accounts for acquisitions in accordance with guidance found in ASC 805, Business Combinations. The guidance requires consideration given, including contingent consideration, assets acquired, and liabilities assumed to be valued at their fair market values at the acquisition date. · Segment Reporting Accounting Standard Codification (“ASC”) Topic 280, Segment Reporting establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organization structure as well as information about geographical areas, business segments and major customers in consolidated financial statements. Currently, the Company operates in four reportable operating segments. · Concentrations of Credit Risk The Company’s financial instruments that are exposed to concentrations of credit risk primarily consist of its cash and cash equivalents and future receivables. 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. F-10 Table of Contents VERDE RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 2023 AND 2022 (Currency expressed in United States Dollars (“US$”), except for number of shares) · Cash and Cash Equivalents Cash and cash equivalents are carried at cost and represent cash in banks, money market funds, and certificates of term deposits with maturities of less than three months, which are readily convertible to known amounts of cash and which, in the opinion of management, are subject to an insignificant risk of loss in value. The Company had $ 200,409 and $ 418,917 in cash and cash equivalents at June 30, 2023 and 2022. At and June 30, 2023, and 2022, cash and cash equivalents consisted of bank deposits and petty cash on hands. · 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, 2023 and 2022, the Company has no allowance for doubtful accounts, as per management’s judgment based on their best knowledge. As of June 30, 2023, and 2022, the longest credit term for certain customers are 60 days. · Inventories Inventories are stated at the lower of cost or market value (net realizable value), cost being determined on a first-in-first-out method. Costs include material, labor and overhead costs. The Company provides inventory allowances based on excess and obsolete inventories determined principally by customer demand. As of June 30, 2023, and 2022, the Company did not record an allowance for obsolete inventories, nor have there been any write-offs. · Property, Plant and Equipment Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Depreciation is calculated on the straight-line basis over the following expected useful lives from the date on which they become fully operational and after taking into account their estimated residual values: Expected useful life Land and buildings 3 - 27.5 years Plant and machinery 5 - 10 years Office equipment 3 years Project equipment 5 years Computers 5 years Motor vehicles 5 years Furniture and fittings 5 years Expenditures for maintenance and repairs, which do not materially extend the useful lives of the assets, are charged to expense as incurred. Expenditures for major renewals and betterment which substantially extend the useful life of assets are capitalized. The cost and related accumulated depreciation of assets retired or sold are removed from the respective accounts, and any gain or loss is recognized in the consolidated statements of income and other comprehensive income in other income or expenses. · Intangible assets Intangible assets acquired from third parties are measured initially at fair value with an infinite live that are not being amortized. The Company annually evaluates the recoverability of the infinite-lived intangible assets for possible impairment whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable. The recoverability of these assets is measured by a comparison of the carrying amounts to the future discounted cash flows the assets are expected to generate. If such a review indicates that the carrying amount of intangible assets is not recoverable, the carrying amount of such assets is reduced to fair value. · Impairment of Long-lived Assets In accordance with the provisions of ASC Topic 360, Impairment or Disposal of Long-Lived Assets , all long-lived assets such as property, plant and equipment owned and held by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is evaluated by a comparison of the carrying amount of an asset to its estimated future undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceed the fair value of the assets. F-11 Table of Contents VERDE RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 2023 AND 2022 (Currency expressed in United States Dollars (“US$”), except for number of shares) · Revenue Recognition ASC Topic 606, Revenue from Contracts with Customers (“ASC Topic 606”), establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts to provide goods or services to customers. The Company applies the following five steps in order to determine the appropriate amount of revenue to be recognized as it fulfils its obligations under each of its agreements: ∙ identify the contract with a customer; ∙ identify the performance obligations in the contract; ∙ determine the transaction price; ∙ allocate the transaction price to performance obligations in the contract; and ∙ recognize revenue as the performance obligation is satisfied. Revenue is recognized when the Company satisfies its performance obligation under the contract by transferring the promised product to its customer that obtains control of the product and collection is reasonably assured. A performance obligation is a promise in a contract to transfer a distinct product or service to a customer. Most of the Company’s contracts have a single performance obligation, as the promise to transfer products or services is not separately identifiable from other promises in the contract and, therefore, not distinct. Product sales Revenues from product sales are recognized when the customer obtains control of the Company’s product, which occurs at a point in time, typically upon delivery to the customer. The Company expenses incremental costs of obtaining a contract as and when incurred if the expected amortization period of the asset that it would have recognized is one year or less or the amount is immaterial. Revenues from product sales are recorded net of reserves established for applicable discounts and allowances that are offered within contracts with the Company’s customers. Product revenue reserves, which are classified as a reduction in product revenues, are generally characterized in the following categories: discounts, returns and rebates. These reserves are based on estimates of the amounts earned or to be claimed on the related sales and are classified as reductions of accounts receivable as the amount is payable to the Company’s customer. Rental income Rental income is recognized on a straight line basis over the term of the respective lease agreement. · Leases The Company determines if an arrangement is a lease or contains a lease at inception. Operating lease liabilities are recognized based on the present value of the remaining lease payments, discounted using the discount rate for the lease at the commencement date. As the rate implicit in the lease is not readily determinable for the operating lease, the Company generally uses an incremental borrowing rate based on information available at the commencement date to determine the present value of future lease payments. Operating lease right-of-use (“ROU assets”) assets represent the Company’s right to control the use of an identified asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets are generally recognized based on the amount of the initial measurement of the lease liability. Lease expense is recognized on a straight-line basis over the lease term. ROU assets are reviewed for impairment when indicators of impairment are present. ROU assets from operating and finance leases are subject to the impairment guidance in ASC Topic 360, Property, Plant, and Equipment , as ROU assets are long-lived nonfinancial assets. ROU assets are tested for impairment individually or as part of an asset group if the cash flows related to the ROU asset are not independent from the cash flows of other assets and liabilities. An asset group is the unit of accounting for long-lived assets to be held and used, which represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. The Company recognized no impairment of ROU assets as of June 30, 2023, and 2022. F-12 Table of Contents VERDE RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 2023 AND 2022 (Currency expressed in United States Dollars (“US$”), except for number of shares) The operating lease is included in operating lease right-of-use assets and operating lease liabilities as current and non-current liabilities in the consolidated balance sheets at June 30, 2023 and 2022. Leases that transfer substantially all the rewards and risks of ownership to the