VERDE RESOURCES, INC. 10-K/A

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion should be read in conjunction with our audited financial statements and the related notes that appear elsewhere in this annual report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to those discussed below and elsewhere in this annual report, particularly in the section entitled “Risk Factors” of this annual report. Our audited financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles. 17 Table of Contents Results of Operations The following table provides selected financial data about our company for the years ended June 30, 2023, and June 30, 2022. Statement of Operation June 30, 2023 2022 Change USD USD USD % Revenue $ 158,098 $ 38,169 119,929 $ 314.2 % Cost of revenue (238,153 ) (145,356 ) (92,797 ) 63.8 % Gross loss (80,055 ) (107,187 ) (27,132 ) (25.3 )% Operating expenses (3,216,022 ) (1,905,301 ) (1,310,721 ) 68.8 % Goodwill impairment - (4,879 ) 4,879 (100.0 )% Loss from operation (3,296,077 ) (2,017,367 ) (1,278,710 ) 63.4 % Interest expense (1,918,572 ) (1,949,151 ) 30,579 (1.6 )% Other income 1,215,689 12,104 1,203,585 9,943.7 % Net loss before income tax 3,998,960 ) (3,954,414 ) (44,546 ) 1.1 % Provision of Income Tax - - NET LOSS (3,998,960 ) (3,954,414 ) (44,546 ) 1.1 % Net loss attributable to non-controlling interests - 6,979 (6,979 ) (100.0 )% Net loss attributable to shareholders of the group $ (3,998,960 ) $ (3,947,435 ) (51,525 ) 1.3 % Revenue The revenue derived from the rental income, compost spreading and distribution of renewable commodities. We have generated $158,098 and $38,169 revenues for the years ended June 30, 2023, and 2022, respectively, and have recorded a gross loss of $80,055 and $107,187 for the year ended June 30, 2023, and 2022. Cost of revenue We incurred cost of revenue of $238,153 and $145,356 in the production and distribution of renewable commodities during the year ended June 30, 2023, and 2022, respectively. Operating Expenses Operating expenses comprised mainly of salaries, office costs, legal and professional fees, consultancy fee and travelling expenses. We have incurred $3,216,022 and $1,905,301 in operating expenses through June 30, 2023, and June 30, 2022. Operating expenses increased by 68.8%, or $1,310,721, primarily due to increase of consultancy fee and legal and professional fee for the year ended June 30, 2023. Interest expense The Company recorded interest expense of $1,881,807 and $1,948,086 on the promissory notes for the years ended June 30, 2023, and 2022, respectively. Lease interest amounted to $36,765 and $1,065 for the years ended June 30, 2023, and 2022, respectively. Other income We have other income of $1,215,689 and $12,104 for the year ended June 30, 2023, and 2022. Other income increased by $1,203,585, primarily due to gain on disposal of a subsidiary of $980,714 and fair value adjustment on convertible promissory notes issued to BOC of $194,865 as disclosed in Note 12 of the financial statements. Net loss We recorded a net loss of $3,998,960 and $3,954,414 for the years ended June 30, 2023, and 2022, respectively. 18 Table of Contents Plan of Operation Expansion Plans The Company is diversifying into the green industry with its acquisition of Bio Resources Ltd (“BRL”), the beneficial and/or registered proprietor of the intellectual property known as “Catalytic Biofraction Process”, which is a slow pyrolysis process using a proprietary catalyst to depolymerise palm biomass wastes (empty fruit bunches or palm kernel shells) in temperature range of 350 degC to 500 degC to yield commercially valuable bio products: bio-oil, wood vinegar (pyroligneous acid), biochar and bio-syngas. The intellectual property is a second-generation pyrolysis process where non-food feedstock like the palm biomass wastes is used as feedstock. The Company announced a momentous partnership with Green Carbon Industries (“GCI”) in August 2023, securing exclusive access to their invaluable intellectual property (IP) rights. This groundbreaking collaboration lays the foundation for revolutionary infrastructure development, marked by innovative biochar asphalt showcase projects within the United States. These projects complement GCI’s established successes in the Asia Pacific (APAC), Middle East, and Africa regions. Our shared commitment revolves around validating the concept’s feasibility and scalability for carbon sequestration, thereby transforming global infrastructure development, and proactively addressing pressing environmental challenges. Biochar-asphalt, an innovative, eco-friendly, high performance, and cost-saving alternative to conventional high CO 2 footprint asphalt production and installation, holds immense promise in addressing environmental concerns. Through the integration and extensive utilization of biochar – a carbon-rich material derived from organic waste, The Company aims to reduce carbon emissions and the carbon footprint of infrastructure projects. The American showcase projects will serve as compelling evidence of the technology’s capability in carbon sequestration, efficiently mitigating greenhouse gas, enhancing durability and cost efficiencies, all while simultaneously addressing pressing environmental challenges. Earlier this year, Puro.earth, the world’s foremost crediting platform for durable carbon removal, officially registered the Company as a Carbon Removal Credit supplier as part of its Accelerate program. This partnership was formalized through a platform agreement signed in April 2023. It is worth noting that Puro.earth was acquired by Nasdaq in June 2021. The Company’s endeavors are poised to unlock revenue opportunities by generating Carbon Removal Credits (CORCs). This critical step incentivizes the broader adoption of climate technologies and enables the Company to supply these credits to companies seeking to offset their carbon footprint in pursuit of net-zero objectives. Simultaneously, this approach creates an additional and substantial revenue stream for the Company. Apart from the green industry, the Company is also working on a partnership with MRX Technologies, a market leader in commercial extraction systems for cannabis and hemp. The partnership includes an agreement for Verde Resources to white-label THC-free CBD products from MRX Technologies. 