VERDE RESOURCES, INC. - Quarter Report: 2013 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10–Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2013

 

or

 

[   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ____________ to ________________

 

Commission file number: 333-170935

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes [X]  No [] 

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes [X] No [  ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one).

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] No [X]

 

As of November 13, 2013 there were 83,977,500 shares of the issuer’s common stock, par value $0.001, outstanding.

 

VERDE RESOURCES, INC.

 

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2013

TABLE OF CONTENTS

 

 

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Item 1.      Financial Statements.

 

 

VERDE RESOURCES, INC.

 

(An Exploration Stage Company)

 

INDEX TO INTERIM CONDENSED FINANCIAL STATEMENTS

 

FOR THE PERIOD OF APRIL 22, 2010 (INCEPTION) TO SEPTEMBER 30, 2013

 

      

3

 

 

 

 

Verde Resources, Inc.

(An Exploration Stage Company)

Condensed Balance Sheets

 

 

 

The accompanying notes are an integral part of these condensed financial statements.

 

4

 

Verde Resources, Inc.

(An Exploration Stage Company)

Condensed Statements of Operations

(Unaudited)

 

 

 

The accompanying notes are an integral part of these condensed financial statements.

 

5

 

Verde Resources, Inc.

(An Exploration Stage Company)

Condensed Statements of Cash Flows

(Unaudited)

 

 

The accompanying notes are an integral part of these condensed financial statements.

6

 

 

Verde Resources, Inc.

(An Exploration Stage Company)

Notes to Condensed Financial Statements

September 30, 2013

(Unaudited)

 

 

NOTE 1 -     ORGANIZATION AND DESCRIPTION OF BUSINESS

 

Verde Resources, Inc. (the “Company”) was incorporated on April 22, 2010 in the State of Nevada, U.S.A.  The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America, and the Company’s fiscal year end is June 30.

 

The Company is an exploration stage company that intends to engage principally in the acquisition, exploration and development of resource properties. The Company signed an option agreement to acquire a property (Note 6). Prior to this, the Company’s activities had been limited to its formation and the raising of equity capital.

 

Exploration Stage Company

 

The Company is considered to be in the exploration stage as defined in ASC 915-10-05 “Development Stage Entities,” and interpreted by the Securities and Exchange Commission for mining companies in Industry Guide 7.  The Company is devoting substantially all of its efforts to development of business plans and the acquisition of mineral properties.  

 

NOTE 2 -     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Condensed Financial Statements

 

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s June 30, 2013 audited financial statements.  The results of operations for the periods ended September 30, 2013 are not necessarily indicative of the operating results for the full years.

 

Basis of Presentation

 

The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America (GAAP).  These audited financial statements include all adjustments that, in the opinion of management, are necessary in order to make the financial statements not misleading. 

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period.  Actual results could differ from those estimates. The Company’s periodic filings with the Securities and Exchange Commission include, where applicable, disclosures of estimates, assumptions, uncertainties and markets that could affect the financial statements and future operations of the Company.

 

Cash and Cash Equivalents

 

Cash and cash equivalents include cash in banks, 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 $1,106 and $2,102 in cash and cash equivalents at September 30, 2013 and June 30, 2013, respectively.

 

 

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Mineral Acquisition and Exploration Costs

 

The Company has been in the exploration stage since its formation on April 22, 2010 and has not yet realized any revenue from its planned operations. It has been primarily engaged in the acquisition, exploration, and development of mining properties.  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.

 

Start-Up Costs

 

In accordance with ASC 720-15-20, “Start-Up Costs,” the Company expenses all costs incurred in connection with the start-up and organization of the Company.

 

Net Income or (Loss) Per Share of Common Stock

 

The Company has adopted ASC Topic No. 260, “Earnings Per Share,” (“EPS”) which requires presentation of basic and diluted EPS on the face of the income statement for all entities with complex capital structures, and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation.  In the accompanying financial statements, basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period.

 

The following table sets forth the computation of basic and diluted earnings per share:

 

 

The Company has no potentially dilutive securities, such as options or warrants, currently issued and outstanding.