lessee, other than legal title, are accounted for as finance leases. Substantially all of the risks or benefits of ownership are deemed to have been transferred if any one of the four criteria is met: (i) transfer of ownership to the lessee at the end of the lease term, (ii) the lease containing a bargain purchase option, (iii) the lease term exceeding 75% of the estimated economic life of the leased asset, (iv) the present value of the minimum lease payments exceeding 90% of the fair value. At the inception of a finance lease, we as the lessee records an asset and an obligation at an amount equal to the present value of the minimum lease payments. The leased asset is amortized over the shorter of the lease term or its estimated useful life if title does not transfer to us, while the leased asset is depreciated in accordance with our depreciation policy if the title is to eventually transfer to us. The periodic rent payments made during the lease term are allocated between a reduction in the obligation and interest element using the effective interest method in accordance with the provisions of ASC Topic 842. · Income Taxes The Company adopted the ASC Topic 740, Income tax provisions of paragraph 740-10-25-13, which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the consolidated financial statements. Under paragraph 740-10-25-13, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Paragraph 740-10-25-13 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. The Company had no material adjustments to its liabilities for unrecognized income tax benefits according to the provisions of paragraph 740-10-25-13. The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying balance sheets, as well as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its balance sheets and provides valuation allowances as management deems necessary. · Uncertain Tax Positions The Company did not take any uncertain tax positions and had no adjustments to its income tax liabilities or benefits pursuant to the ASC Topic 740 provisions of Section 740-10-25 for the years ended June 30, 2023, and 2022. · Foreign Currencies Translation The Company’s reporting currency is the United States dollar (“US$”) and the accompanying consolidated financial statements have been expressed in United States dollars. The Company’s functional currency is the Malaysian Ringgit (“MYR”) which is a functional currency as being the primary currency of the economic environment in which their operations are conducted. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the consolidated statement of operations. For reporting purposes, in accordance with ASC Topic 830 “Translation of Financial Statements”, capital accounts of the consolidated financial statements are translated into United States dollars from MYR at their historical exchange rates when the capital transactions occurred. Assets and liabilities are translated at the exchange rates as of balance sheet date. Income and expenditures are translated at the average exchange rate of the respective year. The gains and losses resulting from translation of financial statements subsidiaries to the reporting currency are recorded as a separate component of accumulated other comprehensive income within the statements of changes in stockholder’s equity. Translation of MYR into U.S. dollars has been made at the following exchange rates for the following periods:- June 30, 2023 June 30, 2022 Year-end MYR:US$ exchange rate 4.66795 4.40773 Annualized average MYR:US$ exchange rate 4.50684 4.23181 · Comprehensive Income ASC Topic 220, Comprehensive Income , establishes standards for reporting and display of comprehensive income, its components and accumulated balances. Comprehensive income as defined includes all changes in equity during a period from non-owner sources. Accumulated other comprehensive income, as presented in the accompanying consolidated statements of changes in stockholders’ equity, consists of changes in unrealized gains and losses on foreign currency translation. This comprehensive income is not included in the computation of income tax expense or benefit. F-13 Table of Contents VERDE RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 2023 AND 2022 (Currency expressed in United States Dollars (“US$”), except for number of shares) · Non-controlling Interest The Company accounts for noncontrolling interest in accordance with ASC Topic 810-10-45, which requires the Company to present noncontrolling interests as a separate component of total shareholders’ equity on the consolidated balance sheets and the consolidated net loss attributable to the noncontrolling interest be clearly identified and presented on the face of the consolidated statements of operations and comprehensive loss. · Net Loss per Share The Company calculates net loss per share in accordance with ASC Topic 260, Earnings per Share . Basic income per share is computed by dividing the net income by the weighted-average number of common shares outstanding during the period. Diluted income per share is computed similar to basic income per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common stock equivalents had been issued and if the additional common shares were dilutive. · Stock Based Compensation The Company accounts for stock-based compensation in accordance with ASC Topic 718-10, Compensation-Stock Compensation , which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors including employee stock options, restricted stock units, and stock appreciation rights are based on estimated fair values. Stock-based compensation expense recognized during the period is based on the value of the portion of share-based payment awards that is ultimately expected to vest during the period. The Company accounts for non-employee stock-based awards at fair value in accordance with the measurement and recognition criteria of ASC Topic 505-50, “Equity-Based Payments to Non-Employees”. · Retirement Plan Costs Contributions to retirement plans (which are defined contribution plans) are charged to general and administrative expenses in the accompanying statements of operation as the related employee service are provided. · Mineral Acquisition and Exploration Costs Mineral property acquisition and exploration costs are expensed as incurred. When it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves, the costs incurred to develop such property are capitalized. Such costs will be amortized using the units-of-production method over the estimated life of the probable reserves. · Environmental Expenditures The operations of the Company have been, and may in the future, be affected from time to time in varying degree by changes in environmental regulations, including those for future reclamation and site restoration costs. Both the likelihood of new regulations and their overall effect upon the Company vary greatly and are not predictable. The Company’s policy is to meet or, if possible, surpass standards set by relevant legislation by application of technically proven and economically feasible measures. Environmental expenditures that relate to ongoing environmental and reclamation programs are charged against earnings as incurred or capitalized and amortized depending on their future economic benefits. All of these types of expenditures incurred since inception have been charged against earnings due to the uncertainty of their future recoverability. Estimated future reclamation and site restoration costs, when the ultimate liability is reasonably determinable, are charged against earnings over the estimated remaining life of the related business operation, net of expected recoveries. · Related Parties The Company follows the ASC 850-10, Related Party for the identification of related parties and disclosure of related party transactions. Pursuant to section 850-10-20 the related parties include a) affiliates of the Company; b) entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of section 825-10-15, to be accounted for by the equity method by the investing entity; c) trusts for the benefit of employees, such as pension and Income-sharing trusts that are managed by or under the trusteeship of management; d) principal owners of the Company; e) management of the Company; f) other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests. F-14 Table of Contents VERDE RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 2023 AND 2022 (Currency expressed in United States Dollars (“US$”), except for number of shares) The consolidated financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a) the nature of the relationship(s) involved; b) a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c) the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d) amount due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement. · Commitments and Contingencies The Company follows the ASC 450-20, Commitments to report accounting for contingencies. Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or un-asserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or un-asserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein. If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed. Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available at this time that these matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows. · Fair Value of Financial Instruments The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and has adopted paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 of the FASB Accounting Standards Codification establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, paragraph 820-10-35-37 of the FASB Accounting Standards Codification establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by paragraph 820-10-35-37 of the FASB Accounting Standards Codification are described below: Level 1 Quoted market prices available in active markets for identical assets or liabilities as of the reporting date. Level 2 Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. Level 3 Pricing inputs that are generally observable inputs and not corroborated by market data. Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument. The carrying amounts of the Company’s financial assets and liabilities, such as cash and cash equivalents, loan and fee receivable, prepayments and other receivables, amounts due from related parties, accrued liabilities and other payables, loans payable, amounts due to related parties approximate their fair values because of the short maturity of these instruments. F-15 Table of Contents VERDE RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 2023 AND 2022 (Currency expressed in United States Dollars (“US$”), except for number of shares) · Recent Accounting Pronouncements During the year ended June 30, 2023, there have been no new, or existing, recently issued accounting pronouncements that are of significance, or potential significance, that impact the Company’s consolidated financial statements. NOTE 3 - GOING CONCERN UNCERTAINTIES The accompanying consolidated financial statements have been prepared using the going concern basis of accounting, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has generated recurring losses and suffered from an accumulated deficit of $ 10,292,430 as of June 30, 2023. The continuation of the Company as a going concern in the next twelve months is dependent upon the Company’s success in pursuing additional financing for its operations. However, there is no assurance that the Company will be successful in securing sufficient funds to sustain the operations. The ability of the Company to survive is dependent upon, among other things, obtaining additional financing to continue operations, and development of its business plan. In response to these problems, management intends to raise additional funds through public or private placement offerings, and related party loans. No assurance can be given that any future financing, if needed, will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, if needed, it may contain undue restrictions on its operations, in the case of debt financing, or cause substantial dilution for its stockholders, in the case of equity financing. These and other factors raise substantial doubt about the Company’s ability to continue as a going concern. These consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets and liabilities that may result in the Company not being able to continue as a going concern. NOTE 4 - BUSINESS SEGMENT INFORMATION Currently, the Company has four reportable business segments: (i) Distribution of THC-free cannabinoid (CBD) products; (ii) Production and distribution of renewable commodities; (iii) Holding of real property; and (iv) Licensor of proprietary pyrolysis technology. F-16 Table of Contents VERDE RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 2023 AND 2022 (Currency expressed in United States Dollars (“US$”), except for number of shares) In the following table, revenue is disaggregated by primary major product line. The table also includes a reconciliation of the disaggregated revenue with the reportable segments for the years ended June 30, 2023, and 2022: Year ended June 30, 2023 Gold mineral mining Distribution of THC-free cannabinoid (CBD) products Production and distribution of renewable commodities Holding property Licensor of proprietary pyrolysis technology Corporate unallocated Consolidated Revenue $ - $ - $ 92,995 $ 57,321 $ - $ 7,782 $ 158,098 Cost of revenue - - ( 235,704 ) - - ( 2,449 ) ( 238,153 ) Gross loss - - ( 142,709 ) 57,321 - 5,333 ( 80,055 ) Selling, general & administrative expenses ( 245,565 ) ( 2,875 ) ( 1,688,983 ) ( 158,260 ) ( 13,802 ) ( 1,106,537 ) ( 3,216,022 ) Loss from operations ( 245,565 ) ( 2,875 ) ( 1,831,692 ) ( 100,939 ) ( 13,802 ) ( 1,101,204 ) ( 3,296,077 ) Interest expense - - ( 36,765 ) - - ( 1,881,807 ) ( 1,918,572 ) Other income 35,596 - 1,109 - 2,439 1,176,545 1,215,689 Loss before income tax ( 209,969 ) ( 2,875 ) ( 1,867,348 ) ( 100,939 ) ( 11,363 ) ( 1,806,466 ) ( 3,998,960 ) Income tax - - - - - - - Net loss $ ( 209,969 ) $ ( 2,875 ) $ ( 1,867,348 ) $ ( 100,939 ) $ ( 11,363 ) $ ( 1,806,466 ) $ ( 3,998,960 ) Total assets at June 30, 2023 $ - $ 215,929 $ 6,293,027 $ 1,236,128 $ 30,194,966 $ 883,495 $ 38,823,545 Year ended June 30, 2022 Gold mineral mining Distribution of THC-free cannabinoid (CBD) products Production and distribution of renewable commodities Holding property Corporate unallocated Consolidated Revenue $ - $ - $ 25,690 $ - $ 12,479 $ 38,169 Cost of revenue - - ( 145,356 ) - - ( 145,356 ) Gross loss - - ( 119,666 ) - 12,479 ( 107,187 ) Selling, general & administrative expenses ( 190,240 ) ( 4,583 ) ( 201,591 ) ( 524,304 ) ( 989,462 ) ( 1,910,180 ) Loss from operations ( 190,240 ) ( 4,583 ) ( 321,257 ) ( 524,304 ) ( 976,983 ) ( 2,017,367 ) Interest expense - - - ( 1,065 ) ( 1,948,086 ) ( 1,949,151 ) Other income 11,963 - 26 115 - 12,104 Loss before income tax ( 178,277 ) ( 4,583 ) ( 321,231 ) ( 525,254 ) ( 2,925,069 ) ( 3,954,414 ) Income tax - - - - - - Net loss $ ( 178,277 ) $ ( 4,583 ) $ ( 321,231 ) $ ( 525,254 ) ( 2,925,069 ) $ ( 3,954,414 ) Total assets at June 30, 2022 $ 35,960 $ 148,703 $ 230,279 $ 1,345,156 $ 31,903,365 $ 33,663,463 F-17 Table of Contents VERDE RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 2023 AND 2022 (Currency expressed in United States Dollars (“US$”), except for number of shares) The below revenues are based on the countries in which the customer is located. Summarized financial information concerning the geographic segments is shown in the following tables: Years ended June 30, 2023 2022 Malaysia $ 32,134 $ 38,169 United States 125,964 - $ 158,098 $ 38,169 NOTE 5 - INVENTORIES Inventories as of June 30, 2023 and 2022 consisted of the following: As of June 30, 2023 2022 Bio produce $ 95,930 $ 87,035 Others 106 - $ 96,036 $ 87,035 NOTE 6 - DEPOSITS AND PREPAYMENTS Deposits and prepayments as of June 30, 2023 and 2022 consisted of the following: As of June 30, 2023 2022 Deposits 193,995 118,516 Prepayments 375,680 722 $ 569,675 $ 119,238 NOTE 7 –INTANGIBLE ASSETS The intangible assets comprise a global intellectual property (“IP”) known as “Catalytic Biofraction Process”, whereby, subsidiary Bio Resources Limited (“BRL”) is the beneficial and/or registered proprietor and an exclusive licence assigned to Verde Malaysia for the operation of the IP in the state of Sabah, Malaysia. The “Catalytic Biofraction Process” is a slow pyrolysis process using a proprietary catalyst to depolymerize palm biomass wastes (empty fruit bunches or palm kernel shells) in temperature range of 350 degrees Celsius to 500 degrees Celsius to yield commercially valuable bio products: bio-oil, wood vinegar (pyroligneous acid), biochar and bio-syngas. The intellectual property is a second-generation pyrolysis process where non-food feedstock like palm biomass wastes is used as feedstock. Upon fulfilling UN’s (United Nations) ACM 22 protocol as well as LCA (Life Cycle Assessment) requirements, it is anticipated that the by-products from this IP with fair value of $ 30,192,771 would lead to certification and issuance of Carbon Avoidance Credits as well as Carbon Removal Credits to generate carbon revenue for the Company. F-18 Table of Contents VERDE RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 2023 AND 2022 (Currency expressed in United States Dollars (“US$”), except for number of shares) NOTE 8 – PROPERTY, PLANT AND EQUIPMENT A summary of property, plant and equipment at June 30, 2023 and 2022 is as follows: As of June 30, 2023 2022 Land and building $ 1,264,117 $ 1,697,131 Plant and machinery 2,291,823 135,151 Office equipment 6,283 24,455 Project equipment 3,971 653,375 Computers 5,483 15,495 Motor vehicles 708,267 227,935 Furniture and fittings 12,935 2,527 4,292,879 2,756,069 Less: accumulated