VERDE RESOURCES, INC. - Annual Report: 2018 (Form 10-K)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended June 30, 2018

or

o 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: 000-55276

Registrant’s telephone number, including area code: (852) 2152-1223

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.001 par value. 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes x No ¨

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 last 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, 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 registration statement was required to submit and post such files). Yes x No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

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 definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

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

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold of $0.025 (or the average bid and asked price of such common equity) as of the last business day of the registrant’s most recently completed second fiscal quarter, being December 29, 2017, was $1,959,235.

Indicate the number of shares outstanding of each of the registrant’s classes of common stock as of the latest practicable date.

115,038,909 as of September 28, 2018

DOCUMENTS INCORPORATED BY REFERENCE

None.

TABLE OF CONTENTS

Part I

Cautionary Note Regarding 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 in the sections “Business,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” You should carefully review the risks described in this Annual Report on Form 10-K 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-K to the “Company,” “Verde,” “we,” “us” or “our” are to Verde Resources, Inc.

Item 1. Business.

Overview

Verde Resources, Inc. (the “Company” or “VRDR”) was incorporated in the State of Nevada on April 22, 2010. The Company conducts business operations in Pahang Malaysia through Champmark Sdn Bhd (“CSB”), a privately limited liability company incorporated in Malaysia, which is a deemed subsidiary under the management control of our 100% subsidiary Gold Billion Global Limited (“GBL”), a company incorporated under the laws of the British Virgin Islands.

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

FMR owns 85% equity interest in CSB, a privately limited liability company incorporated in Malaysia. CSB 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 Assignment Agreement, FMR has assigned its management rights of CSB’s mining operation in the Mining Lease to the Company, through its wholly-owned subsidiary Gold Billion Global Limited (“GBL”), in exchange for 80,000,000 shares of the Company’s common stock, which constituted 95.26% of our issued and outstanding capital stock as of and immediately after the consummation of the acquisition.

GBL was formed on February 7, 2013, by the Board of Directors of FMR to monitor the CSB operation. The acquisition of 100% of the issued and outstanding capital stock of GBL was agreed upon on October 18, 2013, and completed on October 25, 2013, subject to the approval of the Board of Directors and the audit of GBL.

On February 17, 2014, we entered into a Supplementary Agreement to the Assignment Agreement and completed a reverse acquisition of GBL pursuant to the Supplementary Agreement. As a result of the acquisition, the Company holds 100% equity interest in GBL and 85% variable interest in CSB. Our consolidated subsidiaries include GBL being our wholly-owned subsidiary and 85% of CSB being a variable interest entity (VIE) and deemed subsidiary of GBL. On April 1, 2014, GBL purchased 85% equity interest of CSB, and CSB became indirect subsidiary of the Company.

Corporate History and Structure

Verde Resources, Inc. was incorporated on April 22, 2010, in the State of Nevada, U.S.A. The following persons were appointed to serve as directors and to assume the responsibilities of officers on October 17, 2013. Mr. Wu Ming Ding, as President and Director; Mr. Balakrishnan B S Muthu as Treasurer Chief Financial Officer, General Manager and Director; and Mr. Liang Wai Keen as Secretary. Mr. Wu and Mr. Muthu were added to the Board of Directors.

On April 1, 2014, the Board of Directors of Gold Billion Global Limited (“GBL”) notified Federal Mining Resources Limited (“FMR”) of the decision to exercise the right of option to purchase 85% equity interest of Champmark Sdn Bhd (“CSB”) under Management Agreement Section 3.2.4 dated July 1, 2013, between GBL and FMR. This acquisition was completed on April 1, 2014, with consideration of US$1, and GBL then became 85% shareholder of CSB.

Effective August 27, 2014, the Company’s Articles of Incorporation were amended to increase the authorized shares of the Company from 100,000,000 shares of common stock to 250,000,000 shares of common stock.

Effective February 20, 2016, Mr. Wu Ming Ding resigned all of his positions as President and Director of the Company, with Mr. Balakrishnan B S Muthu being appointed President to fill the vacancy created. Effective February 20, 2016, Mr. Chen Ching was appointed Director of the Company and the entire Board of Directors now consists of Mr. Balakrishnan B S Muthu and Mr. Chen Ching.

Effective February 2, 2018, the Company’s Articles of Incorporation were amended to increase the authorized shares of the Company from 250,000,000 shares of common stock to 10,000,000,000 shares of common stock. A copy of the Certificate of Amendment was filed with the Nevada Secretary of State. The Form 8K announcing the increase of the authorized shares of the Company was filed with SEC on February 6, 2018.

The following diagram illustrates our current corporate structure:

According to ASC 810-05-08 A, CSB is a deemed subsidiary of GBL where GBL controls the Board of Directors of CSB, rights to receive future benefits and residual value, and obligation to absorb loss and finance for CSB. GBL has the power to direct the activities of CSB that most significantly impact CSB’s economic performance and the obligation to absorb losses of CSB that could potentially be significant to the CSB or the right to receive benefits from CSB that could potentially be significant to CSB. GBL is the primary beneficiary of CSB because GBL can direct the activities of CSB through the common directors and 85% shareholder FMR. Under 810-23-42, 43, it is determined that CSB is de-facto agent of the principal GBL and so GBL will consolidate CSB from July 1, 2013. On April 1, 2014, GBL purchased 85% equity interest of CSB, and CSB became indirect subsidiary of the Company.

Contractual Arrangements

Our exploration and mining business is currently provided through contractual arrangements with CSB through our wholly-owned subsidiary GBL.

CSB, the VIE of GBL, sells gold minerals directly to the registered gold trading company in Malaysia. We have been and are expected to continue to be dependent on our VIE to operate our exploration and mining business. GBL has entered into contractual arrangements with its VIE, which enable us to exercise effective control over the VIE, receive substantially all of the economic benefits from the VIE, and have the option to purchase equity interests in the VIE.

On July 1, 2013, the Company’s subsidiary GBL entered into a series of agreements (“VIE agreements”) with FMR and details of the VIE agreements are as follows:

With the above agreements, GBL demonstrates its ability to control CSB as the primary beneficiary and the operating results of the VIE was included in the condensed consolidated financial statements for the year ended June 30, 2014.

CSB holds the operating right to Merapoh Gold Mine (the “Mine”) with all regulatory and government operating licenses in Malaysia.

On April 1, 2014, GBL purchased 85% equity interest of CSB, and CSB became indirect subsidiary of the Company.

Stage Of Operation

The Company does not own any title and/or concession right in any mines. The Company is undertaking natural mineral resource extraction management services.

According to the United States Industry Guide 7 (a) (4) on mining operations, the Merapoh Gold Mine is currently in the production stage because the mine has produced approximately 2 kilograms of gold from July 2017 to June 2018. According to the ASC 930-330-20 Glossary, the production phase is defined as “when saleable minerals are extracted (produced) from an ore body, regardless of the level of production”. However, the production is limited to a small part of the site, and extraction is alluvial gold only. The objective of the Company is preparing to improve the productivity of the mines to ensure that the operation will be carried out effectively and efficiently at minimum cost.

Current Mining Property and Location

Merapoh Gold Mine (the “Mine”)

The Merapoh Gold Mine is located in northern Pahang, with convenient road access through Kelantan directly to the mine site and is about 400 kilometers away from Kuala Lumpur. The Mine is located in the middle of Malaysia’s gold metallogenic belt. The central gold belt is the source of the majority of the gold deposits in the peninsula. It lies between the western and eastern tin belts and extends from Kelantan (Sungai Pergau, Sungai Galas) to Pahang (Merapoh, Kuala Lipis, Raub), Terengganu (Lubuk Mandi), Negri Sembilan and Johor (Gunung Ledang).

Mine Area:

Site IV-1 of the Merapoh Gold Mine consists of a mining area of 400 acres with mining lease.

Location and Access:

The Merapoh Gold Mine is about 280km from Kuala Lumpur, and 50km from Kuala Lipis, the former state capital of Pahang, accessible via secondary paved highways with a new major highway under construction expected to be complete d in 2018. The geological coordinates of the mine are 101 ° 58 ′ , 4 ° 35 ′.

Type of Claim:

Champmark Sdn Bhd, the subsidiary of Gold Billion Global Limited, is the Mining Contractor of the Mining Lease for Site IV-1 of the Merapoh Gold Mine under the Contract for Work with MMC Corporation Berhad, the Permit Holder of the Mining Lease.

Identifying Information of the Merapoh Gold Mine:

Mining Right:

Mining Lease No.: ML 08/2008

Operational Mining Scheme No.: JMG.PHG.(M) 38/2018/11 (Au)

Concession Period: From December 4, 2017 to December 3, 2019

Regional Geology:

The Malaysia Central Gold Belt runs along the entire backbone of Peninsular Malaysia, extending further to the north. It was formed between the Sibumasu block in the west and Manabor block in the east that runs along major mineral deposits in Thailand, Myanmar and China. The regional gold deposits were made of Epithermal deposits that formed in a series of volcanic environment, where the tensional fractures along the subduction zone allows the intrusion of mineral rich acidic magma within deep faults.