 

Concentrations of Credit Risk

 

The Company’s financial instruments that are exposed to concentrations of credit risk primarily consist of its cash and cash equivalents and related party payables it will likely incur in the near future.  The Company places its cash and cash equivalents with financial institutions of high credit worthiness.  At times, its cash and cash equivalents with a particular financial institution may exceed any applicable government insurance limits.  The Company’s management plans to assess the financial strength and credit worthiness of any parties to which it extends funds, and as such, it believes that any associated credit risk exposures are limited.

 

Risks and Uncertainties

 

The Company operates in the resource exploration industry that is subject to significant risks and uncertainties, including financial, operational, technological, and other risks associated with operating a resource exploration business, including the potential risk of business failure.

 

 

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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.

 

Recent Accounting Pronouncements

                        

The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

 

NOTE 3 -   CAPITAL STOCK

 

Authorized Stock

 

The Company has authorized 100,000,000 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.

 

Share Issuance

 

Since inception (April 22, 2010) to September 30, 2013, the Company has issued 2,500,000 and 1,477,500 common shares at $0.01 and $0.04 per share, respectively, resulting in total cash proceeds of $84,100, being $3,978 for par value shares and $80,122 for capital in excess of par value.  There were 3,977,500 common shares issued and outstanding at September 30, 2013 and June 30, 2013.  Of these shares, 2,500,000 were issued to directors and officers of the Company.  

 

There are no preferred shares outstanding.  The Company has issued no authorized preferred shares.  The Company has no stock option plan, warrants, or other dilutive securities.

 

NOTE 4 -     DUE TO RELATED PARTY

 

During the period, an officer and director advanced the Company $7,000 for operating expenses. As of September 30, 2013 and June 30, 2013, the Company was obligated to this director, who is also a stockholder, for this non-interest bearing demand loan with balances of $49,919 and 42,919, respectively. The Company plans to pay the loan back as cash flows become available.

 

NOTE 5 -     MINERAL PROPERTY COSTS

 

By agreement dated May 17, 2010, as amended on February 8, 2012 and May 17, 2013, with Gold Explorations, LLC, of Minden, Nevada, the Company acquired an option to earn a 100% undivided interest in certain properties consisting of 6 unpatented mineral claims (the “Property”), located in Esmeralda County, Nevada, USA.

 

Upon execution of the agreement, Gold Explorations, LLC transferred 100% interest in the mineral claims to the Company for $100,000 to be paid, at the Company’s option, as follows:

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All payments shall be made within 30 days of the due date or the Property and all rights will revert back to Gold Explorations, LLC.

 

In addition, the Company must incur exploration expenditures of $50,000 on the Property by May 17, 2015.

 

The Company is also responsible for maintaining the mineral claims in good standing by paying all the necessary rents, taxes, and filing fees associated with the Property.   As of September 30, 2013, the Company met these obligations.

 

The Property is subject to a 3% royalty, to Gold Explorations, LLC, on all mineral commodities sold from the Property.  This royalty shall be reduced to 1.5% upon payment to Gold Explorations, LLC of $1,000,000 USD at any time. As of September 30, 2013, no such royalties were incurred or payable.

 

NOTE 7 -     GOING CONCERN AND LIQUIDITY CONSIDERATIONS              

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business.  As of and for the period ended September 30, 2013, the Company has a loss from operations of $7,981, an accumulated deficit of $140,108, and working capital deficiency of $56,008, and has earned no revenues since inception.  The Company intends to fund operations through debt and equity financing arrangements, which may be insufficient to fund its capital expenditures, working capital and other cash requirements for the year ending June 30, 2014 and subsequently.

 

The ability of the Company to emerge from the exploration stage 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.

 

These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern.  The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

NOTE 8 -     SUBSEQUENT EVENTS

 

On October 17, 2013, the Company provided written notice to Gold Explorations, LLC, that the Purchase Agreement dated May 17, 2013, and amended February 8, 2012, and May 17, 2013 (the “Purchase Agreement”), has been cancelled according to the terms of the Purchase Agreement.  By providing this notification, the Company has no further obligations under the Purchase Agreement and has released any interest in the mineral claims located in Esmeralda County, Nevada.