depreciation ( 258,187 ) ( 1,609,414 ) Foreign exchange adjustment ( 25,602 ) ( 97,762 ) $ 4,009,090 $ 1,048,893 Depreciation expense for the years ended June 30, 2023 and 2022 totaled $ 254,852 and $ 24,792 , respectively. During the year, cost and accumulated depreciation of property, plant and equipment of $ 1,574,928 and $ 1,574,687 related to CSB, which was disposed during the year, have been removed. Land and building with net carrying amount of $ 723,981 at June 30, 2023 and $ 746,145 at June 30, 2022 was pledged to a financial institution for facilities granted. Plant and machinery and motor vehicles with carrying values of $ 849,375 and $ 199,144 are acquired under financing arrangements. NOTE 9 - DEPOSITS PAID At June 30, 2023 and 2022, deposits consist of the following: As of June 30, 2023 2022 Deposits paid for acquisition of subsidiaries - Bio Resources Limited (#1) $ - $ 25,935,550 - Vata VM Synergy (M) Sdn Bhd (“VATA”) (#2) 21,423 - $ 21,423 $ 25,935,550 Deposits paid for acquisition of property, plant and equipment and IP (#3) $ - $ 5,000,000 - Factory site (#4) - 80,000 $ - $ 5,080,000 Security deposit - Factory site (#4) $ 80,000 $ - - Land and building (#5) - 240,000 $ 80,000 $ 240,000 (#1) The Company announced the Share Sale Agreement on May 12, 2021 for the acquisition of the entire issued and paid-up share capital of Bio Resources Limited from various unrelated third parties, Taipan International Limited, The Wision Project Limited, and other individuals, in consideration of the 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 and priced at $ 16,290,550 considering the current market interest rate. The acquisition of BRL was subsequently closed on October 12, 2022. F-19 Table of Contents VERDE RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 2023 AND 2022 (Currency expressed in United States Dollars (“US$”), except for number of shares) (#2) On March 23, 2023, the Company, through its wholly-owned subsidiary Verde Resources (Malaysia) Sdn. Bhd. (“Verde Malaysia”), entered into a Shares Sale Agreement (the “SSA Agreement”) with Murugesu A/L M. Narasimha and Deivamalar A/P Kandiah (“Vendors”), the legal and beneficial owners of Vata VM Synergy (M) Sdn. Bhd. (“VATA”), a company incorporated under the laws of Malaysia, to acquire 60% of the issued and paid-up share capital of VATA, a company engaged in the business of providing green technology to government and private sectors and in creating high quality compost using agricultural waste and biomass products in Malaysia. In relation to the SSA Agreement, the Company through Verde Malaysia also entered into a Shareholders Agreement with Murugesu A/L M. Narasimha and VATA. Under the terms of the SSA Agreement, the consideration for the acquisition of 60% of the issued and paid-up share capital of VATA shall be satisfied by the total purchase consideration of MYR 2,250,000 , which includes a first payment of MYR100,000 upon the execution of the SSA Agreement, a second payment of MYR 150,000 within thirty (30) days from the date of fulfilment or waiver of all the conditions set out in the SSA Agreement , and the issuance of shares of the Company’s restricted Common Stock for the balance consideration of MYR 2,000,000 at a price per share of not more than ten percent ( 10 %) discount from the immediate preceding five trading days volume weighted average price (“VWAP”) from the issuance date pursuant to the terms of the SSA Agreement. As of June 30, 2023, the first payment of MYR100,000 has been made. Subsequent to year end, the Company has initiated the termination of the agreement on the grounds of non-disclosure of material information by VATA. (#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. The acquisition of the assets comprising a biofraction plant and the right to use its licensed intellectual property known as “Catalytic Biofraction Process” in the state of Sabah, Malaysia was completed on February 24,2023. (#4) On March 2, 2022, the Company, through VRAP, entered into a Commercial Lease Agreement and Option to Purchase (“Segama Lease Agreement”) the factory site from Segama Ventures for a lease term of seven ( 7 ) years (“Lease Term”) at a monthly rental of MYR 36,000 ($ 8,571 ). The rental for the entire Lease Term amounts to the sum of MYR 3,024,000 ($ 720,000 ) (the “Lease Payment”) which shall be paid in advance upon commencement of the Segama Lease Agreement together with a payment of security deposit for the sum of MYR 336,000 ($ 80,000 ) (the “Security Payment”). (#5) On February 10, 2022, the Company, through VEL, a limited liability company incorporated in the State of Missouri, which is an indirect wholly-owned subsidiary of the Company via Verde Renewables, Inc., entered into a Commercial Lease Agreement and Option to Purchase (the “La Belle Lease Agreement”) to rent a 24-acre property in La Belle from Jon Neal Simmons and Betty Jo Simmon (the “Landlord”) in order to kickstart carbon farming with biochar in Missouri. Under the La Belle Lease Agreement, the term of the lease will be for a period of two ( 2 ) years and the Company will have the right to renew the lease with a total of three renewal periods with each term being two years. The monthly base rent is $ 10,000 for the term, was payable on the commencement of the La Belle Lease Agreement, together with a security deposit of $ 240,000 . The La Belle Lease Agreement also grants the Company the exclusive right and option to purchase the premises together with all the right title and interest from the Landlord for a consideration of $ 490,000 at any time during the two-year term of the lease. If the Company exercises the option to purchase the premises from the Landlord, the upfront lease payment and security deposit may be utilized as part payment of the purchase consideration. The option to purchase was exercised on September 27, 2022. NOTE 10 - MINING RIGHT A lump sum payment of MYR260,500 ($ 62,260 ) was made for a mining right over a period of 2 years up to June 13, 2023. The mining right is amortized on a straight-line basis over the term of the right. Nevertheless, on April 20, 2023, the subsidiary, CSB, to whom the right belongs, was disposed. The table below presents the operating lease related assets and liabilities recorded on the balance sheets. As of June 30, 2023 2022 Balance as at the July 1, 2022 and July 1, 2021 $ 27,088 $ 60,131 Amortization charge for the period ( 21,832 ) ( 30,779 ) Foreign exchange adjustment ( 363 ) ( 2,264 ) Disposal of subsidiary ( 4,893 ) - Balance as of June 30, 2023 and June 30, 2022 $ - $ 27,088 Amortization charge of rights of use lease assets was $ 21,832 and $ 30,779 for the year ended June 30, 2023 and 2022, respectively. F-20 Table of Contents VERDE RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 2023 AND 2022 (Currency expressed in United States Dollars (“US$”), except for number of shares) NOTE 11 - AMOUNTS DUE TO RELATED PARTIES AND DIRECTOR The following breakdown of the balances due to related parties and director, consisted of:- As of June 30, 2023 2022 Amount due to related companies Borneo Oil Corporation Sdn (“BOC”) (#1) $ 117,125 $ 555,527 Taipan International Limited (#2) 14,770 - Borneo Energy Sdn Bhd (#3) 119,153 - Victoria Capital Sdn Bhd (#4) 107,970 - $ 359,018 $ 555,527 Amount due to director Mr. Jack Wong (#5) $ 9,660 $ - (#1) Borneo Oil Corporation Sdn Bhd (“BOC”) is a wholly owned subsidiary of Borneo Oil Berhad (“BOB”) which holds 13.4 % and 22.8 % of the Company’s issued and outstanding common stock as of June 30, 2023 and June 30, 2022, respectively. The advances are related to ordinary business transactions and bear no interest or collateral, repayable and renewable under normal business advancement terms. (#2) Taipan International Limited who, pursuant to the disposal of BRL to the Company, became one of the shareholders of the Company and held 33.4 % of the Company’s issued and outstanding Common Stock as of June 30, 2023. The advances are related to ordinary business transactions and bear no interest or collateral, repayable and renewable under normal business advancement terms. (#3) Borneo Oil Berhad (“BOB”) is ultimate holding company of Borneo Energy Sdn Bhd, and held 13.4 % and 22.8 % of the Company’s issued and outstanding common stock as of June 30, 2023 and June 30, 2022, respectively. The advances are related to ordinary business transactions and bear no interest or collateral, repayable and renewable under normal business advancement terms. (#4) Victoria Capital Sdn. Bhd. is one of the shareholders of the Company, and held 0.2 % of the Company’s issued and outstanding Common Stock as of June 30, 2023.. The advances are related to ordinary business transactions and bear no interest or collateral, repayable and renewable under normal business advancement terms. (#5) Mr. Jack Wong is the President and Chief Executive of the Company effective October 1, 