Rock Formations and Mineralization:

Site IV-1 of the Merapoh Gold Mine covers an area of 400 acres with mineralization structure being Permian limestone dominating the South-East portion, felsic volcanic tuff in the Western portion of the area and intrusive dacite rock to the north-west of the area. Tectonic contact within the sheer zone of creates epithermal mineralization, forming a mineral rich vein along the contact zone. The mineralized zone is made of highly altered tuffacaous rock with abundant pyrite dissemination and a moderately spaced quartz vein.

Work Completed and Present Condition:

Lode gold exploration on Site IV-1 has commenced since 2011 and still in progress with both in-house drilling team and third party drilling services running in parallel to expedite data collection to generate a comprehensive JORC compliant gold reserve report.

Equipment, Infrastructure and Other Facilities of the Merapoh Gold Mine:

Parlongs

These are basic production plants and the processing method employed five high powered manual water guns, angled water buffering control and 5-lane carpeted sluice with lateral barriers. The processing capacity is between 40 - 45 tons per hour.

OPS 1

This is a modified production plant and the processing method employed four high powered manual water guns, tapered rotating screen scrubber, angled water flow buffering and 3-lane carpeted sluice with lateral barriers. The processing capacity is between 30 - 35 tons per hour.

GS 150

This is a non-self-propelled mobile production plant and the processing method employed fixed spray guns, 6m x 2m rotating screen scrubber, 6-lane carpeted sluice with lateral barriers and conveyer belt pebble dispenser. The processing capacity is between 25 - 30 tons per hour.

GS 120

This is a self-propelled mobile plant with concentrator and the processing method employed fixed spray guns, 4m x 3m rotating screen scrubber, fixed screen, conveyer belt pebble dispenser and triple concentrator processor. The processing capacity is between 15 - 20 tons per hour.

Description of Processing Facilities:

Process for removing ore concentrates from the ore body

Refining of the concentrate

Current State of Exploration:

As of the date of this report, the Merapoh Gold Mine property is without known reserves.

The Merapoh Gold Mine commenced exploratory operation in alluvia mining and achieved its first gold pour in July 2011. Through the years of operation, the Company has performed ongoing exercises to improve upon the matching of processing method with the types of ore in order to optimize cost to recovery ratio. In July 2013, production was outsourced to a reputable subcontractor, and developed a resource management system to match ore against processes to achieve the most cost efficient and highest recovery production procedure.

Gold ore extraction of the Merapoh Gold Mine for the twelve months ended June 30, 2018, was approximately 185,000 tons of gold ore or a monthly average of 15,417 tons (using a 12-month average), with an average gold grade of 0.01 g/t. Gold concentrate sold for the twelve months ended June 30, 2018, was approximately 2.03 kg. The production level, in units of daily tonnage of raw mineral rocks extracted, averaged 507 tons/day (12-month average) during the fiscal year 2018.

The Merapoh Gold Mine is currently at the production stage. As our business is affected by the fluctuations of gold prices, the Company intends to diversify its product line by acquiring mining projects with potential for different mineral resources other than gold. We continue to hold discussions with other mining companies for potential collaboration to carry out exploration and exploitation works on other mineral resources in Southeast Asia regions. Apart from the mining industry, the Company is taking steps to look into investment opportunities in the non-mining areas that include the bioenrgy industry and the food & beverage sector.

Subcontractors

In an effort to enhance the efficiency of mine operations at the Merapoh Gold Mine, Champmark Sdn Bhd (“CSB”) entered into an Operation Term Sheet (“OTS”) agreement in July 2013 to outsource the exploitation works of alluvial gold resources at Site IV-1 of the Merapoh Gold Mine to a third party subcontractor Borneo Oil & Gas Corporation Sdn Bhd (“BOG”). However, BOG became the Company’s shareholder in January 29, 2014, and was no longer a third party subcontractor.

BOG has the experience and local knowledge in managing the exploitation of alluvial gold at the Merapoh Gold Mine. The Company currently intends to continue to outsource the exploitation of alluvial gold at our mine site to BOG as our third party subcontractor. The Company will provide necessary disclosure when any significant agreements have been made with the sub-contractor in the future.

Number of Employees

The Company had 3 employees during the year from July 1, 2017 to June 30, 2018.

Reports to Security Holders

The public may read and copy any materials filed with the SEC at the SEC’s Public Reference Room at 100 F Street NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The Company files its reports electronically with the SEC. The SEC maintains an Internet site that contains reports, proxy and information statements, and other electronic information regarding New Media and filed with the SEC at http://www.sec.gov.

Change of Control

On October 25, 2013, the Company entered into an Assignment Agreement for the Assignment of Management Right (“AAMA”) in Merapoh Gold Mines in Malaysia with Federal Mining Resources Limited (“FMR”). Under the terms of the Agreement and relevant subsequent Supplemental Agreement, FMR assigned its management rights to the Company Board of Directors of FMR agreed to transfer 1 share common stock of Gold Billion Global Limited (“GBL”) which represented all shares of common stock of GBL owned by the Investor, and the Company’s Board of Directors agreed to issue 80,000,000 million shares of common stock in full value as consideration. At the time of closing under the AAMA, the Investor transferred 100% ownership of GBL shares to the Company, and the Company issued 80,000,000 million shares of common stock to the shareholders of FMR in exchange for the GBL Shares. The effect of the transaction was to make GBL and its deemed subsidiaries become wholly-owned and 85.00% owned subsidiaries of the Company, and to cause a change of control of GBL. Following the closing, there was a change of control in the Company.

The Transaction was accounted for as a “reverse merger,” since FMR owned a majority of the outstanding shares of VRDR’s common stock immediately following the execution of the transaction. The Company was deemed to be the accounting acquirer in the reverse merger. Consequently, the assets and liabilities and the historical operations that were reflected in the financial statements for periods prior to the transaction were those of the Company and its deemed subsidiaries, and were recorded at the historical cost basis of the Company. After completion of the transaction, the Company’s consolidated financial statements were include the assets and liabilities of the Company and its subsidiaries, the historical operations of the Company and its subsidiaries, and the operations of the Company and its subsidiaries from the closing date of the transaction.

Item 1A. Risk Factors

Risks Associated With Verde Resources, Inc.

We are dependent on certain key personnel and loss of these key personnel could have a material adverse effect on our business, financial condition and results of operations.

Messrs. Balakrishnan Muthu, our current principal executive officer and financial officer, has extensive contacts and experience in the gold exploration and natural resource industry in Malaysia, and we are dependent upon his abilities and services to develop and market our business. He is responsible for overseeing all of our day-to-day business operations of our operating company, CSB, and its subsidiaries and VIEs, including the mining operations and negotiations for the sales of any gold concentrates extracted. We may not be able to retain the executive officers/managers for any given period of time. The loss of their services could have a material adverse effect upon our business operations, financial condition and results of operations. In addition, we must attract, recruit and retain a sizeable workforce of technically competent employees in Malaysia to run our mining operations. Our ability to effectively implement our proposed business strategies and expand our operations will depend upon the successful recruitment and retention of additional highly skilled and experienced management and other key personnel in Malaysia. If we cannot maintain highly experienced and skilled management teams, our business could fail and you could lose any investment you make in our shares.

Since our business consists of managing gold mining projects, the drop in the price of gold would negatively impact our asset values, cash flows, potential revenues and profits.

We plan to pursue opportunities in properties with gold mineralized material or reserves with exploration potential. Our potential future revenues are expected to be derived from the production and sale of gold from these properties, or from the sale of some of these properties. The value of any gold reserves or other mineralized materials, and the value of any potential mineral production will vary in direct proportion to changes in those mineral prices. The price of gold has fluctuated widely as a result of numerous factors beyond our control. The effect of these factors on the price of gold and other minerals, and therefore the economic viability of any of our projects, cannot accurately be predicted. Any drop in the price of gold and other minerals we may produce would negatively affect our asset values, cash flows and potential revenues and profits.

We may not be able to find commercially viable reserves.

Mineral exploration and development involve a high degree of risk and few properties that are explored are ultimately developed into producing mines. The reserve estimates, if any, are based only on prefeasibility studies that are inherited with the following drawbacks:

We cannot assure that any future mineral exploration and development activities will result in any discoveries of proven or probable reserves as defined by the SEC. Further, we cannot provide any assurance that, even if we discover commercial quantities of mineralization, a mineral property will be brought into commercial production. Development of our mineral property will follow only upon obtaining sufficient funding and satisfactory exploration results.

We may not be able to successfully compete with other mineral exploration and mining companies.

We compete with other mineral exploration and mining companies or individuals, including large, well established mining companies with substantial capabilities and financial resources in Malaysia, to research and acquire rights to mineral properties containing gold and other minerals. There is a limited supply of desirable mineral lands available for claim staking, lease or other acquisition in Malaysia. We do not know if we will be able to successfully acquire any prospective mineral properties against competitors with substantially greater financial resources than we have. If we cannot successfully acquire other mining properties to manage and explore and generally expand our business operations, our results of operations, financial condition and future revenues could be reduced and you could suffer a loss of any investment made in our shares.

We are subject to the many risks of doing business internationally, including but not limited to the difficulty of enforcing liabilities in foreign jurisdictions.

