UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
For the transition period from ______ to _______
Commission File Number
(Name of small business issuer in its charter)
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
[X]
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 (Sec.232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
[X]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of large accelerated filer, accelerated filer, smaller reporting company and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Emerging growth company |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
As of September 12, 2022, there were
1
VERDE BIO HOLDINGS, INC.*
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TABLE OF CONTENTS |
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Page |
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PART I. FINANCIAL INFORMATION |
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ITEM 1. |
F-1 |
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ITEM 2. |
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
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ITEM 3. |
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ITEM 4. |
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PART II. OTHER INFORMATION |
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ITEM 1. |
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ITEM 1A. |
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ITEM 2. |
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ITEM 3. |
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ITEM 4. |
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ITEM 5. |
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ITEM 6. |
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Special Note Regarding Forward-Looking Statements
Information included in this Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (Exchange Act). This information may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Verde Bio Holdings, Inc., (the Company), to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements. Forward-looking statements, which involve assumptions and describe future plans, strategies and expectations of the Company, are generally identifiable by use of the words may, will, should, expect, anticipate, estimate, believe, intend, or project or the negative of these words or other variations on these words or comparable terminology. These forward-looking statements are based on assumptions that may be incorrect, and there can be no assurance that these projections included in these forward-looking statements will come to pass. Actual results of the Company could differ materially from those expressed or implied by the forward-looking statements as a result of various factors. Except as required by applicable laws, the Company has no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.
*Please note that throughout this Quarterly Report, except as otherwise indicated by the context, references in this report to Company, VBH, we, us and our are references to Verde Bio Holdings, Inc.
2
PART I - FINANCIAL INFORMATION
ITEM 1. CONDENSED FINANCIAL STATEMENTS
VERDE BIO HOLDINGS, INC.
Condensed Consolidated Financial Statements
For the Three Months Ended July 31, 2022 and 2021
(unaudited)
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F-2 |
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F-3 |
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Condensed Consolidated Statements of Stockholders’ Equity (unaudited) |
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F-6 |
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Notes to the Condensed Consolidated Financial Statements (unaudited) |
F-7 |
F-1
VERDE BIO HOLDINGS INC.
Condensed Consolidated Balance Sheets
(Expressed in US dollars)
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July 31, 2022 $ |
April 30, 2022 $ |
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(unaudited) |
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ASSETS |
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Current Assets |
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Cash |
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Accounts receivable |
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Prepaid expenses |
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Total current assets |
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Non-current assets |
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Right-of-use operating lease asset |
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Property and equipment, net |
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Oil and natural gas properties, net based on the full cost method of accounting |
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Total assets |
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LIABILITIES |
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Current Liabilities |
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Accounts payable and accrued liabilities |
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Loan payable |
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Current portion of operating lease liability |
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Warrant liabilities |
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Total Current Liabilities |
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Non-current portion of operating lease liability |
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Total Liabilities |
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TEMPORARY EQUITY |
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Series C Preferred Stock: Designated:
Issued and outstanding:
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Series C accrued dividends |
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Total Temporary Equity |
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STOCKHOLDERS’ EQUITY |
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Series A Preferred Stock Designated:
Issued and outstanding:
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Common Stock Authorized –
Issued and outstanding:
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Additional paid-in capital |
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Accumulated deficit |
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Total Stockholders’ Equity |
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Total Liabilities and Equity |
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(The accompanying notes are an integral part of these condensed consolidated financial statements)
F-2
VERDE BIO HOLDINGS INC.
Condensed Consolidated Statements of Operations
(Expressed in US dollars)
(unaudited)
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For the three months ended July 31, 2022 $ |
For the three months ended July 31, 2021 $ |
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Revenue |
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Mineral property and royalty revenues |
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Operating Expenses |
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Consulting fees |
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Depletion expense |
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Depreciation expense |
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General and administrative |
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Professional fees |
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Project expenditures |
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Total Operating Expenses |
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Net Operating Loss |
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Other Income (Expenses) |
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Financing cost |
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Interest expense |
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Gain on extinguishment of debt |
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Total Other Income (Expenses) |
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Net Loss |
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Series C Preferred Stock Dividends |
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Net Loss to Common Shareholders |
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Net Loss Per Share – Basic and Diluted |
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Weighted Average Shares Outstanding – Basic and Diluted |
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(The accompanying notes are an integral part of these condensed consolidated financial statements)
F-3
VERDE BIO HOLDINGS INC.