2022. Effective March 30, 2023, Jack Wong was appointed Director of the Company for a one ( 1 ) year term, effective March 30, 2023. Jack Wong will hold the Board position formerly held by Carl Craven. On September 12, 2023, Jack Wong stepped down from his position as President of the Company, but remains as Chief Executive Office of the Company. NOTE 12 - PROMISSORY NOTES June 30 June 30 2023 2022 Promissory Notes (#1) $ - $ 18,484,028 Promissory Notes (#2) 487,790 - $ 487,790 $ 18,484,028 (#1) Pursuant to the acquisition of the entire issued and paid-up share capital of Bio Resources Limited from various unrelated third parties, being Taipan International Limited, The Wision Project Limited and other individuals as announced on May 13, 2021, promissory notes with a principal amount of $ 20,355,000 and a two-year term period were issued on May 12, 2021. The face value (principal) amount of $ 20,355,000 was repayable by May 12, 2023, and bearing zero coupon interest. On January 20, 2022, the Company had reached a mutual agreement with the Lenders of the Notes to enter into a Supplement to Promissory Note, with each Lender, to convert the total principal loan amount of $ 20,355,000 into shares of the Company’s restricted Common Stock priced at $ 0.0611 per share, which represents the last ninety (90) days’ volume weighted average price (VWAP) as of the market closing of January 19, 2022. With the consummation of the acquisition of BRL on October 12, 2022, on December 9, 2022 the conversion of Promissory Notes was completed pursuant to a Supplementary Agreement dated December 7, 2022, with the issuance of 333,142,389 shares of the Company’s restricted Common Stock, at the price of $ 0.0611 per share, to the 17 Lenders, including the Company’s President and CEO, Jack Wong. The fair value of the outstanding promissory notes was calculated with the following assumptions: Risk free rate 0.26 8 % Credit spread 6.51 3 % Liquidity risk premium 5.00 0 % F-21 Table of Contents VERDE RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 2023 AND 2022 (Currency expressed in United States Dollars (“US$”), except for number of shares) The following is a reconciliation of the beginning and ending balances of promissory notes payable using Level 3 inputs: June 30 June 30 2023 2022 Balance at the beginning of year $ 18,484,028 $ 16,535,942 Interest expense 1,870,972 1,948,086 Converted to Company’s restricted Common Stock ( 20,355,000 ) - Balance at the end of year $ - $ 18,484,028 (#2) On March 13, 2023, the Company and its indirect wholly-owned subsidiary CSB entered into a Settlement of Debts Agreement (the “SDA Agreement”) for the settlement in full of CSB’s account payable to Borneo Oil Corporation Sdn Bhd (“BOC”) by way of the issuance on March 13, 2023 of a two year term Promissory Notes with the face value (principal) amount of $675,888, and bearing 2% coupon interest. The Notes are 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. The fair value of the Promissory Notes of $ 481,023 was calculated using the net present value of estimated future cash flows with the assumptions of risk free rate at 4.03 %, credit spread of 11.6 % and liquidity risk premium of 5.6 %. The following is a reconciliation of the beginning and ending balances of promissory note: June 30 June 30 2023 2022 Balance at the beginning of year $ - $ - Promissory notes issued to related party at fair value 481,023 - Interest expense 6,767 - Balance at the end of year $ 487,790 $ - The Company recorded $ 1,877,739 and $ 1,948,086 interest expense for the years ended June 30, 2023 and 2022, respectively. Interest payable attributable to promissory notes (#2) was $ 4,068 . A fair value adjustment of $ 194,865 is recognized in the Profit and Loss during the year ended June 30, 2023. NOTE 13 - LEASES The Company adopted ASU No. 2016-02, Leases and determines whether an arrangement is a lease at inception. This determination generally depends on whether the arrangement conveys the right to control the use of an identified fixed asset explicitly or implicitly for a period of time in exchange for consideration. Control of an underlying asset is conveyed if we obtain the rights to direct the use of and to obtain substantially all of the economic benefit from the use of the underlying asset. Some of our leases include both lease and non-lease components which are accounted for as a single lease component as the Company has elected the practical expedient. Some of the operating lease agreements include variable lease costs, primarily taxes, insurance, common area maintenance or increases in rental costs related to inflation. Substantially all of our equipment leases and some of our real estate leases have terms of less than one year and, as such, are accounted for as short-term leases as we have elected the practical expedient. Operating leases are included in the right-of-use lease assets, other current liabilities and long-term lease liabilities on the Consolidated Balance Sheet. Right-of-use assets and lease liabilities are recognized at each lease’s commencement date based on the present values of its lease payments over its respective lease term. When a borrowing rate is not explicitly available for a lease, the incremental borrowing rate is used based on information available at the lease’s commencement date to determine the present value of its lease payments. Operating lease payments are recognized on a straight-line basis over the lease term. The Company adopts a 5 % as weighted average incremental borrowing rate to determine the present value of the lease payments. The weighted average remaining life of the lease was 3 years. F-22 Table of Contents VERDE RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 2023 AND 2022 (Currency expressed in United States Dollars (“US$”), except for number of shares) The table below presents the lease-related assets and liabilities recorded on the balance sheet. As of June 30, 2023 2022 Assets Right-of-use asset (#1) $ 720,000 $ 720,000 Right-of-use asset (#2) 64,910 - Total RoU assets $ 784,910 $ 720,000 Less: Amortisation ( 151,801 ) ( 34,286 ) 633,109 685,714 Liabilities Current: Operating lease liabilities $ 20,768 $ - Finance lease liabilities 172,184 75,224 Non-current: Operating lease liabilities 29,483 - Finance lease liabilities 608,455 97,900 Total lease liabilities $ 830,890 $ 173,124 As of June 30, 2023, right-of-use assets were $ 633,109 and lease liabilities were $ 830,890 . As of June 30, 2022, right-of-use assets were $ 685,714 and lease liabilities were $ 173,124 . For the year ended June 30, 2023 and 2022, the amortization charge on right-of-use assets was $ 117,517 and $ 34,286 , respectively. (#1) This leasing arrangement for the lease of the Segama factory amounting to $ 720,000 is for a lease term of seven ( 7 ) years and includes an exclusive right and option to purchase the factory site, together with all its right title and interest, for a consideration to be mutually agreed between the parties at any time during the period of two years from the date of the Segama Lease Agreement. The Lease Payment and Security Payment shall be applied toward the Purchase Price upon VRAP exercising the option to purchase. The Company’s lease agreements do not contain any material restrictive covenants. There are no corresponding lease liabilities recorded as the lease payments for the entire lease period has been paid upfront upon inception of the agreement. (#2) This leasing arrangement for the lease of the executive vehicle amounting to $ 84,718 is for a lease term of three ( 3 ) years and includes option to purchase the said vehicle at an agreed consideration as stated in the Lease Agreement. The purchase option fee shall be applied toward the Purchase Price upon VRI exercising the option to purchase. The Company’s lease agreements do not contain any material restrictive covenants. The Company excludes short-term leases (those with lease terms of less than one year at inception) from the measurement of lease liabilities or right-of-use assets. The following tables summarize the lease expense for the years. Years ended June 30, 2023 2022 Finance lease cost: Interest on lease liabilities (per ASC 842) $ 36,765 $ 1,065 Operating lease cost: Operating lease expense (per ASC 842) 126,388 34,286 Total lease expense $ 163,153 $ 35,351 F-23 Table of Contents VERDE RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 2023 AND 2022 (Currency expressed in United States Dollars (“US$”), except for number of shares) Components of Lease Expense The Company recognizes operating lease expense on a straight-line basis over the term of the operating leases, comprising interest expense determined using the effective interest method, and amortization of the right-of-use asset, as reported within “general and administrative” expense on the accompanying unaudited condensed consolidated statement of