We are a Nevada corporation and, as such, are subject to the jurisdiction of the State of Nevada and the United States courts for purposes of any lawsuit, action or proceeding by investors. An investor would have the ability to effect service of process in any action against the Company within the United States. In addition, we are registered as a foreign corporation doing business in Malaysia, and as such, are subject to the local laws of Malaysia governing an investors’ ability to bring actions in foreign courts and enforce liabilities against a foreign private issuer, or any person, based on U.S. federal securities laws.

Investors may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing original actions in Malaysia based upon U.S. laws, including the federal securities laws or other foreign laws against us or our management.

All of our current operations are conducted in Malaysia, and all of our directors and officers are nationals and residents of Malaysia and other foreign countries. All or substantially all of the assets of these persons are located outside the United States and in other foreign countries. As a result, it may not be possible to effect service of process within the United States or elsewhere outside Malaysia upon these persons. In addition, uncertainty exists as to whether the courts of Malaysia would recognize or enforce judgments of U.S. courts obtained against us or such officers and/or directors predicated upon the civil liability provisions of the securities laws of the United States or any state thereof, or be competent to hear original actions brought in Malaysia against us or such persons predicated upon the securities laws of the United States or any state thereof.

Failure to comply with the United States Foreign Corrupt Practices Act could subject us to penalties and other adverse consequences.

We are subject to the United States Foreign Corrupt Practices Act, which generally prohibits U.S. companies from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business. In addition, we are required to maintain records that accurately and fairly represent our transactions and have an adequate system of internal accounting controls. Foreign companies, including some that may compete with us, are not subject to these prohibitions, and therefore may have a competitive advantage over us. Our executive officers and employees have not been subject to the United States Foreign Corrupt Practices Act prior to 2010. If our employees or other agents are found to have engaged in such practices, we could suffer severe penalties and other consequences that may have a material adverse effect on our business, financial condition and results of operations.

Mining risks and insurance could negatively effect on our profitability.

The business of mining for gold is generally subject to a number of risks and hazards including environmental hazards, industrial accidents, labor disputes, unusual or unexpected geological conditions, pressures, cave-ins, changes in the regulatory environment, and natural phenomena such as inclement weather conditions, floods, blizzards and earthquakes. At the present time, we have in effect statutory required social insurance for all employees and mine workers. There is currently no other insurance in place for the mining site and management, and, even if we were to purchase additional insurance, we cannot be sure that such insurance would be available to us, or that we could afford the premiums. Insurance coverage may not continue to be available or may not be adequate to cover any resulting liability. In addition, insurance against risks such as environmental pollution or other hazards as a result of exploration and production is not generally available to companies in the mining industry on acceptable terms. We might also become subject to liability for pollution or other hazards which we may not be insured against, or which we may elect not to insure against, because of premium costs or other reasons. Any losses from any of these events may cause us to incur significant costs that could have a material adverse effect upon our financial performance and results of operations, which could negatively impact any investment you make in our shares.

If we fail to maintain effective internal controls over financial reporting, the price of our common stock may be adversely affected.

Malaysian companies may not always adopt a Western style of management and financial reporting concepts and practices, which includes strong corporate governance, internal controls and computer, financial and other control systems. In addition, we may have difficulty in hiring and retaining a sufficient number of qualified employees to work in Malaysia. As a result of these factors, we may experience difficulty in establishing management, legal and financial controls, collecting financial data and preparing financial statements, books of account and corporate records and instituting business practices that meet Western standards for foreign subsidiaries. As a result, we may experience difficulties in implementing and maintaining adequate internal controls as required under Section 404 of the Sarbanes-Oxley Act of 2002. This could result in significant deficiencies or material weaknesses in our internal controls, which could impact the reliability of our financial statements and prevent us from complying with SEC rules and regulations and the requirements of the Sarbanes-Oxley Act of 2002. Any actual or perceived weaknesses and conditions that need to be addressed in our internal control over financial reporting, disclosure of management's assessment of our internal controls over financial reporting or disclosure of our public accounting firm's attestation to or report on management's assessment of our internal controls over financial reporting may have an adverse impact on the price of our common stock.

Changes in interest rates could negatively impact our results of operations, stockholders’ equity (deficit) and fair value of net assets.

Our investment activities and credit guarantee activities expose us to interest rate and other market risks. Changes in interest rates, up or down, could adversely affect our net interest yield. Although the yield we earn on our assets and our funding costs tend to move in the same direction in response to changes in interest rates, either can rise or fall faster than the other, causing our net interest yield to expand or compress. For example, due to the timing of maturities or rate reset dates on variable-rate instruments, when interest rates rise, our funding costs may rise faster than the yield we earn on our assets. This rate change could cause our net interest yield to compress until the effect of the increase is fully reflected in asset yields. Changes in the slope of the yield curve could also reduce our net interest yield.

Interest rates can fluctuate for a number of reasons, including changes in the fiscal and monetary policies of the federal government and its agencies, such as the Federal Reserve. Federal Reserve policies directly and indirectly influence the yield on our interest-earning assets and the cost of our interest-bearing liabilities. The availability of derivative financial instruments (such as options and interest rate and foreign currency swaps) from acceptable counterparties of the types and in the quantities needed could also affect our ability to effectively manage the risks related to our investment funding. Our strategies and efforts to manage our exposures to these risks may not be effective in the future, which could negatively impact our results of operations and the price of our common stock.

The audit report included in our Annual Report was prepared by auditors who are not inspected by the Public Accounting Oversight Board (“PCAOB”) and as a result, our shareholders are deprived of the benefit of having PCAOB inspections.

The independent registered public accounting firm that issues the audit reports included in our annual reports filed with the SEC, as auditors of companies that are traded publicly in the United States and a firm registered with the Public Company Accounting Oversight Board (United States), or the “PCAOB”, is required by the laws of the United States to undergo regular inspections by the PCAOB to assess its compliance with the laws of the United States and professional standards. Because our auditors are located in Hong Kong SAR, a jurisdiction where the PCAOB is currently unable to conduct inspections without the approval of the Hong Kong authorities, our auditors are not currently inspected by the PCAOB.

Inspections of other firms that the PCAOB has conducted outside Hong Kong SAR have identified deficiencies in those firms’ audit procedures and quality control procedures, which may be addressed as part of the inspection process to improve future audit quality. The inability of the PCAOB to conduct inspections in Hong Kong SAR prevents the PCAOB from regularly evaluating our auditor’s statements, audits and quality control procedures. As a result, investors may be deprived of the benefits of PCAOB inspections.

The inability of the PCAOB to conduct inspections of auditors in Hong Kong SAR makes it more difficult to evaluate the effectiveness of our auditor’s quality control and audit procedures as compared to auditors outside of Hong Kong SAR that are subject to PCAOB inspections. Investors may lose confidence in our reported financial information and procedures and the quality of our financial statements.

We may be exposed to risks relating to management’s conclusion that our disclosure controls and procedures and internal controls over financial reporting are ineffective.

We do not have an independent audit committee and our Board of Directors may be unable to fulfill the functions of such a committee, which may compromise the management of our business. Our Board of Directors functions as our audit committee and is comprised of two directors, none of whom are considered to be “independent” in accordance with the requirements of Rule 10A-3 under the Securities Exchange Act of 1934. An independent audit committee plays a crucial role in the corporate governance process, assessment of the Company’s processes relating to its risks and control environment, oversight of financial reporting, and evaluation of internal and independent audit processes. The lack of an independent audit committee may prevent the Board of Directors from being independent in its judgments and decisions and its ability to pursue the committee’s responsibilities, which could compromise the management of our business.

If we fail to maintain effective internal controls over financial reporting, the price of our common stock may be adversely affected.

Malaysian companies may not always adopt a Western style of management and financial reporting concepts and practices, which includes strong corporate governance, internal controls and computer, financial and other control systems. In addition, we may have difficulty in hiring and retaining a sufficient number of qualified employees to work in Malaysia. As a result of these factors, we may experience difficulty in establishing management, legal and financial controls, collecting financial data and preparing financial statements, books of account and corporate records and instituting business practices that meet Western standards for foreign subsidiaries. As a result, we may experience difficulties in implementing and maintaining adequate internal controls as required under Section 404 of the Sarbanes-Oxley Act of 2002. This could result in significant deficiencies or material weaknesses in our internal controls, which could impact the reliability of our financial statements and prevent us from complying with SEC rules and regulations and the requirements of the Sarbanes-Oxley Act of 2002. Any actual or perceived weaknesses and conditions that need to be addressed in our internal control over financial reporting, disclosure of management’s assessment of our internal controls over financial reporting or disclosure of our public accounting firm’s attestation to or report on management’s assessment of our internal controls over financial reporting may have an adverse impact on the price of our common stock.

Changes in interest rates could negatively impact our results of operations, stockholders’ equity (deficit) and fair value of net assets.

Our investment activities and credit guarantee activities expose us to interest rate and other market risks. Changes in interest rates, up or down, could adversely affect our net interest yield. Although the yield we earn on our assets and our funding costs tend to move in the same direction in response to changes in interest rates, either can rise or fall faster than the other, causing our net interest yield to expand or compress. For example, due to the timing of maturities or rate reset dates on variable-rate instruments, when interest rates rise, our funding costs may rise faster than the yield we earn on our assets. This rate change could cause our net interest yield to compress until the effect of the increase is fully reflected in asset yields. Changes in the slope of the yield curve could also reduce our net interest yield.