Condensed Consolidated Statements of Stockholders’ Equity
(Expressed in US dollars)
For the three months ended July 31, 2022 and 2021
(unaudited)
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Series A Preferred Stock |
Common Stock |
Additional |
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Shares |
Par Value |
Shares |
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Par Value |
Paid-in
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Accumulated
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Total |
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$ |
# |
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$ |
$ |
$ |
$ |
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Balance – April 30, 2022 |
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Series C preferred stock issued for commitment fee |
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Common shares issued for conversion of Series C preferred stock |
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Common shares issued for services |
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Series C preferred stock issued for cash |
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Series C preferred stock dividend |
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(
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(
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Net loss for the period |
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(
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Balance – July 31, 2022 |
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(
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Series A Preferred Stock |
Common Stock |
Additional |
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Shares |
Par Value |
Shares |
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Par Value |
Paid-in
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Shares Issuable |
Accumulated
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Total |
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# |
$ |
# |
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$ |
$ |
$ |
$ |
$ |
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Balance – April 30, 2021 |
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(
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Common shares issued upon conversion of notes payable |
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Common shares issued for cash |
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(
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Common shares issued for conversion of Series B preferred shares |
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Common shares issued for services |
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Common shares issued to settle accounts payable |
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Share issuance costs |
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(
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(
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Net loss for the period |
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(
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Balance – July 31, 2021 |
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(
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(The accompanying notes are an integral part of these condensed consolidated financial statements)
F-4
VERDE BIO HOLDINGS INC.
Condensed Consolidated Statements of Cash Flow
(Expressed in US dollars)
(unaudited)
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For the three months ended July 31, 2022 $ |
For the three months ended July 31, 2021 $ |
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Operating Activities |
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Net loss |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Amortization of right-of-use asset |
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Common stock issued for services |
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Depreciation expense |
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Depletion expense |
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Gain on settlement of debt |
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Original issue discount and transaction fees on financing |
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Series C preferred stock issued for commitment fee |
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Changes in operating assets and liabilities: |
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Accounts receivable |
(
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(
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Prepaid expenses |
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Right-of-use liability |
(
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(
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Accounts payable and accrued liabilities |
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Net Cash Used In Operating Activities |
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Investing Activities |
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Acquisition of oil and gas properties |
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(
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Acquisition of property and equipment |
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Net Cash Used In Investing Activities |
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Financing Activities |
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Proceeds from issuance of common stock |
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Proceeds from convertible debenture |
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Proceeds from issuance of series C preferred shares |
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Repayment of convertible debenture |
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(
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Share issuance costs |
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Net Cash Provided by Financing Activities |
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Change in Cash |
(
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(
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Cash – Beginning of Period |
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Cash – End of Period |
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Supplemental Disclosures |
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Interest paid |
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Income tax paid |
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Non-cash investing and financing activities |
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Common stock issued/issuable for conversion of convertible debentures |
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Common stock issued for conversion of Series B preferred shares |
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Common stock issued for settlement of accounts payable |
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Series C preferred stock accrued dividend |
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Common stock issued for conversion of Series C preferred stock |
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(The accompanying notes are an integral part of these condensed consolidated financial statements)
F-5
VERDE BIO HOLDINGS INC.
Notes to the Condensed Consolidated Financial Statements
(Expressed in US dollars)
(unaudited)
1. Nature of Operations and Continuance of Business
Verde Bio Holdings Inc. (the “Company”) was incorporated in the State of Nevada on
On March 11, 2021, the World Health Organization declared COVID-19 a global pandemic. This contagious disease outbreak and any related adverse public health developments, has adversely affected workforces, economies, and financial markets globally, leading to an economic downturn. The impact on the Company has not been significant but management continues to monitor the situation.