operations. Finance lease expense comprise of interest expenses determined using the effective interest method. Future Contractual Lease Payments as of June 30, 2023 The below table summarizes our (i) minimum lease payments over the next five years, (ii) lease arrangement implied interest, and (iii) present value of future lease payments for the next five years and thereafter ending June 30: Years ending June 30, Operating and finance lease amount 2024 $ 244,655 2025 192,324 2026 168,791 2027 164,084 2028 104,259 Thereafter 127,432 Total minimum finance lease liabilities payment 1,001,545 Less: interest ( 170,655 ) Present value of lease liabilities $ 830,890 Representing:- Current liabilities $ 192,952 Non-current liabilities 637,938 $ 830,890 For the years ended June 30, 2023 and 2022, the amortization charge was $ 126,388 and $ 34,286 , respectively. NOTE 14 - STOCKHOLDERS’ EQUITY Authorized Stock The Company has authorized 10,000,000,000 Common shares and 50,000,000 preferred shares, both with a par value of $ 0.001 per share. Each Common share entitles the holder to one vote, in person or proxy, on any matter on which action of the stockholders of the corporation is sought. Preferred stock outstanding There are no preferred shares outstanding as of June 30, 2023, and 2022. Common stock outstanding On July 15, 2022, the Company issued a total of 1,500,000 restricted Common Shares at US$ 0.155 per share to two consultants pursuant to two consultant agreements; 1,000,000 restricted Common Shares were issued to Gary F. Zimmer and 500,000 restricted Common Shares were issued to Lisa Leilani Zimmer Durand, to serve as consultants to the Company. An aggregate of $ 232,500 was recognized as stock-based compensation under general and administrative expenses. During the period ended September 30, 2022, 15,328,029 restricted Common Shares were committed to be issued pursuant to private placement and were subsequently issued on November 7, 2022, comprising of 291,667 restricted Common Shares for US$ 21,000 at US$ 0.072 per share to one non-US shareholder, 15,036,362 restricted Common Shares for US$ 1,323,200 at US$ 0.088 per share to five non-US Shareholders. F-24 Table of Contents VERDE RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 2023 AND 2022 (Currency expressed in United States Dollars (“US$”), except for number of shares) On November 7, 2022, the Company issued 603,181 restricted Common Shares for US$ 53,080 at US$ 0.088 per share to three US Shareholders. On October 26, 2022, the Company entered into a corporate consulting services agreement (the “Consulting Agreement”) for investor communication and public relations services with Dutchess Group LLC (“DGL”). On December 9, 2022, pursuant to terms of the Consulting Agreement, the Company issued a total of 1,500,000 restricted Common Shares at US$ 0.12 per share to DGL. On November 30, 2022, the Company, through its wholly-owned subsidiary Verde Renewables, Inc.(“VRI”), a company incorporated in the State of Missouri, U.S.A., entered into a Services Agreement (the “Ibrahim Agreement”) with YM Tengku Chanela Jamidah YAM Tengku Ibrahim to engage her as its Director of Strategic Initiatives to promote and make introductions for the benefit of advancing the Company’s business and interests amongst her networks as designated in the Agreement. Under the Ibrahim Agreement, the Company will pay YM Tengku Chanela Jamidah YAM Tengku Ibrahim by the issuance of 1,000,000 shares of the Company’s restricted Common Stock, par value $ 0.001 per share (the “Common Stock”) in two tranches of 500,000 shares each on or before December 31, 2022 and December 31, 2023 respectively. The term of the Ibrahim Agreement will be for a fixed period of twenty-four (24) months commencing on November 30, 2022 and both parties may renew the agreement or enter into a new agreement as may be mutually agreed on terms to be separately negotiated. On December 31, 2022, pursuant to terms of the Ibrahim Agreement, the Company issued a total of 500,000 restricted Common Shares at US$ 0.20 per share to YM Tengku Chanela Jamidah YAM Tengku Ibrahim. On December 1, 2022, the Company through its wholly-owned subsidiary VRI, a company incorporated in the State of Missouri, U.S.A., entered into a Services Agreement (the “Sorhus Agreement”) with Steven Sorhus to engage him as its Financial Controller to prepare monthly financial reports and financial projections, and oversee daily accounting practices of the Company and its subsidiaries as designated in the Sorhus Agreement. Under the Sorhus Agreement, the Company will pay Steven Sorhus by the issuance of 800,000 shares of the Company’s restricted Common Stock, par value $ 0.001 per share (the “Common Stock”) in two tranches of 300,000 shares on or before December 31, 2022 and 500,000 shares on or before December 31, 2023. The term of the Sorhus Agreement will be for a fixed period of twenty-five (25) months commencing on December 1, 2022, and both parties may renew the agreement or enter into a new agreement as may be mutually agreed on terms to be separately negotiated. On December 31, 2022, pursuant to terms of the Sorhus Agreement, the Company issued a total of 300,000 restricted Common Shares at US$ 0.20 per share to Steven Sorhus. On December 1, 2022, the Company through its wholly-owned subsidiary VRI, a company incorporated in the State of Missouri, U.S.A., entered into a Services Agreement (the “EMGTA Agreement”) with EMGTA LLC (“EMGTA”). Under the EMGTA Agreement, EMGTA will provide services to develop business plan and marketing strategy to facilitate business growth, and identify new customers and markets for the Company. The Company will pay EMGTA by the issuance of 750,000 shares of the Company’s restricted Common Stock, par value $ 0.001 per share (the “Common Stock”) in two tranches of 375,000 shares each on or before December 31, 2022, and December 31, 2023 respectively. The term of the EMGTA Agreement will be for a fixed period of twenty-five (25) months commencing on December 1, 2022 and both parties may renew the agreement or enter into a new agreement as may be mutually agreed on terms to be separately negotiated. On December 31, 2022, pursuant to terms of the EMGTA Agreement, the Company issued a total of 375,000 restricted Common Shares at US$ 0.20 per share to EMGTA. On December 9, 2022, promissory notes with a principal value of $ 20,355,000 was converted pursuant to a Supplementary Agreement dated December 7, 2022, to 333,142,389 shares of the Company’s restricted Common Stock priced at $ 0.0611 per share which represents the last ninety (90) days’ volume weighted average price (VWAP) as of the market closing of January 19, 2022. On December 15, 2022, the Company entered into a Services Agreement (the “Looi Pei See Agreement”) with Looi Pei See to engage her as its consultant to develop the retail markets for the Company’s products and services in Malaysia and Singapore. On December 31, 2022, pursuant to terms of the Looi Pei See Agreement, the Company issued a total of 1,140,000 restricted Common Shares at US$ 0.20 per share to Looi Pei See. The term of the Looi Pei See Agreement will be for a fixed period of thirty-six (36) months . On February 17, 2023, the Company issued 714,285 restricted Common Shares for $ 50,000 at $ 0.07 per share to one non-US shareholder. On February 24, 2023, the acquisition of the assets of biofraction plant and the right to use intellectual property license in Sabah, Malaysia from Borneo Energy Sdn Bhd was completed. The Company had 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 on May 10, 2021, 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 March 13, 2023, the Company and its indirect wholly-owned subsidiary CSB entered into a Settlement of Debts Agreement (the “SDA Agreement”) and a two year term period Promissory Note with CSB’s creditor Borneo Oil Corporation Sdn Bhd (the “Creditor”) to settle in full a total of USD 675,888 of CSB’s account payable to the Creditor either in cash or by the issuance of new restricted shares of the Company’s Common Stock at a price of $ 0.07 per share. As set out in the SDA Agreement, the new restricted shares for settlement of the account payable to the Creditor shall be issued to the Creditor or its nominee. F-25 Table of Contents VERDE RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 2023 AND 2022 (Currency expressed in United States Dollars (“US$”), except for number of shares) On March 23, 2023, the Company, through its wholly-owned subsidiary Verde Resources (Malaysia) Sdn. Bhd. (“Verde Malaysia”), entered into a Shares Sale Agreement (the “SSA Agreement”) with Murugesu A/L M. Narasimha and Deivamalar A/P Kandiah (“Vendors”), the legal and beneficial owners of Vata VM Synergy (M) Sdn. Bhd. (“VATA”), a company incorporated under the laws of Malaysia, to acquire 60% of the issued and paid-up share capital of VATA, a company