 

On October 25, 2013, Verde Resources, Inc. entered into an Assignment Agreement For the Assignment of Management Right in Merapoh Gold Mines in Malaysia with Federal Mining Resources Limited (“Federal Mining”), a company incorporated under the laws of the British Virgin Islands.  Under the terms of the Agreement, Federal Mining assigned its management rights to the Company, through its newly-formed subsidiary, Gold Billion Global Ltd., in exchange for 80,000,000 shares of the Company’s common stock. 

 

The Company has evaluated subsequent events from the balance sheet date through the date the financial statements were issued and determined there are no additional items to disclose.

 

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Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

Forward-Looking Statements

 

Except for historical information, this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.  Such forward-looking statements involve risks and uncertainties, including, among other things, statements regarding our business strategy, future revenues and anticipated costs and expenses.  Such forward-looking statements include, among others, those statements including the words “expects,” “anticipates,” “intends,” “believes” and similar language.  Our actual results may differ significantly from those projected in the forward-looking statements.  Factors that might cause or contribute to such differences include, but are not limited to, those discussed herein as well as in the “Description of Business – Risk Factors” section in our Annual Report on Form 10-K, as filed on September 30, 2013.  You should carefully review the risks described in our Annual Report and in other documents we file from time to time with the Securities and Exchange Commission.  You are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this report.  We undertake no obligation to publicly release any revisions to the forward-looking statements or reflect events or circumstances after the date of this document.

 

Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, there are a number of risks and uncertainties that could cause actual results to differ materially from such forward-looking statements.

 

All references in this Form 10-Q to the “Company,” “Verde Resources,” “we,” “us,” or “our” are to Verde Resources, Inc.

 

Results of Operations

 

We have generated no revenues since inception (April 22, 2010) and have incurred $140,108 in expenses through September 30, 2013

 

The following table provides selected financial data about our company for the three months ended September 30, 2013 and year ended June 30, 2013. 

 

 

Description of Business

 

We are a start-up, exploration-stage company and have not yet generated or realized any revenues from our business operations.

 

Our auditors have issued a going concern opinion on our audited financial statements for the year ended June 30, 2013.  This means that there is substantial doubt that we can continue as an on-going business for the next twelve months unless we obtain additional capital to pay our bills.  This is because we have not generated any revenues and no revenues are anticipated until we begin removing and selling minerals.  There is no assurance we will ever reach this point.  Accordingly, we must raise cash from sources other than the sale of minerals found on the Property.  That cash must be raised from other sources.  Our only other source for cash at this time is investments by others.  We must raise cash to implement our project and stay in business. As of September 30, 2013, the Company had $1,106 in cash on hand.

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On October 17, 2013, the Company provided written notice to Gold Explorations, LLC, that the Purchase Agreement dated May 17, 2013, and amended February 8, 2012, and May 17, 2013 (the “Purchase Agreement”), has been cancelled according to the terms of the Purchase Agreement.  By providing this notification, the Company has no further obligations under the Purchase Agreement and has released any interest in the mineral claims located in Esmeralda County, Nevada.

 

On October 25, 2013, Verde Resources, Inc. entered into an Assignment Agreement For the Assignment of Management Right in Merapoh Gold Mines in Malaysia with Federal Mining Resources Limited (“Federal Mining”), a company incorporated under the laws of the British Virgin Islands. 

 

Federal Mining owns 85% equity interest in Champmark SDN BHD, a privately limited liability company incorporated in Malaysia.  Champmark is the Mining Contractor of the Mining Lease for Site IV-1 at the Merapoh Gold Mine under the Contract for Work with MMC Corporation Berhad, the Permit Holder of the Mining Lease.

 

Under the terms of the Agreement, Federal Mining will assign its management rights of Champmark’s mining operation in the Mining Lease to the Company, through its newly-formed subsidiary, Gold Billion Global Ltd., in exchange for 80,000,000 shares of the Company’s common stock.

 

Limited Operating History; Need for Additional Capital

 

There is no historical financial information about us upon which to base an evaluation of our performance.  We are an exploration stage corporation and have not generated any revenues from operations.  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.