Going Concern
These condensed consolidated financial statements have been prepared on a going concern basis, which implies that the Company will continue to realize its assets and discharge its liabilities in the normal course of business. During the period ended July 31, 2022, the Company incurred a net loss of $
2. Summary of Significant Accounting Policies
(a) Basis of Presentation and Principles of Consolidation
The accompanying condensed consolidated financial statements of the Company should be read in conjunction with the consolidated financial statements and accompany notes filed with the U.S. Securities and Exchange Commission for the year ended April 30, 2022. These condensed consolidated financial statements are unaudited and have been prepared on the same basis as the annual consolidated financial statements and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s financial position, results of operations and cash flows for the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for a full year or for any future period.
These condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”) and are expressed in U.S. dollars. The condensed consolidated financial statements are comprised of the records of the Company and its wholly owned subsidiary, IP Control Risk Inc., a company incorporated in the State of Nevada, United States. All intercompany transactions have been eliminated on consolidation. The Company’s fiscal year end is April 30.
(b) Use of Estimates
The preparation of financial statements in conformity with US GAAP 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 amounts of revenues and expenses during the reporting period.
F-7
VERDE BIO HOLDINGS INC.
Notes to the Condensed Consolidated Financial Statements
(Expressed in US dollars)
(unaudited)
2. Summary of Significant Accounting Policies (continued)
(b) Use of Estimates (continued)
The Company regularly evaluates estimates and assumptions related to the collectability of accounts receivable relating to oil and gas interests which is based on the operator’s production statements, carrying value of oil and gas properties, the useful life, carrying value, and incremental borrowing rate used for right-of-use assets and lease liabilities, the fair value of stock-based compensation, revenue recognition including the calculation of the reserves and the fair value of the reserves for oil and gas interests, and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
(c) Basic and Diluted Net Loss per Share
The Company computes net loss per share in accordance with ASC 260,
Earnings per Share
. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net loss available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. As of July 31, 2022, the Company had
(d) Fair Value Measurements
The Company measures and discloses the estimated fair value of financial assets and liabilities using the fair value hierarchy prescribed by U.S. generally accepted accounting principles. The fair value hierarchy has three levels, which are based on reliable available inputs of observable data. The hierarchy requires the use of observable market data when available. The three-level hierarchy is defined as follows:
Level 1 – quoted prices for identical instruments in active markets;
Level 2 – quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model derived valuations in which significant inputs and significant value drivers are observable in active markets; and
Level 3 – fair value measurements derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
Financial instruments consist principally of cash, accounts payable and accrued liabilities, notes payable, convertible debentures and amounts due to related parties. The fair value of cash is determined based on Level 1 inputs. There were no transfers into or out of “Level 3” during the period ended July 31, 2022. The recorded values of all other financial instruments approximate their current fair values because of their nature and respective relatively short maturity dates or durations.
F-8
VERDE BIO HOLDINGS INC.
Notes to the Condensed Consolidated Financial Statements
(Expressed in US dollars)
(unaudited)
2. Summary of Significant Accounting Policies (continued)
(d) Fair Value Measurements (continued)
Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
(e) Recent Accounting Pronouncements
The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
3. Right-of-Use Operating Lease Asset and Lease Liability
ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease calculated by discounting fixed lease payments over the lease term at the rate implicit in the lease or the Company’s incremental borrowing rate. Lease liabilities are increased by interest and reduced by payments each period, and the ROU asset is amortized over the lease term. For operating leases, interest on the lease liability and the amortization of the ROU asset result in straight-line rent expense over the lease term. ROU assets and liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term.
On March 11, 2022, the Company entered into a sublease agreement with a sublandlord regarding its office at 5750 Genesis Court, Suite 220, Frisco, Texas 75036. The agreement was treated as an operating lease in accordance with ASC 842, Lease , which resulted in initial recognition of right-of-use asset and lease liability of $122,120. The incremental borrowing rate used in the calculation is 18%.