Interest rates can fluctuate for a number of reasons, including changes in the fiscal and monetary policies of the federal government and its agencies, such as the Federal Reserve. Federal Reserve policies directly and indirectly influence the yield on our interest-earning assets and the cost of our interest-bearing liabilities. The availability of derivative financial instruments (such as options and interest rate and foreign currency swaps) from acceptable counterparties of the types and in the quantities needed could also affect our ability to effectively manage the risks related to our investment funding. Our strategies and efforts to manage our exposures to these risks may not be effective in the future, which could negatively impact our results of operations and the price of our common stock.

The audit report included in our Annual Report was prepared by auditors who are not inspected by the Public Accounting Oversight Board (“PCAOB”) and as a result, our shareholders are deprived of the benefit of having PCAOB inspections.

The independent registered public accounting firm that issues the audit reports included in our annual reports filed with the SEC, as auditors of companies that are traded publicly in the United States and a firm registered with the Public Company Accounting Oversight Board (United States), or the “PCAOB”, is required by the laws of the United States to undergo regular inspections by the PCAOB to assess its compliance with the laws of the United States and professional standards. Because our auditors are located in Hong Kong SAR, a jurisdiction where the PCAOB is currently unable to conduct inspections without the approval of the Hong Kong authorities, our auditors are not currently inspected by the PCAOB.

Inspections of other firms that the PCAOB has conducted outside Hong Kong SAR have identified deficiencies in those firms’ audit procedures and quality control procedures, which may be addressed as part of the inspection process to improve future audit quality. The inability of the PCAOB to conduct inspections in Hong Kong SAR prevents the PCAOB from regularly evaluating our auditor’s statements, audits and quality control procedures. As a result, investors may be deprived of the benefits of PCAOB inspections.

The inability of the PCAOB to conduct inspections of auditors in Hong Kong SAR makes it more difficult to evaluate the effectiveness of our auditor’s quality control and audit procedures as compared to auditors outside of Hong Kong SAR that are subject to PCAOB inspections. Investors may lose confidence in our reported financial information and procedures and the quality of our financial statements.

We may be exposed to risks relating to management’s conclusion that our disclosure controls and procedures and internal controls over financial reporting are ineffective.

We do not have an independent audit committee and our Board of Directors may be unable to fulfill the functions of such a committee, which may compromise the management of our business. Our Board of Directors functions as our audit committee and is comprised of two directors, none of whom are considered to be “independent” in accordance with the requirements of Rule 10A-3 under the Securities Exchange Act of 1934. An independent audit committee plays a crucial role in the corporate governance process, assessment of the Company’s processes relating to its risks and control environment, oversight of financial reporting, and evaluation of internal and independent audit processes. The lack of an independent audit committee may prevent the Board of Directors from being independent in its judgments and decisions and its ability to pursue the committee’s responsibilities, which could compromise the management of our business.

Risks Associated with Our Common Stock

Our shares are defined as “penny stock.” The rules imposed on the sale of the shares may affect your ability to resell any shares you may purchase, if at all.

Our shares are defined as a “penny stock” under the Securities and Exchange Act of 1934, and rules of the Commission. The Exchange Act and such penny stock rules generally impose additional sales practice and disclosure requirements on broker-dealers who sell our securities to persons other than certain accredited investors who are, generally, institutions with assets in excess of $5,000,000 or individuals with net worth in excess of $1,000,000 or annual income exceeding $200,000, or $300,000 jointly with spouse, or in transactions not recommended by the broker-dealer. For transactions covered by the penny stock rules, a broker-dealer must make a suitability determination for each purchaser and receive the purchaser’s written agreement prior to the sale. In addition, the broker-dealer must make certain mandated disclosures in penny stock transactions, including the actual sale or purchase price and actual bid and offer quotations, the compensation to be received by the broker-dealer and certain associated persons, and deliver certain disclosures required by the Commission. Consequently, the penny stock rules may affect the ability of broker-dealers to make a market in or trade our common stock, and may also affect your ability to resell any shares you may purchase.

Market for penny stock has suffered in recent years from patterns of fraud and abuse

Stockholders should be aware that, according to SEC Release No. 34-29093, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include:

Our management is aware of the abuses that have occurred historically in the penny stock market. Although we do not expect to be in a position to dictate the behavior of the market or of broker-dealers who participate in the market, management will strive within the confines of practical limitations to prevent the described patterns from being established with respect to our securities. The occurrence of these patterns or practices could increase the volatility of our share price.

Inability and unlikelihood to pay dividends

To date, we have not paid, nor do we intend to pay in the foreseeable future, dividends on our common stock, even if we become profitable. Earnings, if any, are expected to be used to advance our activities and for general corporate purposes, rather than to make distributions to stockholders. Prospective investors will likely need to rely on an increase in the price of Company stock to profit from his or her investment. There are no guarantees that any market for our common stock will ever develop or that the price of our stock will ever increase.

Since we are not in a financial position to pay dividends on our common stock and future dividends are not presently being contemplated, investors are advised that return on investment in our common stock is restricted to an appreciation in the share price. The potential or likelihood of an increase in share price is questionable at best.

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

We do not currently own any properties.

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

FMR owns 85% equity interest in Champmark Sdn Bhd (“CSB”), a privately limited liability company incorporated in Malaysia. CSB 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 Assignment Agreement, FMR assigned its management rights of CSB’s mining operation in the Mining Lease to the Company, through its wholly-owned subsidiary Gold Billion Global Limited (“GBL”), in exchange for 80,000,000 shares of the Company’s common stock, which constituted 95.26% of our issued and outstanding capital stock as of and immediately after the consummation of the acquisition.

On April 1, 2014, the Board of Director of Gold Billion Global Limited (“GBL”) notified Federal Mining Resources Limited (“FMR”) upon the decision to exercise the right of option to purchase 85% equity interest of Champmark Sdn Bhd (“CSB”) under Management Agreement Section 3.2.4 dated July 1, 2013, between GBL and FMR. The original agreement was filed with SEC as ex10-2.htm of Form 8K on February 20, 2014. This acquisition was completed on April 1, 2014, with consideration of US$1. GBL then became 85% shareholder of CSB.

As at June 30, 2018, the property and equipment owned by CSB are summarized, at net book values as follows:

Item 3. Legal Proceedings.

None

Item 4. Mine Safety Disclosures.

Pursuant to Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“ Dodd-Frank Act “), issuers that are operators, or that have a subsidiary that is an operator, of a coal or other mine in the United States are required to disclose in their periodic and annual reports filed with the SEC information regarding specified health and safety violations, orders and citations, related assessments and legal actions, and mining-related fatalities under the regulation of the Federal Mine Safety and Health Act of 1977. The Company did not have any mines in the United States during the year ended June 30, 2018.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market Information

Our common stock is now quoted on the OTCQB, under the symbol “VRDR”. Our stock was approved for quotation on the OTCBB on September 26, 2012. However, the Company’s common stock did not begin active trading until October, 2013.

The following table sets forth the high and low bid prices for our common stock per quarter as reported by the OTCBB since trading began October 7, 2013, based on our fiscal year end June 30, 2018 These prices represent quotations between dealers without adjustment for retail mark-up, markdown or commission, and may not represent actual transactions.

As of September 28, 2018, we had 34 shareholders of record of our common stock and 115,038,909 shares issued and outstanding.

Dividend Policy

We have not paid any cash dividends on our common stock and have no present intention of paying any dividends on the shares of our common stock. Our current policy is to retain earnings, if any, for use in our operations and in the development of our business. Our future dividend policy will be determined from time to time by our board of directors.

Equity Compensation Plan Information

None.

Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities

We did not sell any equity securities which were not registered under the Securities Act during the year ended June 30, 2018, that were not otherwise disclosed on our quarterly reports on Form 10-Q or our current reports on Form 8-K filed during the year ended June 30, 2018.

On January 29, 2014, the Company issued a total of 643,229 common shares for $665,238, of which 288,288 common shares at US$1.25 per share, 183,661 common shares at US$0.83 per share and 171,280 common shares at US$0.89 per share, to Borneo Oil & Gas Corporation Sdn Bhd (“BOG”), a Malaysia Limited Liability Company, under the terms of the Sub-Contractor Agreement for the engagement of its sub-contractor services.

On March 10, 2014, the Company issued a total of 693,180 common shares for $609,756, of which 179,340 common shares at US$0.85 per share and 513,840 common shares at US$0.89 per share, to Borneo Oil & Gas Corporation Sdn Bhd (“BOG”), a Malaysia Limited Liability Company, under the terms of the Sub-Contractor Agreement for the engagement of its sub-contractor services.

On January 21, 2015, the Company issued 5,900,000 common shares at US$0.05 per share to Borneo Oil & Gas Corporation Sdn Bhd (“BOG”), a Malaysia Limited Liability Company, under the terms of the Consultant Agreement for the additional services of its sub-contractor.