 

To become profitable and competitive, we must conduct the research and exploration of our properties before we start production of any minerals we may find.  We will require equity and/or debt financing to provide for the capital required to implement our research and exploration phase. We will require additional funds to operate for the next year.

 

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

 

From inception until the date of this filing, we have had limited operating activities.  Our financial statements from inception (April 22, 2010) through the period ended September 30, 2013, reported no revenues and a net loss of $140,108.

 

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.

 

 

 

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Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

 

As a “smaller reporting company”, we are not required to provide the information required by this Item.

 

Item 4.  Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures  

 

As of September 30, 2013, management assessed the effectiveness of our internal control over financial reporting based on the criteria for effective internal control over financial reporting established in Internal Control--Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and SEC guidance on conducting such assessments. Based on that evaluation, they concluded that, during the period covered by this report, such internal controls and procedures were not effective to detect the inappropriate application of US GAAP rules as more fully described below. This was due to deficiencies that existed in the design or operation of our internal controls over financial reporting that adversely affected our internal controls and that may be considered to be material weaknesses.

 

The matters involving internal controls and procedures that our management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board were: (1) lack of a functioning audit committee, (2) lack of a majority of outside directors on our board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; (3) inadequate segregation of duties consistent with control objectives; and (4) management is dominated by three individuals without adequate compensating controls. The aforementioned material weaknesses were identified by our Chief Executive and Financial Officers in connection with the review of our financial statements as of September 30, 2013.

 

Management believes that the material weaknesses set forth above did not have an effect on our financial results. However, management believes that the lack of a functioning audit committee and the lack of a majority of outside directors on our board of directors results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements in future periods.

 

Changes in Internal Controls  

 

There have been no changes in our internal controls over financial reporting identified in connection with the evaluation required by paragraph (d) of Securities Exchange Act Rule 13a-15 or Rule 15d-15 that occurred in the quarter ended September 30, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 

PART II – OTHER INFORMATION

 

Item 1.  Legal Proceedings.

 

We know of no material, existing or pending legal proceedings against our Company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered beneficial shareholder, is an adverse party or has a material interest adverse to our interest.

 

Item 1A.  Risk Factors.

 

As a “smaller reporting company”, we are not required to provide the information required by this Item.

 

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Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds.

 

Pursuant to the terms of the Assignment Agreement described in item 2 above, the Company will issue 80,000,000 shares of the Company’s common stock.  The shares were not registered in reliance on exemption from registration contained in Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”) and Rule 506(b).  The Company’s reliance on Section 4(2) of the Securities Act was based upon the following factors:  (a)the issuance of the securities was an isolated private transaction by us which did not involve a public offering; (b) there were only a limited number of offerees; (c) there were no subsequent or conterminous public offerings of the securities by the Company; and (d) the negotiations for the sale of the stock took place directly between the offeree and the Company.  No underwriters or agents were used in this transaction and no commissions or finder’s fees were paid.

 

Item 3.  Defaults Upon Senior Securities.

 

None.

 

Item 4.  Mine Safety Disclosure.

 

None.

 

Item 5.  Other Information.

 

None.

 

Item 6.  Exhibits.

 

The following exhibits are included as part of this report:

Exhibit No.                  Description 

31.1                       Rule 13a-14(a) / 15d-14(a) Certification of Chief Executive Officer.

31.2                       Rule 13a-14(a) / 15d-14(a) Certification of Chief Financial Officer.

32.1                       Rule 1350 Certifications of Chief Executive Officer and Chief Financial Officer.

101*

 

*  The following financial information from Verde Resources, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2013, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Balance Sheets as of September 30, 2013, and June 30, 2013, (ii) Condensed Statements of Operations for the three months ended September 30, 2013 and 2012, and cumulative from inception (April 22, 2010) to September 30, 2013, (iii) Condensed Statements of Cash Flows for the three months ended September 30, 2013 and 2012, and cumulative from inception (April 22, 2010) to September 30, 2013, and (iv) Notes to Condensed Financial Statements.

 

 

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SIGNATURES  

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

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