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July 31, 2022 |
April 30, 2022 |
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$ |
$ |
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Components of lease expense were as follows:
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Operating lease cost |
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Supplemental cash flow information related to leases: |
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Cash paid for amounts included in the measurement of lease liabilities: |
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Operating cash flows from operating leases |
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F-9
VERDE BIO HOLDINGS INC.
Notes to the Condensed Consolidated Financial Statements
(Expressed in US dollars)
(unaudited)
3. Right-of-Use Asset and Lease Liability (continued)
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July 31, 2022 |
April 30, 2022 |
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Supplemental balance sheet information related to leases: |
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Operating Leases |
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Operating lease right-of-use assets |
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Operating lease liabilities |
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Weighted Average Remaining Lease Term |
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Operating leases |
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Weighted Average Discount Rate |
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Operating leases |
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Maturities of lease liabilities are as follows: |
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Year Ending April 30, |
Operating Leases |
Operating Leases |
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2023 |
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2024 |
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Total lease payments |
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Less: imputed interest |
(
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(
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Total |
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4. Royalty Interests in Oil and Gas Properties
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$ |
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Balance, April 30, 2022 |
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Depletion expense |
(
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Balance, July 31, 2022 |
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5. Property and Equipment
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Land $ |
Vehicles $ |
Equipment $ |
Leasehold Improvements $ |
Total $ |
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Cost |
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Balance, April 30, 2022 |
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Additions |
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Balance, July 31, 2022 |
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Accumulated depreciation |
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Balance, April 30, 2022 |
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Additions |
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Balance, July 31, 2022 |
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Balance, April 30, 2022 |
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Balance, July 31, 2022 |
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F-10
VERDE BIO HOLDINGS INC.
Notes to the Condensed Consolidated Financial Statements
(Expressed in US dollars)
(unaudited)
6. Convertible Loan
On June 3, 2022, the Company entered into a convertible loan agreement with an arms-length party for $
7. Related Party Transactions
(a)
During the quarter ended July 31, 2022, the Company paid $
8. Common Shares
Authorized:
On May 10, 2022, the Company issued
On May 13, 2022, the Company issued
On May 17, 2022, the Company issued
On May 26, 2022, the Company issued
On June 15, 2022, the Company issued
On June 16, 2022, the Company issued
On July 8, 2022, the Company issued
On July 18, 2022, the Company issued
On July 21, 2022, the Company issued
9. Preferred Shares
Authorized:
Convertible Preferred Series A stock
On April 18, 2017, the Company designated
F-11
VERDE BIO HOLDINGS INC.
Notes to the Condensed Consolidated Financial Statements
(Expressed in US dollars)
(unaudited)
Convertible Preferred Series C stock
On December 3, 2021, the Company entered into a securities purchase agreement (the “December Agreement”) with an arms-length party for the issuance of up to 1,000 shares of convertible preferred Series C stock (“Series C”) for $1,000,000 based on the stated value of $1,000 per share. Under the December Agreement, the Company has a put option with regards to the Series C shares. Under the terms of the December Agreement, the Series C shares are non-redeemable, subject to annual dividend payments of 10% and are convertible into common stock of the Company at a discount to the market price of the Company’s common stock at the date of the notice of conversion form the note holder. In addition to the Series C shares, the Company issued an additional 40 Series C shares, with a fair value of $
On May 24, 2022, the Company entered into an additional securities purchase agreement (the “May Agreement”) with an arms-length party for the issuance of up to 250 shares of convertible preferred Series C stock for $
The Series C preferred stock and the accrued dividends relating to the stock are classified as temporary equity. As at July 31, 2022, the Company had 956 (April 30, 2022 – 1,040) shares of Series C stock with a carrying value of $
In addition to the Series C stock, the Company issued
10. Share Purchase Warrants
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Number of warrants |
Weighted average exercise price $ |
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Balance, July 31, 2022 and April 30, 2022 |
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Additional information regarding share purchase warrants as of July 31, 2022 is as follows:
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Outstanding and exercisable |
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||
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Range of Exercise Prices $ |
Number of Warrants |
Weighted Average Remaining Contractual Life (years) |
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F-12
VERDE BIO HOLDINGS INC.
