10-Q: Verde Resources Q1 Loss Widens Amid BioAsphalt Transition

Verde Resources reported a significant net loss in Q1 2026, driven by a strategic shift to an upgraded BioAsphalt formulation and reduced sales, despite key commercialization milestones and a new licensing deal with Ergon.

Summary

• Reported a net loss of $919,555 for the three months ended September 30, 2025, a significant increase from a net profit of $354,715 for the same period in 2024.
• Revenue decreased by 98.2% to $2,269 for Q1 2026, down from $125,570 in Q1 2025, primarily due to a planned transition to an upgraded BioAsphalt formulation.
• Gross profit fell by 98.8% to $934 for Q1 2026, compared to $75,974 in Q1 2025.
• Selling, general, and administrative expenses increased by 9.4% to $888,976, mainly due to a $62,500 increase in research and development costs.
• Entered into an exclusive licensing agreement with Ergon Asphalt & Emulsions, Inc. for its proprietary cold mix biochar asphalt emulsifying agent, Verde V24, across the United States, Canada, and Mexico.
• Ergon purchased 24,943,876 shares of common stock and a warrant for an equal number of shares for $2 million in a private placement.
• NCAT testing validated BioAsphalt's consistent durability and superior performance of its cold recycling mix using 100% reclaimed asphalt pavement (RAP), exceeding industry specifications.
• Puro.earth officially registered the company as a Carbon Removal Credit supplier, and the world's first carbon removal credits from asphalt production (8 tons) were generated and sold in April 2025.
• Temporarily ceased operations of the Borneo biofraction plant in June 2023 to focus on North American operations.
• Identified material weaknesses in internal control over financial reporting, including constraints in a small finance team, lack of formal policies, limited U.S. GAAP/SEC expertise, absence of internal audit, and lack of a functioning audit committee.

Sentiment

Score: 3

Explanation: While strategic partnerships and technology validation are positive, the significant decline in revenue and gross profit, coupled with a widening net loss and identified material weaknesses in internal controls, indicates a challenging financial period. The future outlook relies heavily on successful commercialization and further capital raises, which carry inherent risks.

Positives

• Secured an exclusive 10-year licensing agreement with Ergon Asphalt & Emulsions, Inc. for Verde V24 in North America (US, Canada, Mexico), with automatic renewals, enabling large-scale commercialization.
• Received a $2 million investment from Ergon through a private placement of common stock and warrants, enhancing liquidity and financial position.
• NCAT (National Center for Asphalt Technology) preliminary performance results (July 2025) demonstrated BioAsphalt's consistent durability under low-volume roadway conditions.
• NCAT's latest evaluation (September 2025) confirmed Verde's cold recycling mix with 100% reclaimed asphalt pavement (RAP) exceeds industry specifications for cohesion, tensile strength ratio (TSR), and retained stability.
• Puro.earth officially registered the company as a Carbon Removal Credit supplier, opening a new revenue stream through the generation and sale of Carbon Removal Credits (CORCs).
• Successfully generated and sold the world's first carbon removal credits from asphalt production and installation (8 tons) in April 2025, pre-purchased by a major financial institution.
• The company's 'Verde Net Zero Blueprint' positions it as a first mover in scalable Net Zero solutions, combining infrastructure performance with measurable climate impact.
• Adoption of an asset-light business model is expected to enable scalable growth while minimizing capital intensity and creating recurring revenue streams.

Negatives

• Reported a net loss of $919,555 for the three months ended September 30, 2025, a significant increase from a net profit of $354,715 in the prior year, representing a 359.2% increase in loss.
• Revenue decreased by 98.2% to $2,269 for Q1 2026, down from $125,570 in Q1 2025, primarily due to a strategic scale-back during the transition to an upgraded BioAsphalt formulation.
• Gross profit declined by 98.8% to $934 for Q1 2026, compared to $75,974 in Q1 2025, also impacted by lower sales volume and a shift to lower-margin distribution-level sales.
• Selling, general, and administrative expenses increased by 9.4% ($76,413) year-over-year, driven by higher research and development costs.
• Other income decreased by 98% ($1,219,870) due to lower unrealized foreign exchange gains and the absence of a non-recurring insurance claim gain recognized in the prior year.
• Cash used in operating activities increased by 54.4% to $777,851 for Q1 2026.
• No rental income was recorded in the current period, compared to $38,200 in the prior period, following the disposal of related property.
• Disclosure controls and procedures were deemed not effective as of September 30, 2025, due to identified material weaknesses in internal control over financial reporting.