engaged in the business of providing green technology to government and private sectors and in creating high quality compost using agricultural waste and biomass products in Malaysia. In relation to the SSA Agreement, the Company through Verde Malaysia also entered into a Shareholders Agreement with Murugesu A/L M. Narasimha and VATA. Under the terms of the SSA Agreement, the consideration for the acquisition of 60% of the issued and paid-up share capital of VATA shall be satisfied by the total purchase consideration of Malaysia Ringgit MYR 2,250,000, which includes a first payment of Malaysia Ringgit MYR 100,000 upon the execution of the SSA Agreement, a second payment of Malaysia Ringgit MYR 150,000 within thirty (30) days from the date of fulfillment or waiver of all the conditions set out in the SSA Agreement, and the issuance of shares of the Company’s restricted Common Stock for the balance consideration of Malaysia Ringgit MYR 2,000,000 at a price per share of not more than ten percent (10%) discount from the immediate preceding five trading days volume weighted average price (“VWAP”) from the issuance date pursuant to the terms of the SSA Agreement . Subsequent to year end however, the Company initiated the termination of the SSA Agreement. On April 21, 2023, the Company issued 1,428,571 restricted Common Shares for $ 100,000 at $ 0.07 per share and 480,768 restricted Common Shares for $ 50,000 at $ 0.104 per share to one non-US shareholder. There were 1,176,200,278 and 819,188,055 shares of common stock issued and outstanding at June 30, 2023 and June 30, 2022, respectively. The Company has no stock option plan, warrants, or other dilutive securities. NOTE 15 - NET LOSS PER SHARE The following table sets forth the computation of basic and diluted net (loss) income per share for the respective years: Years ended June 30, 2023 2022 Net loss $ ( 3,998,960 ) $ ( 3,954,414 ) Less: Net loss attributable to non-controlling interest - 6,979 Net loss attributable to Verde Resources, Inc. shareholders $ ( 3,998,960 ) $ ( 3,947,435 ) Weighted average common shares outstanding: - Basic 1,019,752,220 812,847,811 - Diluted 1,019,752,220 812,847,811 Net loss per share: - Basic $ ( 0.00 ) $ ( 0.00 ) - Diluted $ ( 0.00 ) $ ( 0.00 ) # less than $0.005 For the years ended June 30, 2023, and 2022, diluted weighted-average common shares outstanding is equal to basic weighted-average common shares, due to the Company’s net loss position. Hence, no common stock equivalents were included in the computation of diluted net loss per share since such inclusion would have been antidilutive. The Company has no potentially dilutive securities, such as, options or warrants, currently issued and outstanding other than the restricted common stock to be issued at $ 0.07 per share upon conversion of the Promissory Notes with a principal amount of $ 675,888 at a future date to be to be mutually agreed with the Lenders, and the commitment to issue 375,000 shares, 500,000 shares and 500,000 shares to EMGTA LLC, YM Tengku Chanela Jamidah YAM Tengku Ibrahim and Steven Sorhus on or before December 31, 2023 respectively pursuant to respective contract of service. F-26 Table of Contents VERDE RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 2023 AND 2022 (Currency expressed in United States Dollars (“US$”), except for number of shares) NOTE 16 - INCOME TAX For the years ended June 30, 2023, and 2022, the local (“United States of America”) and foreign components of loss before income taxes were comprised of the following: Years ended June 30, 2023 2022 Tax jurisdiction from: - Local (US regime) $ ( 3,795,326 ) $ ( 3,130,173 ) - Foreign, including British Virgin Island 594,580 ( 325,539 ) Malaysia ( 786,851 ) ( 498,702 ) ALabuan, Malaysia ( 11,363 ) - Loss before income taxes $ ( 3,998,960 ) $ ( 3,954,414 ) The provision for income taxes consisted of the following: Years ended June 30, 2023 2022 Current tax: $ - $ - - Local - - - Foreign - - Deferred tax - Local - - - Foreign - - Income tax expense (benefit) $ - $ - The effective tax rate in the years presented is the result of the mix of income earned in various tax jurisdictions that apply a broad range of income tax rate. The Company mainly operates in U.S.A. and Malaysia that is subject to taxes in the jurisdictions in which they operate, as follows: United States of America VRDR, VRI and VLI are subject to the tax laws of United States of America. The U.S. Tax Cuts and Jobs Act (the “Tax Reform Act”) was signed into law. The Tax Reform Act significantly revised the U.S. corporate income tax regime to 21 % effective January 1, 2018. The Company’s policy is to recognize accrued interest and penalties related to unrecognized tax benefits in its income tax provision. The Company has not accrued or paid interest or penalties which were not material to its results of operations for the periods presented. The Company has provided for a full valuation allowance against the deferred tax assets of $ 1,079,890 on the expected future tax benefits from the net operating loss (“NOL”) carry forwards of $ 5,142,333 as the management believes it is more likely than not that these assets will not be realized in the future. Net Operating Losses (NOLs) generated prior to January 1, 2018, are able to be carried forward up to twenty subsequent years. Any NOLs created for tax years subsequent to that may be carried forward indefinitely. However, any NOLs arising from tax years ending after December 31, 2020, can only be used to offset up to 80% of taxable income. For the years ended June 30, 2023, and 2022, there were no operating income in US tax regime. BVI Under the current BVI law, VRAP is not subject to tax on income. F-27 Table of Contents VERDE RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 2023 AND 2022 (Currency expressed in United States Dollars (“US$”), except for number of shares) Labuan Under the current laws of the Labuan applicable to BRL, income derived from an intellectual property right is subject to tax under the Malaysian Income Tax Act 1967 (ITA) at 24 % of its chargeable income. However, BRL is not subject to income tax, given that it was a net loss position during the current period presented. The losses are presently not able to be carried forward to offset against its future operation income as income generating activities have not yet been undertaken. Malaysia The Company’s subsidiary is registered in Malaysia and is subject to the Malaysia corporate income tax at a standard income tax rate of 24 % on chargeable income. For the year ended June 30, 2023, the operation in Malaysia incurred $ 472,981 of cumulative net operating losses which can be carried forward to offset future taxable income. The net operating loss are allowed to be carried forward up to a maximum of ten (10) years of assessments under the current tax legislation in Malaysia. The Company has provided for a full valuation allowance against the deferred tax assets of $ 113,516 on the expected future tax benefits from the net operating loss (“NOL”) carry forwards as the management believes it is more likely than not that these assets will not be realized in the future. Years ended June 30, 2023 2022 Loss before income taxes $ ( 228,882 ) $ ( 498,702 ) Statutory income tax rate 24 % 24 % Income tax expense at statutory rate ( 54,932 ) ( 119,688 ) Non-deductible items 26,603 4,505 Tax losses unable to be carried forward 2,727 - Net operating loss 25,602 115,183 Income tax expense $ - $ - The following table sets forth the significant components of the deferred tax assets of the Company: As of June 30, 2023 2022 Deferred tax assets: Net operating loss carry forwards, from US tax regime $ 1,079,890 $ 169,688 Malaysia tax regime 113,516 1,259,662 Less: valuation allowance ( 1,193,406 ) ( 1,429,350 ) Deferred tax assets, net $ - $ - The Company has recorded valuation allowances for certain tax attribute carry forwards and other deferred tax assets due to uncertainty that exists regarding future realizability. If in the future the Company believes that it is more likely than not that these deferred tax benefits will be realized, the majority of the valuation allowances will be reversed 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, 2023, and June 30, 2022. The Company did not have uncertainty tax positions or events leading to uncertainty tax position within the next 12 months. NOTE 17 - PENSION COSTS The Company is required to make contribution to their employees under a government-mandated defined contribution pension scheme for its eligible full-times employees in Malaysia. The Company is required to contribute a specified percentage of the participants’ relevant income based on their ages and wages level. During the years ended June 30, 2023, and 2022, $ 19,961 and $ 7,219 contributions were made accordingly. F-28 Table of Contents VERDE RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 