Notes to the Condensed Consolidated Financial Statements
(Expressed in US dollars)
(unaudited)
11. Commitments and Contingencies
On May 28, 2020, the Company and an unrelated party entered into equity financing agreement, whereby the investor agreed to invest up to $5,000,000 over the period of 36 months pursuant to a “put” option held by the Company, subject to certain limitations. The price of the common shares shall be equal to 80% of the lowest traded price during the last 10 trading days leading up to each put notice, subject to a floor of $0.001 per share. As part of the agreement, the Company issued a convertible promissory note to the unrelated party to offset transaction costs of $20,000, which was deemed as earned upon the execution of the agreement. The note is convertible into common stock of the Company at a fixed price of $0.01, which equals the lowest traded price for the common stock on the trading day preceding the execution of the note. The purchase of the shares are subject to a “put” option held by the Company. As of July 31, 2022 and April 30, 2022, no common shares have been sold pursuant to the equity financing agreement.
12. Subsequent Events
(a) In August 2022, the Company repaid $44,845 of principal and accrued interest on the outstanding convertible loan. Refer to Note 6.
(b) On August 15, 2022, the Company issued 100,000 shares of common stock for services.
(c) On August 18, 2022, the Company issued 22,222,223 shares of common stock pursuant to the conversion of 35 shares of Series C preferred stock.
(d) On August 29, 2022, the Company issued 31 shares of its Series C preferred stock for $31,000 in cash.
(e) On September 12, 2022, the Company received a notice of conversion for 45 shares of Series C preferred stock into 24,000,000 shares of the Company’s common stock.
F-13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
OR PLAN OF OPERATION
FORWARD-LOOKING STATEMENTS
This Management's Discussion and Analysis of Financial Condition and Results of Operations (MDA) contains forward-looking statements that involve known and unknown risks, significant uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed, or implied, by those forward-looking statements. You can identify forward-looking statements by the use of the words may, will, should, could, expects, plans, anticipates, believes, estimates, predicts, intends, potential, proposed, or continue or the negative of those terms. These statements are only predictions. In evaluating these statements, you should consider various factors which may cause our actual results to differ materially from any forward-looking statements. Although we believe that the exceptions reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.
RESULTS OF OPERATIONS
Working Capital
|
|
July 31, 2022 |
|
April 30, 2022 |
|
$ |
$ |
||
|
|
(unaudited) |
|
|
|
Current Assets |
262,342 |
|
295,873 |
|
Current Liabilities |
1,700,048 |
|
1,453,145 |
|
Working Capital Deficit |
(1,437,706) |
|
(1,157,272) |
Cash Flows
|
|
July 31, 2022 |
|
July 31, 2021 |
|
$ |
$ |
||
|
|
(unaudited) |
|
(unaudited) |
|
Cash Flows used in Operating Activities |
(427,111) |
|
(612,892) |
|
Cash Flows from (used in) Investing Activities |
(6,985) |
|
(4,036,861) |
|
Cash Flows from Financing Activities |
394,000 |
|
3,882,335 |
|
Net increase (decrease) in Cash During Period |
(40,096) |
|
(767,418) |
Operating Revenues
During the three months ended July 31, 2022, the Company earned royalty revenues of $209,910 compared to royalty revenues of $64,599 for the three months ended July 31, 2021. The revenue is derived from its interests in various oil and gas properties and the increase in royalty revenues in the current period was attributed to an increase in the investment in royalty rights based on the Company’s continued investment and development in its operating activities. As part of the revenues generated from the oil and gas properties, the Company recorded depletion expense of $145,121 during the three months ended July 31, 2022 compared to depletion expense of $21,989 during the period ended July 31, 2021 which represents the proportionate use of the produced units in the properties relative to proven and probable reserves. The overall increase in depletion expense is reflective of the overall increase in investment in royalty properties.