On September 29, 2016, the Company issued a total of 4,750,000 common shares at US$0.04 per share, of which 2,375,000 common shares to Vincent Lee Sen Min and 2,375,000 common shares to Reggie Abraham, both are Malaysian citizens.

On March 1, 2018, the Company issued a total of 10,000,000 common shares at US$0.02 per share to each of the two directors, of which 5,000,000 common shares to Balakrishnan B S Muthu and 5,000,000 common shares to Chen Ching. An aggregate of $200,000 for this transaction was recognized as stock-based compensation under selling, general and administrative expenses during the three and six months ended March 31, 2018.

On March 1, 2018, the Company issued a total of 9,000,000 common shares at US$0.02 per share to three consultants under the Consultant Agreements, of which 5,000,000 common shares to Vincent Yong Tuck Seng, 2,500,000 common shares to Georgia Suzanne Lingam and 1,500,000 common shares to Liu Jiew Shin, all are Malaysian citizens. An aggregate of $180,000 for this transaction was recognized as stock-based compensation under selling, general and administrative expenses during the three and six months ended March 31, 2018.

Purchase of Equity Securities by the Issuer and Affiliated Purchasers

We did not purchase any of our shares of common stock or other securities during our fourth quarter of our fiscal year ended June 30, 2018.

Item 6. Selected Financial Data.

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

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.

Results of Operations

We have generated $929,655 and $819,448 revenues for the year ended June 30, 2017 and 2018, respectively, and have recorded a gross loss of $205,153 and $232,311 for the year ended June 30, 2017 and 2018. We have incurred $498,411 and $316,620in operating expenses through June 30, 2017 and June 30, 2018. We have other income $77,093 and $130,960 for the year ended June 30, 2017 and 2018.

The following table provides selected financial data about our company for the year ended June 30, 2018 and June 30, 2017.

The revenue derived from the sales of gold mineral to customers in Malaysia. The decrease of revenue for the period ended June 30, 2018 was mainly due to a decrease in gold production and gold sales during the period. The decrease of cost of revenue was mainly due to a decrease of salaries and depreciation and increased of closing stock as at period ended and weakness of average rate for MYR:USD compared with last year. (2018: 0.2462 2017: 0.2329). Operating expenses comprised mainly of salaries, office costs, legal and professional fees and travelling expenses. The decrease in operating expenses for the period was mainly due to the due to the weakness of average rate for MYR:USD as mentioned above, and a reduction in the provision for professional and consultancy fees payable to related companies.

Plan of Operation

Our Industry and Principal Markets

As reported in the GFMS Gold Surveys H1 2018 released by Thomson Reuters, after closing 2017 in fine fettle gold sentiment changed early in 2018, pressuring prices towards $1,240/oz. While professional sentiment has been gold-averse, there are shifts in some regional areas of demand and growing scope for a short-covering rally. In Malaysia, the report expects the Malaysian gold market to benefit from the removal of Goods and Services Tax (GST) as a new government takes over. The jewellery demand is expected to pick up as a result of the removal of the consumption tax but the rate of recovery will depend largely on the prevailing gold price.

Another report by BMI Research states that global gold mine output growth will pick up in the next few years, supported by higher gold prices and solid projects in key countries. BMI Research forecasts global gold production to increase from 105moz in 2018 to 125moz by 2026, averaging 2.3% annual growth. While a steady pace of growth, this represents a slight deceleration in growth rate compared with the previous eight-year average of 3.1%.

Subcontractor

In an effort to enhance the efficiency of mine operations at the Merapoh Gold Mine, Champmark Sdn Bhd (“CSB”) entered into an Operation Term Sheet (“OTS”) agreement in July 2013, to outsource the exploitation works of alluvial gold resources at Site IV-1 of the Merapoh Gold Mine to a third party subcontractor Borneo Oil & Gas Corporation Sdn Bhd (“BOG”).

BOG has the experience and local knowledge in managing the exploitation of alluvial gold at the Merapoh Gold Mine. The Company currently intends to continue to outsource the exploitation of alluvial gold at our mine site to BOG as our third party subcontractor. The Company will provide necessary disclosure when any significant agreements have been made with the sub-contractor in the future.

BOG became the Company’s shareholder in January 29, 2014, and was no longer a third party subcontractor.

Expansion Plans

At present, we are well positioned working with our third party subcontractor, who has the experience and local knowledge to manage our exploitation of alluvial gold at the Merapoh Gold Mine. The Company believes that there are excellent growth opportunities for its business outside Malaysia. We are constantly exploring for potential acquisition of mining projects in other parts of the world.

The Company, through its wholly-owned subsidiary company Gold Billion Global Ltd (“GBL”) entered into a letter of intent with Xinjiang Changhe Mining Co., Ltd (“XCM”) on September 29, 2014. Under the letter of intent, GBL has offered to acquire ownership in XCM for the Ayigate Gold Project subject to due diligence. The Ayigate gold mine is located within the Tianshan region in Wuqia County, Xinjiang Uygur Autonomous Region of the People’s Republic of China. After several discussions, the Company decided not to proceed with the offer to acquire ownership in XCM.

As our business is affected by the fluctuations of gold prices, the Company intends to diversify its product line by acquiring mining projects with potential for different mineral resources other than gold. We continue to hold discussions with other mining companies for potential collaboration to carry out exploration and exploitation works on other mineral resources in Southeast Asia regions. Apart from the mining industry, the Company is taking steps to look into investment opportunities in the non-mining areas that include the bioenrgy industry and the food & beverage sector.

Limited Operating History; Need for Additional Capital

There is limited historical financial information about us upon which to base an evaluation of our performance. We cannot guarantee we will be successful in our business operations. Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources, possible delays in the exploration of our properties, and possible cost overruns due to price and cost increases in services.

We have no assurance that future financing will be available to us on acceptable terms. If financing is not available on satisfactory terms, we may be unable to continue, develop or expand our operations. Equity financing could result in additional dilution to existing shareholders.

Liquidity and Capital Resources

The following table provides selected cash flow data about our company for the year ended June 30, 2018 and 2017.

For the year ended June 30, 2018, the Company had incurred net loss from operation of $288,030 which posted a negative impact to the company’s cash flow. The reconciliation on non-cash items such as depreciation provides negative impact on cash.

In the operation analysis, the net cash used in operating activities decreased from $205,297 to $51,134 for the years ended June 30, 2017 and 2018, respectively. The operation loss of $288,030 was partially offset by the noncash expenses such as $18,617 in depreciation, $380,000 in stock-based compensation and noncash income of $17,545 in wavier of consultancy service fees. In the operating assets and liabilities, the net decrease in current assets, such as accounts receivable, inventory and deposits was $65 whereas the net decrease in current liabilities, such as accounts payable, accrued liabilities, advanced from sub-contractor & related parties and taxation payable was $144,241, which provided $236,896 positive cash flow effect but not enough to offset the $288,030 loss in operation and loss from non-cash loss in the reorganization. The final result of the cash flow from operating activities was $51,134 negative cash flow effect.

In the investing cash flow analysis, there was no change for the year ended June 30, 2018.

In financing analysis, the repayments of bank loans end up with a negative cash flow of $4,873 for the year ended June 30, 2018, compared to $25,663 repaid to the bank for the year ended June 30, 2017. On September 29, 2016, the Company issued a total of 4,750,000 common shares and generated $190,000 positive cash flow. The overall cash flow effect was negative.

The net decrease in exchange rate effect of $27,423 also provided positive cash flow effect. The cash and cash equivalents at the end of June 30, 2018, was decreased by $28,584 with $10,032 as balance.

The cash flow situation will not allow for operations in the coming next 12 months by self-generated cash provided from operating activities. The Company needs to increase cash flow supplies with a long term plan until the Company makes sustainable profits and has a positive cash flow. Otherwise, loans from related parties may be a temporary solution, although we have no written loan agreements. There is no guarantee that we will be able to secure adequate financing. If we fail to secure sufficient funds, our business activities may be curtailed, or we may cease to operate.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material to investors.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

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

Item 8. Financial Statements and Supplementary Data

VERDE RESOURCES, INC.

INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED JUNE 30, 2018

Report of Independent Registered Public Accounting Firm

Opinion of the Financial Statements

We have audited the accompanying consolidated balance sheets of Verde Resources, Inc. and its subsidiaries (the “Company”) as of June 30, 2018 and 2017, and the related consolidated statements of operations, changes in stockholders’ deficit and cash flows for each of the years in the two-year period ended June 30, 2018. The Company’s management is responsible for these financial statements. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of June 30, 2018 and 2017, and the consolidated results of its operations and its cash flows for each of the years in the two-year period ended June 30, 2018, in conformity with accounting principles generally accepted in the United States of America.

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 consolidated 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 audits 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 audits, 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 audits 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 audits provide a reasonable basis for our opinion.

/s/ Centurion ZD CPA Limited

Centurion ZD CPA Limited

We have served as the Company’s auditor since 2014.

Hong Kong, China

September 28, 2018

Verde Resources, Inc

Consolidated Balance Sheets

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

Verde Resources, Inc.

Consolidated Statements of Operations

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

Verde Resources, Inc.