19 Table of Contents Limited Operating History; Need for Additional Capital There is limited historical financial information about us upon which to base an evaluation of our performance. We cannot guarantee we will be successful in our business operations. Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources, possible delays in the exploration of our properties, and possible cost overruns due to price and cost increases in services. We have no assurance that future financing will be available to us on acceptable terms. If financing is not available on satisfactory terms, we may be unable to continue, develop or expand our operations. Equity financing could result in additional dilution to existing shareholders. Liquidity and Capital Resources Our primary sources of liquidity are cash generated from private placements. Cash generated from operations is highly dependent on the sale of our products, which are still under development stage. Cash and cash equivalents totaled $0.2 million as of June 30, 2023, and $0.4 million as of June 30, 2022. The following table provides selected cash flow data about our company for the years ended June 30, 2023, and 2022. Cash Flow Date June 30, 2023 June 30, 2022 Net cash used in operating activities $ (1,656,896 ) $ (1,595,961 ) Net cash used in investing activities $ (387,938 ) $ (1,348,823 ) Net cash provided by financing activities $ 1,628,281 $ 989,594 Effect of exchange rate changes on cash and cash equivalents $ 198,045 $ 256,485 Net increase in cash and cash equivalents $ (218,508 ) $ (1,698,705 ) Cash and cash equivalents at beginning of year $ 418,917 $ 2,117,622 Cash and cash equivalents at end of year $ 200,409 $ 418,917 Net Cash Used In Operating Activities. Cash used in operating activities reflects net loss adjusted for certain non-cash items, including depreciation expense, amortization of intangible assets, gain on disposal of subsidiary, fair value adjustment on convertible promissory notes, and stock-based compensation, and the effects of changes in operating assets and liabilities. The increase in cash used in operating activities for the year ended June 30, 2023, as compared to 2022 was primarily due to higher net loss adjusted for non-cash interest expense of promissory notes and the increase of accrued liabilities and other payables and advanced from related parties. In the operation analysis, the net cash used in operating activities increased from $1,595,961 to $1,656,896. The operation loss of $3,998,960 was partially offset by the noncash expenses such as $254,852 in depreciation, $124,688 in amortization, $519,671 in share-based compensation, $1,877,739 in interest expenses on promissory notes, $60,297 in lease interest expense, fair value adjustment on convertible promissory note of $194,865, gain on disposal of subsidiary of $980,714 and $600 from gain on disposal of property, plant and equipment. In the operating assets and liabilities, the net decrease in current assets resulted from an increase of other receivables, deposits and prepayments of $104,470, an increase in inventories held of $13,850 and a decrease in accounts receivables of $7,785. The net increase in current liabilities resulted from $348,913 increase in advances from related parties, $403,259 increase in accrued liabilities and other payables and $75,768 increase in accounts payable, offset by a decrease in advances from director of $12,877. The final result of the cash flow used in operating activities was $1,656,896. Net Cash Used In Investing Activities. The net cash used by investing activity of $387,938 resulted from purchase of property, plant and equipment of $497,302, deposit paid for acquisition of subsidiary company of $21,423, offset by proceeds on disposal of property, plant and equipment of $23,000, net cash inflow from disposal of subsidiary company of $106,647 and net cash inflow on acquisition of a subsidiary company of $1,140 for the year ended June 30, 2023. Net Cash Provided By Financing Activities. The net cash provided by financing activities of $1,628,281 resulted from proceeds from shares issued of $1,576,280 and net proceeds from drawdown of loans of $191,000, set off partially by repayments to lease liabilities and related interests for the years ended June 30, 2023, of $138,999 and $10,406 respectively. The cash flow situation will not allow for operations in the coming next 12 months by self-generated cash provided from operating activities. The Company needs to increase cash flow supplies with a long-term plan until the Company makes sustainable profits and has a positive cash flow. Otherwise, loans from related parties may be a temporary solution, although we have no written loan agreements. There is no guarantee that we will be able to secure adequate financing. If we fail to secure sufficient funds, our business activities may be curtailed, or we may cease to operate. Off-Balance Sheet Arrangements We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material to investors. Item 7A. Quantitative and Qualitative Disclosures About Market Risk. As a “smaller reporting company”, we are not required to provide the information required by this Item. 20 Table of Contents