4
Operating Expenses and Net Loss
Three Months Ended July 31, 2022 and 2021
During the three months ended July 31, 2022, the Company incurred operating expenses of $908,371 compared to operating expenses of $741,949 during the three months ended July 31, 2021. The increase in operating expenses was due to an increase in operating activity for the majority of the Company’s operating activities, which is due in part to an increase in the overall number of royalty properties held by the Company during the current fiscal period compared to the prior fiscal period. Included in the increase in operating expenses was an increase in consulting fees of $59,113, an increase in general and administrative costs of $33,599, and an increase in professional fees of $10,550. Offsetting the increase in operating expenses was a decrease in project expenditures of $75,106, as the Company was heavily investing in new properties during the period ended July 31, 2021 whereas the current year period was focused on building economic stability based on the Company’s portfolio of assets, as the Company did not add any new royalty properties during the current fiscal period.
Net loss for the three months ended July 31, 2022 was $764,008 compared to a net loss of $672,995 during the three months ended July 31, 2021. In addition to revenues and operating expenses, the Company incurred financing costs of $38,200 related to issuance discounts and legal and transaction fees related to a new convertible loan agreement for $200,200 and a new agreement signed in May 2022 for additional issuances of up to 250 Series C preferred shares. Furthermore, the Company incurred $27,347 of interest expense, which included $24,024 of interest expense on a one-time interest charge relating to the new convertible loan agreement, and accrued dividends related to outstanding Series C preferred stock of $22,609. Conversely, during the three months ended July 31, 2021, the Company had a gain on extinguishment of outstanding debt of $4,722 and interest expense of $367.
For the three months ended July 31, 2022 and 2021, the Company recorded a basic and diluted loss per share of $0.00.
Liquidity and Capital Resources
As at July 31, 2022, the Company had cash of $101,110 and total assets of $4,886,079 compared to cash of $141,206 and total assets of $5,085,057 as at April 30, 2022. Overall, the Company’s cash and asset balances were relatively consistent, as the Company did not acquire any new oil and natural gas properties during the period and only received financing from a convertible loan agreement and Series C preferred stock issuances to support its ongoing development and operating activities.
The Company had total liabilities of $1,705,502 as at July 31, 2022 compared to $1,474,482 as at April 30, 2022. The increase in liabilities was due to a new convertible loan agreement for $200,200, which included an additional accrued interest charge of $24,024 which was recorded in accounts payable and accrued liabilities. Outside of the new convertible loan agreement, there were no other significant transactions relating to the Company’s total liabilities.
As of July 31, 2022, the Company had a working capital deficit of $1,437,706 compared to a working capital deficit of $1,157,272 as at April 30, 2022. The increase in the working capital deficit was due to the new convertible loan agreement of $200,200 with the accrued interest charge of $24,024, which was used to fund the Company’s ongoing operating activity.
During the period ended July 31, 2022, the Company entered into a new Series C preferred stock agreement that allowed investors to subscribe for up to 250 Series C preferred stock at $1,000 per stock for overall proceeds of $250,000. As at July 31, 2022, the Company had issued 231 shares of Series C preferred stock for proceeds of $231,000 less $12,000 for legal and transaction costs. The Company also issued 13,300,000 common shares for services with a fair value of $98,010 and issued 84,908,453 common shares pursuant to the exercise of 320 shares of Series C preferred stock related to the December 2021 Series C preferred stock agreement.
Cash Flow from Operating Activities
During the three months ended July 31, 2022, the Company used $427,111 of cash for operating activities compared to $612,892 of cash for operating activities during the three months ended July 31, 2021. The decrease in the use of cash for operating activities was due to lower project expenditure costs as the Company incurred more time and cost in the prior fiscal period on project evaluation as the Company was focused on acquisition of new properties whereas in the current fiscal period, the Company was focused on the overall management of the Company’s existing portfolio of oil and natural gas properties.
5
Cash Flow from Investing Activities
During the three months ended July 31, 2022, the Company used $6,985 of cash for investing activities, which was used for acquisition of equipment. Conversely, during the three months ended July 31, 2021, the Company incurred cash of $4,036,861 of cash for investing activities including $3,911,266 for purchases of oil and gas properties and $125,595 of equipment as the Company was heavily focused on building its portfolio of oil and natural gas properties during the prior year.