Statement of Changes in Stockholders’ Equity (Deficit)

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

Verde Resources, Inc.

Consolidated Statements of Cash Flows

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

Verde Resources, Inc .

Notes to Consolidated Financial Statements

NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS

Verde Resources, Inc. (the “Company” or “VRDR”) 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.

Gold Billion Global Limited (“Gold Billion” or “GBL”) was incorporated in British Virgin Islands on February 7, 2013. GBL is setup by the Board of Director of Federal Mining Resources Limited (“FMR”). The major operation of GBL is to manage and monitor the mineral exploration and mining projects of FMR.

On July 1, 2013, FMR has assigned its rights and obligation on Champmark Sdn Bhd (“CSB”) to GBL. Four of the five members of CSB Board of Directors were appointed by FMR, with two of the GBL Board of Directors currently sitting on the CSB Board. According to ASC 810-05-08 A, CSB is a deemed subsidiary of GBL where it has controlled the CSB Board of Directors, has assigned rights to receive future benefits and residual value, and obligation to absorb loss and finance for CSB by GBL. GBL has the power to direct the activities of CSB that most significantly impact CSB’s economic performance and the obligation to absorb losses of CSB that could potentially be significant to the CSB or the right to receive benefits from CSB that could potentially be significant to CSB. GBL is the primary beneficiary of CSB because it has been assigned with all relevant rights and obligation and can direct the activities of CSB through the common directors and the 85% shareholder, FMR. Under 810-23-42, 43, it is determined that CSB is de-facto agent of GBL and GBL is the de-facto principal of CSB. GBL will start to consolidate CSB from July 1, 2013 and the Company will consolidated GBL and CSB from October 25, 2013 onwards.

On February 17, 2014, the Company entered into a Supplementary Agreement to the Assignment Agreement and completed an acquisition of GBL pursuant to the Supplementary Agreement. The acquisition was a reverse acquisition in accordance with ASC 805-40 “Reverse Acquisitions”. The legal parent was VRDR which was the accounting acquiree while GBL was the accounting acquirer. There was a 15% non-controlling interest of Champmark SDN BHD (“CSB”) after the acquisition. This transaction was accounted for as a recapitalization effected by a share exchange, wherein GBL with its 85% deemed subsidiary CSB was considered the acquirer for accounting and financial reporting purposes. The assets and liabilities of the acquired entity have been brought forward at their book value and no goodwill has been recognized.

As a result of the acquisition, the Company holds 100% equity interest in GBL and 85% variable interest in CSB. Our consolidated subsidiaries include GBL being our wholly-owned subsidiary and 85% of CSB being a variable interest entity (VIE) and deemed subsidiary of GBL.

On March 17, 2014, the Company through GBL and its deemed subsidiary CSB entered into a Sub-Contract Agreement with Borneo Oil & Gas Corporation Sdn Bhd (“BOG”) for the engagement of its sub-contractor services to carry out exploration and exploitation works on alluvial and lode gold resources at Site IV-1 of the Merapoh Mine. The Sub-Contract Agreement is for a period of 5 years with a renewal for another 5 years subject to review by both parties. BOG is a wholly-owned subsidiary of Borneo Oil Berhad (BOB) which is listed on the main market of Kuala Lumpur Stock Exchange. BOG being a local company in Malaysia provides the Company with the advantage of local knowledge and well-established connection in dealing with the relevant local authorities in our mining operations.

On April 1, 2014, GBL purchased 85% equity interest of CSB, and CSB became indirect subsidiary of the Company.

Effective August 27, 2014, the Company’s Articles of Incorporation were amended to increase the authorized shares of the Company from 100,000,000 shares of common stock to 250,000,000 shares of common stock. A copy of the Certificate of Amendment was filed with the Nevada Secretary of State. The Form 8K announcing the increase of the authorized shares of the Company was filed with SEC on September 15, 2014.

Effective February 20, 2016, Mr. Wu Ming Ding resigned all of his positions as President and Director of the Company with Mr. Balakrishnan B S Muthu being appointed President to fill the vacancy created. Effective February 20, 2016, Mr. Chen Ching was appointed Director of the Company and the entire Board of Directors now consists of Mr. Balakrishnan B S Muthu and Mr. Chen Ching. The SC 14F1 and Form 8-K announcing the change in officers and directors were filed with SEC on February 10, 2016 and February 22, 2016 respectively.

Effective February 2, 2018, the Company's Articles of Incorporation were amended to increase the authorized shares of the Company from 250,000,000 shares of common stock to 10,000,000,000 shares of common stock. A copy of the Certificate of Amendment was filed with the Nevada Secretary of State. The Form 8K announcing the increase of the authorized shares of the Company was filed with SEC on February 6, 2018.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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 consolidated financial statements are expressed in United States dollars ($). Financial statements prepared in accordance with GAAP contemplate the realization of assets and the satisfaction of liabilities in the normal course of business. These condensed consolidated audited financial statements include all adjustments that, in the opinion of management, are necessary in order to make the financial statements not misleading.

Basis of Consolidation

The condensed consolidated financial statements include the financial statements of Verde Resources, Inc., its wholly owned subsidiary Gold Billion Global Limited (“GBL”) and the 85% of the deemed subsidiary variable interest of Champmark SDN BHD (“CSB”). All inter-company balances and transactions between the Company and its subsidiary and variable interest entity (VIE) have been eliminated upon consolidation.

The Company has adopted ASC Topic 810-10-5-8, “Variable Interest Entities”, which requires a variable interest entity or VIE to be consolidated by a company if that company is subject to a majority of the risk of loss for the VIE or is entitled to receive a majority of the VIE’s residual returns.

Variable Interest Entity

On July 1, 2013, the Company’s subsidiary, GBL entered into a series of agreements (“VIE agreements”) with FMR and details of the VIE agreements are as follows:

With the above agreements, GBL demonstrates its ability to control CSB as the primary beneficiary and the operating results of the VIE was included in the condensed consolidated financial statements for the year ended June 30, 2014.

On April 1, 2014, the Board of Director of GBL notified FMR upon the decision to exercise the right of option to purchase 85% equity interest of CSB under Management Agreement Section 3.2.4 dated July 1, 2013 between GBL and FMR. This acquisition was completed on April 1, 2014 with consideration of US$1. GBL then became 85% shareholder of CSB and is required to consolidate CSB as a subsidiary.

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 $10,032 and $38,616 in cash and cash equivalents at June 30, 2018 and June 30, 2017, respectively.

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.

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, 2018 and June 30, 2017, the Company has no allowance for doubtful accounts, as per management’s judgment based on their best knowledge. As of June 30, 2018 and June 30, 2017, the longest credit term for certain customers are 60 days.

Provision for Doubtful Accounts

The Company maintains an allowance for doubtful accounts to reserve for potentially uncollectible receivables and reviews accounts receivable by amounts due by customers which are past due to identify specific customers with known disputes or collectability issues. In determining the amount of the reserve, the Company makes judgments about the creditworthiness of customers based on past collection experience and ongoing credit risk evaluations. At June 30, 2018 and June 30, 2017 there was no allowance for doubtful accounts.

Fair Value

ASC Topic 820 “Fair Value Measurement and Disclosures” establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market.

These tiers include:

The Company’s financial instruments consist of cash and cash equivalents, trade receivables, other receivables, payables, and short term and long term debt. The carrying values of cash and cash equivalents, trade receivables, other receivables, and payables approximate their fair value due to their short maturities. The carrying value of long term debt approximates the fair value of debt of similar terms and remaining maturities available to the company.

The Company’s non-financial assets are measured on a recurring basis. These non-financial assets are measured for impairment annually on the Company’s measurement date at the reporting unit level using Level 3 inputs. For most assets, ASC 820 requires that the impact of changes resulting from its application be applied prospectively in the year in which the statement is initially applied.

The Company’s non-financial assets measured on a non-recurring basis include the Company’s property, plant and equipment and finite-use intangible assets which are measured for recoverability when indicators for impairment are present. ASC 820 requires companies to disclose assets and liabilities measured on a non-recurring basis in the period in which the re-measurement at fair value is performed.

The Company did not have any convertible bonds as of June 30, 2018 and June 30, 2017.

Foreign Currency Translation

The Company’s reporting currency is the United States dollar (“$”) 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.

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 resulting exchange differences are recorded in the consolidated statement of operations.

Comprehensive Income

Comprehensive income is defined to include all changes in equity except those resulting from investments by owners and distributions to owners. Among other disclosures, all items that are required to be recognized under current accounting standards as components of comprehensive income are required to be reported in a financial statement that is presented with the same prominence as other financial statements. Comprehensive income includes net income and the foreign currency translation changes.

Segment Reporting

The Company currently engages in one operation segment: Gold Mining. The expenses incurred were consisting principally of management services. The Company’s major operation is located in Malaysia.

Mineral Acquisition and Exploration Costs

The Company has been primarily engaged in the acquisition, exploration, and development of mining properties. The Company was no longer

considered an exploration stage company after the reverse take-over with its subsidiary GBL.

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.

Revenue Recognition

In accordance with the ASC Topic 605, “Revenue Recognition”, the Company recognizes revenue when persuasive evidence of an arrangement exists, transfer of title has occurred or services have been rendered, the selling price is fixed or determinable and collectibility is reasonably assured.