2023 AND 2022 (Currency expressed in United States Dollars (“US$”), except for number of shares) NOTE 18 - RELATED PARTY TRANSACTIONS For the Years ended June 30, 2023 2022 Related party transactions: Sales to: Borneo Eco Food Sdn Bhd (#2) $ 12,238 $ 7,314 BOC (#4) $ 2,062 $ - Rental income: Mr. Jack Wong $ 49,121 $ - Other income – Sales of wash sand to: Jusra Mining Merapoh Sdn Bhd (#1) $ - $ 10 Site expenses: Warisan Khidmat Sdn Bhd (#3) $ 9,776 $ 16,085 Professional services provided by: Warisan Khidmat Sdn Bhd (#3) $ 18,652 $ 9,091 Interest expense paid to: Borneo Oil Corporation Sdn Bhd (#9) $ 4,068 $ - Related party balances: June 30, 2023 2022 Trade receivables Borneo Eco Food Sdn Bhd (#2) $ - $ 5,933 Deposits paid for acquisition of property, plant and equipment Borneo Energy Sdn Bhd (#2) $ - $ 5,000,000 Advanced from related parties BOC (#4) $ 117,125 $ 555,527 Borneo Energy Sdn Bhd (#2) $ 14,770 $ - Taipan International Limited (#6) $ 119,153 $ - Victoria Capital Sdn Bhd (#7) $ 107,970 $ - Trade payables Warisan Khidmat Sdn Bhd (#3) $ - $ 7,253 BOC (#4) $ 467 $ - Advanced to related party Vetrolysis Limited (#8) $ 100 $ - (#1) Lamax Gold Limited (“LGL”) held 15 % equity interests of Champmark Sdn Bhd which was disposed on October 20, 2021 to Verde Resources Asia Pacific Limited and is also the major shareholder of Jusra Mining Merapoh Sdn Bhd. (#2) Borneo Oil Berhad (“BOB”) is ultimate holding company of Borneo Eco Food Sdn. Bhd. and Borneo Energy Sdn Bhd, and held 13.4% and 22.8% of the Company’s issued and outstanding common stock as of June 30, 2023 and June 30, 2022, respectively . (#3) Warisan Khidmat Sdn. Bhd. is a company whose shareholdings is entirely held by a Director of VRSB. (#4) Borneo Oil Corporation Sdn Bhd (formerly known as Borneo Oil and Gas Corporation Sdn Bhd) (“BOC”) is a wholly owned subsidiary of Borneo Oil Berhad (“BOB”) (holding 13.4% and 22.8% of the Company’s issued and outstanding common stock as of June 30, 2023 and June 30, 2022, respectively) . The advances are related to ordinary business transactions and bear no interest or collateral, repayable and renewable under normal business advancement terms. (#5) Mr. Jack Wong is the President and Chief Executive of the Company effective October 1, 2022. Effective March 30, 2023, Carl Craven voluntarily resigned from his position as Director of the Company. By resolution of the Board of Directors, Jack Wong was appointed Director of the Company for a one ( 1 ) year term, effective March 30, 2023. Jack Wong will hold the Board position formerly held by Carl Craven. On September 12, 2023, Jack Wong stepped down from his position as President of the Company, but remains as Chief Executive Office of the Company. (#6) Taipan International Limited is one of the shareholders of the Company, and held 33.4% of the Company’s issued and outstanding Common Stock as of June 30, 2023 . (#7) Victoria Capital Sdn. Bhd. is one of the shareholders of the Company, and held 0.2% of the Company’s issued and outstanding Common Stock as of June 30, 2023 . (#8) Encik Anuar bin Ismail, an indirect significant shareholder, is a director of Vetrolysis Limited. (#9) Borneo Oil Corporation Sdn Bhd (“BOC”) is a wholly owned subsidiary of Borneo Oil Berhad (“BOB”) which holds 13.4% and 22.8% of the Company’s issued and outstanding common stock as of June 30, 2023 and June 30, 2022, respectively. F-29 Table of Contents VERDE RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 2023 AND 2022 (Currency expressed in United States Dollars (“US$”), except for number of shares) Apart from the transactions and balances detailed elsewhere in these accompanying consolidated financial statements, the Company has no other significant or material related party transactions during the years presented. NOTE 19 - CONCENTRATIONS OF RISK The Company is exposed to the following concentrations of risk: (a) Major customers For the years ended June 30, 2023, and 2022, there was no single customer whose revenue exceeded 10 % of the revenue. (b) Economic and political risk The Company’s major operations are conducted in U.S.A. and Malaysia. Accordingly, the political, economic, and legal environments in U.S.A. and Malaysia, as well as the general state of U.S.A. and Malaysia’s economy may influence the Company’s business, financial condition, and results of operations. (c) Exchange rate risk The Company cannot guarantee that the current exchange rate will remain steady; therefore, there is a possibility that the Company could post the same amount of profit for two comparable periods and because of the fluctuating exchange rate actually post higher or lower profit depending on exchange rate of HKD converted to US$ on that date. The exchange rate could fluctuate depending on changes in political and economic environments without notice. NOTE 20 - COMMITMENTS AND CONTINGENCIES As of June 30, 2023, the Company had the following commitments: a) commitment to issue restricted Common Shares to the following service provider on or before December 31, 2023, for services to be performed pursuant to the Service Agreements signed as disclosed in Note 14 on or before December 31, 2023: Number of shares to be issued EMGTA LLC $ 375,000 YM Tengku Chanela Jamidah YAM Tengku Ibrahim 500,000 Steven Sorhus 500,000 $ 1,375,000 b) commitment to repay Promissory Notes with the face value (principal) amount of $ 675,888 , bearing 2 % coupon interest by May 12, 2025, in cash or by issuance of the Company’s restricted Common Shares priced at $ 0.07 per share as disclosed in Note 12. c) commitment to pay MYR 150,000 within thirty (30) days from the date of fulfillment or waiver of all the conditions set out in the Shares Sale Agreement (the “SSA Agreement”) for acquisition of 60% of the issued and paid-up share capital of Vata VM Synergy (M) Sdn. Bhd. (“VATA”), and the issuance of shares of the Company’s restricted Common Stock for the balance consideration of MYR 2,000,000 at a price per share of not more than ten percent ( 10 %) discount from the immediately preceding five trading days volume weighted average price (“VWAP”) from the issuance date pursuant to the terms of the SSA Agreement as disclosed in Note 8. Subsequent to year end, the Company has initiated the termination of the SSA agreement on the grounds of non-disclosure of material information by VATA. As of June 30, 2023, the Company has no material contingencies. F-30 Table of Contents VERDE RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 2023 AND 2022 (Currency expressed in United States Dollars (“US$”), except for number of shares) NOTE 21 - SUBSEQUENT EVENTS In accordance with ASC Topic 855, “ Subsequent Events ”, which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before consolidated financial statements are issued, the Company has evaluated all events or transactions that occurred after June 30, 2022, up through the date the Company issued the audited consolidated financial statements. On August 7, 2023, the Company entered into a Memorandum of Understanding (the “MOU”) with Andre van Zyl (“AvZ”) & Green Carbon Industries Group of Companies (“GCI”), headquartered in Western Australia, to actively pursue and put in place a mutually agreeable and fully funded project venture in North America, through the Company to securely ring-fence, support, preserve and implement the existing and related Intellectual Property of both parties and their respective subsidiaries/representatives, as well as to fund and support ongoing and future Research and Developments. The intended project venture will also be responsible to establish a phased implementation plan for modified, scaled Biochar and Construction Char operations, that will be paired with new Cold Bio Emulsion and Cold Bio Mix technology plant production operations to be established for the production of low CO2 footprint construction material in the territory of North America. Upon successful implementation of the project venture, there will be further option to expand operations throughout the continents of South America’s, APAC, Europe, and Africa. This technology makes possible high duty road base and road wearing course installations with superior performance, utilizing more cost-effective local soils and gravels with extended life of road performance, and substantially lower maintenance activities and cost. On September 12, 2023, Jack Wong stepped down from his position as President of the Company, but remains as Chief Executive Office of the Company. On September 12, 2023, the Board of Directors of the Company appointed Jack Wong, CEO and Director of the Company, as Chairman of the Board of Directors. On October 1, 2023, the Company appointed Eric Bava and Andre van Zyl as Chief Operating Officer and Chief Technology Officer respectively to drive the Company’s climate-tech innovation. F-31 Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None