Cash Flow from Financing Activities
During the three months ended July 31, 2022, the Company raised $394,000 of cash from financing activities, which included $175,000 (net of OID and legal fees of $25,200) from the issuance of a convertible note payable and $219,000 (net of legal and transaction fees of $12,000) from the issuance of 231 Series C preferred stock. During the three months ended July 31, 2021, the Company received $3,882,335 of cash from financing activities, including $3,950,500 from the issuance of common shares less repayment of $5,000 to repay the outstanding balance of a convertible debenture and $33,165 of share issuance costs.
Going Concern
We have not attained profitable operations and are dependent upon obtaining financing to pursue any extensive acquisitions and activities. During the period ended July 31, 2022, the Company incurred a net loss of $764,008 and used cash of $427,111 for operating activities. At July 31, 2022, the Company has an accumulated deficit of $15,022,899. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. The unaudited condensed financial statements included in this report on Form 10-Q does not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
Off-Balance Sheet Arrangements
We have no significant 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 are material to stockholders.
Future Financings
We will continue to rely on equity sales of our Common Shares in order to continue to fund our business operations. Issuances of additional shares will result in dilution to existing stockholders. There is no assurance that we will achieve any additional sales of the equity securities or arrange for debt or other financing to fund planned acquisitions and exploration activities.
Critical Accounting Policies
Our financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.
We regularly evaluate the accounting policies and estimates that we use to prepare our financial statements. A complete summary of these policies is included in the notes to our financial statements. In general, management's estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.
Recently Issued Accounting Pronouncements
The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
6
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934 (the Exchange Act), that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of July 31, 2022. Based on the evaluation of these disclosure controls and procedures, and in light of the material weaknesses found in our internal controls over financial reporting, our Chief Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures were not effective.
Changes in Internal Control over Financial Reporting
There has been no change in our internal control over financial reporting identified in connection with our evaluation we conducted of the effectiveness of our internal control over financial reporting as of July 31, 2022, that occurred during the period that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
We know of no material, existing or pending legal proceedings against our Company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which our director, officer or any affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.
ITEM 1A. RISK FACTORS.
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
1. Quarterly Issuances:
Other than as previously disclosed in the above Notes to the Condensed Consolidated Financial Statements, we did not issue any unregistered securities during the quarter.
2. Subsequent Issuances:
Other than as previously disclosed in the above Notes to the Condensed Consolidated Financial Statements, we did not issue any unregistered securities subsequent to the quarter.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
7
ITEM 4. MINE SAFETY DISCLOSURES.
Not Applicable.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS
|
Exhibit Number |
|
Description of Exhibit |
|
Filing |
|
3.1 |
|
|
Filed previously and incorporated by reference |
|
|
3.2 |
|
Amended and Restated Certificate of Designation for Series C Preferred Shares (incorporated by reference as Exhibit 3.1 to Form 8K filed June 1, 2022) |
|
Filed previously and incorporated by reference |
|
3.3 |
|
|
Filed previously and incorporated by reference. |
|
|
31.1 |
|
Certification of Principal Executive Officer Pursuant to Rule 13a-14 |
|
Filed herewith. |
|
31.2 |
|
Certification of Principal Financial Officer Pursuant to Rule 13a-14 |
|
Filed herewith. |
|
32.1 |
|
Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act |
|
Filed herewith. |
|
32.2 |
|
Certification of Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act |
|
Filed herewith. |
* Pursuant to Regulation S-T, this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.
8
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company caused this amended report to be signed on its behalf by the undersigned, thereunto duly authorized.
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VERDE BIO HOLDINGS, INC.
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Dated: September 14, 2022 |
By: |
/s/ Scott Cox |
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|
Scott Cox |
|
|
Its: |
President, Principal Executive Officer Principal Financial Officer (Principal Accounting Officer) |
Pursuant to the requirement of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated:
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Dated: September 14, 2022 |
By: |
/s/ Scott Cox |
|
|
Its: |
Scott Cox, Director |