The Company derives revenues primarily from the sales of gold mineral to registered gold trading companies in Malaysia. The Company generally recognizes its revenues at the time of gold sales and its selling price is determined by the prevailing market value of gold bullion quoted by the leading registered gold trading company in Malaysia. Sales invoice will be duly presented to the trading companies when delivery is completed and revenue is then recognized.

Cost of Revenue

The cost of revenue consists of exploration cost, mine equipment depreciation, production cost, mine site management cost, sub-contractor cost, and royalty and tribute payment which are levied on the gross revenue at the rate of 18% on the invoiced value of gold sales.

Advertising Expenses

Advertising costs are expensed as incurred under ASC Topic 720, “Advertising Costs” . Advertising expenses incurred for the years ended June 30, 2018 and year ended June 30, 2017 were $0.

Income Taxes

The provision for income taxes is determined in accordance with the provisions of ASC Topic 740, “Accounting for Income Taxes” (“ASC 740”). Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Any effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

ASC 740 prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their financial statements uncertain tax positions taken or expected to be taken on a tax return. Under ASC 740, tax positions must initially be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions must initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts. As of June 30, 2018 and June 30, 2017, the Company did not have any significant unrecognized uncertain tax positions.

Recent Accounting Pronouncements

The FASB has issued Accounting Standards Update No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business , clarifying the definition of a business. The amendments affect all companies and other reporting organizations that must determine whether they have acquired or sold a business.

The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The amendments are intended to help companies and other organizations evaluate whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The amendments provide a more robust framework to use in determining when a set of assets and activities is a business. They also provide more consistency in applying the guidance, reduce the costs of application, and make the definition of a business more operable.

For public companies, the amendments are effective for annual periods beginning after December 15, 2017, including interim periods within those periods. For all other companies and organizations, the amendments are effective for annual periods beginning after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019.

The FASB has issued Accounting Standards Update No. 2017-05, Other Income – Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets.

A contract may involve the transfer of both nonfinancial assets and financial assets (e.g., cash and receivables). The amendments clarify that a financial asset is within the scope of Subtopic 610-20 if it meets the definition of an in substance nonfinancial asset. The amendments also define the term in substance nonfinancial asset.

The amendments clarify that nonfinancial assets within the scope of Subtopic 610-20 may include nonfinancial assets transferred within a legal entity to a counterparty. For example, a parent may transfer control of nonfinancial assets by transferring ownership interests in a consolidated subsidiary. A contract that includes the transfer of ownership interests in one or more consolidated subsidiaries is within the scope of Subtopic 610-20 if substantially all of the fair value of the assets that are promised to the counterparty in a contract is concentrated in nonfinancial assets.

The amendments clarify that an entity should identify each distinct nonfinancial asset or in substance nonfinancial asset promised to a counterparty and derecognize each asset when a counterparty obtains control of it.

The amendments are effective at the same time Topic 606, Revenue from Contracts with Customers is effective. For public entities, the amendments are effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. For all other entities, the amendments are effective for annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019.

The FASB has issued Accounting Standards Update (ASU) No. 2017-07, Compensation — Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost . The amendments apply to all employers, including not-for-profit entities, that offer to their employees defined benefit pension plans, other postretirement benefit plans, or other types of benefits accounted for under Topic 715, Compensation — Retirement Benefits .

The amendments require that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. If a separate line item or items are used to present the other components of net benefit cost, that line item or items must be appropriately described. If a separate line item or items are not used, the line item or items used in the income statement to present the other components of net benefit cost must be disclosed.

The amendments also allow only the service cost component to be eligible for capitalization when applicable (e.g., as a cost of internally manufactured inventory or a self-constructed asset).

The amendments are effective for public business entities for annual periods beginning after December 15, 2017, including interim periods within those annual periods. For other entities, the amendments are effective for annual periods beginning after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019. Early adoption is permitted as of the beginning of an annual period for which financial statements (interim or annual) have not been issued or made available for issuance.

The FASB has issued Accounting Standards Update (ASU) No. 2017-09, Compensation—Stock Compensation (Topic 718) — Scope of Modification Accounting . ASU 2017-09 applies to entities that change the terms or conditions of a share-based payment award.

The FASB adopted ASU 2017-09 to provide clarity and reduce diversity in practice as well as cost and complexity when applying the guidance in Topic 718, Compensation—Stock Compensation , to the modification of the terms and conditions of a share-based payment award.

Diversity in practice has arisen in part because some entities apply modification accounting under Topic 718 for modifications to terms and conditions that they consider substantive, but do not when they conclude that particular modifications are not substantive. Others apply modification accounting for any change to an award, except for changes that they consider purely administrative in nature. Still others apply modification accounting when a change to an award changes the fair value, the vesting, or the classification of the award. In practice, it appears that the evaluation of a change in fair value, vesting, or classification may be used to evaluate whether a change is substantive.

Although the Master Glossary of the FASB Accounting Standards Codification™ currently defines the term modification as “a change in any of the terms or conditions of a share-based payment award,” Topic 718 does not contain guidance on what changes are substantive or purely administrative.

The amendments in ASU 2017-09 include guidance on determining which changes to the terms and conditions of share-based payment awards require an entity to apply modification accounting under Topic 718.

These amendments require the entity to account for the effects of a modification unless all of the following conditions are met:

The amendments are effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017.

Early adoption is permitted, including adoption in any interim period for: ( a ) public business entities for reporting periods for which financial statements have not yet been issued, and ( b ) all other entities for reporting periods for which financial statements have not yet been made available for issuance. The amendments should be applied prospectively to an award modified on or after the adoption date.

The FASB has issued Accounting Standards Update (ASU) No. 2018-01, Leases (Topic 842):Land Easement Practical Expedient for Transition to Topic 842, which clarifies the application of the new leases guidance to land easements and eases adoption efforts for some land easements.

ASU 2018-01 is expected to reduce the cost of adopting the new leases standard for certain land easements. It is also an attempt to help ensure that companies can make a successful transition to the standard without compromising the quality of information provided to investors about these transactions.

Land easements (also commonly referred to as rights of way) represent the right to use, access, or cross another entity’s land for a specified purpose. Land easements are used by utility and telecommunications companies, for example, when they need to take a small strip of land, or easement, to bury wires. Not all companies have historically accounted for them as leases.

Stakeholders pointed out that the requirement to evaluate all old and existing land easements, sometimes numbering in the tens of thousands, to determine if they meet the definition of a lease under the new standard could be very costly. They also noted there would be limited benefit to applying this requirement, as many of their land easements would not meet the definition of a lease, or even if they met that definition, many of their easements are prepaid and, therefore, already are recognized on the balance sheet.

The land easements ASU addresses this by:

The FASB issued an Accounting Standards Update (ASU No. 2018-02) that helps organizations address certain stranded income tax effects in accumulated other comprehensive income (AOCI) resulting from the Tax Cuts and Jobs Act.

ASU No. 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, provides financial statement preparers with an option to reclassify stranded tax effects within AOCI to retained earnings in each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act (or portion thereof) is recorded.

The ASU requires financial statement preparers to disclose:

The amendments affect any organization that is required to apply the provisions of Topic 220, Income Statement—Reporting Comprehensive Income, and has items of other comprehensive income for which the related tax effects are presented in other comprehensive income as required by GAAP.

The amendments are effective for all organizations for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted. Organizations should apply the proposed amendments either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized.

FASB Adds SEC Guidance to the Codification on the Tax Cuts and Jobs Act. The FASB has issued Accounting Standards Update (ASU) No. 2018-05, Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118. ASU 2018-05 amends certain SEC material in Topic 740 for the income tax accounting implications of the recently issued Tax Cuts and Jobs Act (Act).

ASU 2018-05 adds the following guidance, among other things, to the FASB Accounting Standards Codification™ regarding the Act:

ASU 2018-05 is effective upon inclusion in the FASB Codification.

The FASB has issued an Accounting Standards Update (ASU) intended to reduce cost and complexity and to improve financial reporting for nonemployee share-based payments.

The ASU expands the scope of Topic 718, Compensation—Stock Compensation (which currently only includes share-based payments to employees) to include share-based payments issued to nonemployees for goods or services. Consequently, the accounting for share-based payments to nonemployees and employees will be substantially aligned. The ASU supersedes Subtopic 505-50, Equity—Equity-Based Payments to Non-Employees.

The amendments in this ASU are effective for public companies for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. For all other companies, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted, but no earlier than a company’s adoption date of Topic 606, Revenue from Contracts with Customers.

The FASB has released Accounting Standards Update (ASU) No. 2018-09, Codification Improvements. ASU 2018-09 affects a wide variety of Topics in the Codification including:

The amendments to paragraphs 820-10-35-18D through 35-18F and 820-10-35- 18H through 35-18L revise the current guidance to allow portfolios of financial instruments and nonfinancial instruments accounted for as derivatives in accordance with Topic 815 to use the portfolio exception to valuation. The amendments improve guidance by adding wording that explicitly states that a group of financial assets, financial liabilities, nonfinancial items accounted for as derivatives in accordance with Topic 815, or a combination of these items that otherwise meet the criteria to do so are permitted to apply the portfolio exception for measuring fair value of the group. This allows entities to measure fair value on a net basis for those portfolios in which financial assets and financial liabilities and nonfinancial instruments are managed and valued together.

Transition and Effective Date. The transition and effective date guidance is based on the facts and circumstances of each amendment. Some of the amendments in ASU No. 2018-09 do not require transition guidance and will be effective upon issuance of ASU No. 2018-09. However, many of the amendments do have transition guidance with effective dates for annual periods beginning after December 15, 2018, for public business entities.

In addition, there are some conforming amendments in ASU No. 2018-09 that have been made to recently issued guidance that is not yet effective that may require application of the transition and effective date guidance in the original ASU. For example, there are conforming amendments to Topic 820 and Subtopic 944-310, Financial Services—Insurance—Receivables, that are related to the amendments in Accounting Standards Update No. 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, which require application of the transition and effective date guidance in that ASU.

The FASB has issued Accounting Standards Update (ASU) No. 2018-10, Codification Improvements to Topic 842, Leases.

ASU No. 2018-10, among other things, amends Topic 842 as follows:

The FASB has issued Accounting Standards Update (ASU) No. 2018-11, Leases (Topic 842): Targeted Improvements. This ASU is intended to reduce costs and ease implementation of the leases standard for financial statement preparers.

“The targeted improvements in the ASU address areas our stakeholders identified as sources of unnecessary cost or complexity in the leases standard,” stated FASB Chairman Russell G. Golden. “They represent the FASB’s commitment to proactively address implementation issues raised by our stakeholders to ensure a successful transition to the new standard without compromising the quality of information provided to investors.”

ASU 2018-11 provides a new transition method and a practical expedient for separating components of a contract.

Transition: Comparative Reporting at Adoption

The amendments ASU 2018-11 provide entities with an additional (and optional) transition method to adopt the new leases standard. Under this new transition method, an entity initially applies the new leases standard at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption consistent with preparers’ requests. Consequently, an entity’s reporting for the comparative periods presented in the financial statements in which it adopts the new leases standard will continue to be in accordance with current GAAP in Topic 840, Leases.

An entity that elects this additional (and optional) transition method must provide the required Topic 840 disclosures for all periods that continue to be in accordance with Topic 840. The amendments do not change the existing disclosure requirements in Topic 840 (for example, they do not create interim disclosure requirements that entities previously were not required to provide).

Separating Components of a Contract

The amendments in ASU 2018-11 provide lessors with a practical expedient, by class of underlying asset, to not separate nonlease components from the associated lease component and, instead, to account for those components as a single component if the nonlease components otherwise would be accounted for under the new revenue guidance (Topic 606) and both of the following are met:

An entity electing this practical expedient (including an entity that accounts for the combined component entirely in Topic 606) is required to disclose certain information, by class of underlying asset, as specified in the ASU.

Effective Date

The amendments in ASU 2018-11 related to separating components of a contract affect the amendments in ASU No. 2016-02, which are not yet effective but can be early adopted.

For entities that have not adopted Topic 842 before the issuance of this ASU, the effective date and transition requirements for the amendments in this update related to separating components of a contract are the same as the effective date and transition requirements in ASU 2016-02.

For entities that have adopted Topic 842 before the issuance of ASU 2018-11, the transition and effective date of the amendments related to separating components of a contract in this ASU are as follows:

All entities, including early adopters that elect the practical expedient related to separating components of a contract in this ASU must apply the expedient, by class of underlying asset, to all existing lease transactions that qualify for the expedient at the date elected.

NOTE 3 - CASH AND CASH EQUIVALENT

The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. As of June 30, 2018 and June 30, 2017 cash and cash equivalents consisted of bank deposits in banks in Malaysia and petty cash on hands.

NOTE 4 - AMOUNT DUE FROM RELATED PARTIES

Amount due from related parties at June 30, 2018 and June 30, 2017 consist of the following items:

______________

(*) One of the directors of Stable Treasure Sdn. Bhd., Mr. Balakrishnan B S Muthu is also the director of the Company. The advances related to ordinary business transactions and bear no interest or collateral, repayable and renewable under normal business advancement terms.

NOTE 5 - INVENTORIES

Inventories are valued at cost, not in excess of market. Inventories are determined at first in first out basis and comprised of production cost, mine site management cost and sub-contractor cost. Inventories, at June 30, 2018 and June 30, 2017 are summarized as follows:

The inventories represent the gold minerals as at June 30, 2018 and June 30, 2017, which were comprised of 8% share by the Company and 92% share by the sub-contractor and the other parties such as original mine assigner.

NOTE 6 - ACCOUNTS PAYABLE AND ADVANCED FROM RELATED PARTIES

Accounts Payable

Accounts payable at June 30, 2018 and June 30, 2017 consist of the following items:

______________

(*) Due to Changxin Wanlin Technology Co Ltd are accounts payable derived from ordinary business transactions. One of the directors of Changxin Wanlin Technology Co. Ltd., Mr. Wu Ming Ding, has resigned as director of VRDR (as of February 20, 2016), GBL (as of February 11, 2016) and CSB (as of February 17, 2016). This accounts payable bears no interest or collateral, repayable and renewable under normal business accounts payable terms .

Advanced from related parties

Advanced from related parties at June 30, 2018 and June 30, 2017 consist of the following items:

______________

(#1) BOG is one of the shareholders of the Company. The advances are related to ordinary business transactions and bear no interest or collateral, repayable and renewable under normal business advancement terms.

(#2) One of the directors of Federal Mining Resources Limited, Mr. Chen Ching, has been appointed as director of the Company effective February 20, 2016. Another director of Federal Mining Resources Limited, Mr. Wu Ming Ding, has resigned as director of the Company effective February 20, 2016. The advances are related to ordinary business transactions and bear no interest or collateral, repayable and renewable under normal business advancement terms.

(#3) One of the directors of Federal Capital Investment Limited, Mr. Wu Ming Ding, has resigned as director of the Company effective February 20, 2016. The advances are related to ordinary business transactions and bear no interest or collateral, repayable and renewable under normal business advancement terms.

(#4) One of the directors of Yorkshire Capital Limited, Mr. Lai Kui Shing, Andy, has resigned as director of CSB effective February 17, 2016. The advances are related to ordinary business transactions and bear no interest or collateral, repayable and renewable under normal business advancement terms.

NOTE 7 - PROPERTY, PLANT AND EQUIPMENT

Property and equipment at June 30, 2018, and June 30, 2017, are summarized as follows:

The depreciation expenses charged for the year ended June 30, 2018 and 2017 were $18,617 and $118,662 respectively.

NOTE 8 - LOANS FROM BANKS (HIRE PURCHASE INSTALLMENT LOANS)

The loans from banks include long term and short term and are summarized as follow:

Hire purchase installment loans with total amount $2,735 and $7,533 as at June 30, 2018, and June 30, 2017, are $2,659 and $7,111 net of imprest charges equivalent to interest $76 and $422 respectively are summarized as follows:

______________

(*) Hire purchase installment loans with Motor Vehicles as collateral. The financial institutions in Malaysia are Islamic banks and bear no interest in the installment agreement. However, there are certain imprest charges equivalent to interests which are being calculated at an average annual rate of approximate 2.86% for the rest of entire loans life and periods.

The scheduled maturities of the CSB’s hire purchase installment loans are as follows:

______________

(#) Minimum payment reflected in the balance sheet as current and non-current obligations under hire purchases installment loans as at June 30, 2018.

NOTE 9 - INCOME TAX

The Company and its subsidiaries are subject to income taxes on an entity basis on income arising in, or derived from, the tax jurisdiction in which they operate. The Company is a Nevada incorporated company and subject to United State Federal Income Tax. The Tax Cuts and Jobs Act of (“TCJ Act”) was signed into law in December 2017, and among its many provisions, it imposed a mandatory one-time transition tax on undistributed international earnings and reduced the U.S. corporate income tax rate to 21%, effective January 1, 2018. No provision for income taxes in the United States has been made as the Company had no taxable income for the periods ended June 31, 2018 and 2017. GBL is a British Virgin Islands incorporated company and not required to pay income tax on corporate income. CSB is a Malaysia incorporated company and required to pay corporate income tax at 25% of taxable income.

A reconciliation between the income tax computed at the relevant statutory rate and the Company’s provision for income tax is as follows:

Summary of the Company’s net deferred tax liabilities and assets are as follows:

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 recognized 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, 2018 and June 30, 2017 or balance sheet as of June 30, 2018 and June 30, 2017. The Company did not have uncertainty tax positions or events leading to uncertainty tax position within the next 12 months.

NOTE 10 - COMMITMENTS AND CONTINGENCIES

As at June 30, 2018, the Company’s office rent has expired and is currently being rent under month to month term. There are no commitments and contracts on such rental expenses as at June 30, 2018.

As at June 30, 2018, the Company’s hire purchase installment agreements are disclosed in Note 8. See Note 8 for the commitments for minimum installment payments under these agreements.

NOTE 11 - EARNINGS/(LOSS) PER SHARE

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 year.

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