Risks

• Ability to establish and implement the business plan and begin to generate revenues, including through the licensing model strategy with key commercial partners like Ergon.
• Ability to generate and monetize carbon renewal credits utilizing its technology and products.
• Ability to effectively compete in the industry and execute on its business plan.
• Impact of governmental laws and regulations, and the ability to comply with new regulations and compliance requirements that affect the business.
• Ability to effectively scale operations in North America and other regions, either independently or through third-party collaborators.
• Ability to adequately market products and services, and to develop additional products and product offerings.
• Ability to successfully expand operations into foreign markets.
• Assumptions related to the size of the market for products and solutions may not be accurate.
• Future capital needs and the ability to raise additional capital; there are no assurances that sufficient financing will be obtained on favorable terms or at all.
• Potential difficulties with certain licensees (such as Ergon), licensors from whom the company has rights to key intellectual property, or other third parties upon which it relies.
• Ability to attract, develop, and retain capable key personnel.
• Ability to protect intellectual property (including trade secrets) or manage threats posed by breaches of security.
• Economic and political risks in the United States and Malaysia, as well as the general state of global economies, may influence the company's business.
• Exposure to exchange rate risk due to fluctuations between the Malaysian Ringgit (MYR) and the United States Dollar (US$).
• Material weaknesses in internal control over financial reporting, including constraints in a small finance team, lack of formal policies, limited U.S. GAAP/SEC expertise, absence of an internal audit function, and lack of a functioning audit committee.
• C-Twelve Pty Ltd has the right to hold the company in breach of the C-Twelve Agreement if the C-Twelve Loan and additional $1 million fee are not funded by July 31, 2026, contingent on uplisting to a U.S. national exchange.
• Ergon may terminate the Ergon License if CEO Jack Wong or COO Eric Bava are removed from their positions for reasons other than termination for cause or voluntary resignation.

Future Outlook

The company's current priority is the successful commercialization of its technology in North America, with plans to expand the Verde Net Zero Blueprint globally to countries aligned with the Paris Climate Agreement. It expects to generate and grow revenue over the next twelve months primarily through marketing and selling its proprietary road technologies exclusively through Ergon in North America. Production planning has commenced, with distribution anticipated through Ergon's established sales channels. While the company anticipates generating revenue from the Ergon License, it acknowledges no assurances that sufficient revenue will be generated or that operations will be profitable, particularly during the initial 15-month go-to-market period with Ergon. The company plans to seek additional funding through public and private offerings of its securities, including a potential listing on a national exchange and concurrent public offering, to finance future development.

Management Comments

• Our proprietary product BioAsphalt incorporates biochar, a powerful carbon sequestering material, into infrastructure with the goal of reducing emissions, improving performance, and lowering overall costs.
• We believe our proprietary products, know-how and business plan place us at the forefront of sustainable innovation in the construction and building materials sector, an industry we believe is long overdue for transformation.
• Our model presents a novel combination of infrastructure performance with measurable climate impact, establishing us as a first mover in scalable Net Zero solutions, which we believe positions us well to meet the demands of a rapidly decarbonizing, carbon-constrained economy.
• With key third-party validations from groups such as NCAT and Puro.earth in place, we are now focused on commercializing our solutions in the United States, our most strategic market.
• We believe our asset light business model enables scalable growth while minimizing capital intensity, creating recurring revenue streams through licensing, sales, royalties, carbon monetization, and strategic partnerships.
• We are committed to continuous improvement and innovation on our core technologies to enhance performance, durability, and environmental benefits.
• We believe that the successful completion of the Offering has improved our liquidity and financial position for the near term.
• All of these financing options should provide our company with the flexibility as we continue to drive shareholder value.

Industry Context

The company operates within the road construction and building materials sector, which is undergoing a transformation towards sustainability and decarbonization. Its focus on biochar-based asphalt and carbon removal credits aligns with global trends in green infrastructure, ESG initiatives, and the growing demand for verifiable carbon offsets, particularly from industries like data centers facing increasing pressure to reduce their carbon footprints. The exclusive licensing agreement with Ergon, a major player in the North American asphalt market, positions the company to scale its innovative solutions and capitalize on the increasing market demand for sustainable construction materials and carbon sequestration technologies.

Comparison to Industry Standards

• NCAT testing demonstrated BioAsphalt's consistent durability, particularly under low-volume roadway conditions, indicating competitive strength and flexibility for road applications.
• NCAT's latest evaluation of Verde's cold recycling mix using 100% reclaimed asphalt pavement (RAP) not only meets but exceeds industry specifications for cold-recycled asphalt.
• Results showed superior cohesion, high tensile strength ratio (TSR), and retained stability compared to standard cold mix benchmarks.
• The company believes its achievement of the world's first carbon removal credits generated through asphalt production and installation, verified and certified under Puro.earth, establishes it as a first mover in scalable Net Zero solutions.

Management Changes

Corporate Governance

Legal Proceedings

• Not a party to, nor aware of, any legal proceedings, investigations or claims which are likely to have a material adverse effect on the business, financial condition or results of operations.

Related Party Transactions

• Amounts due to related parties (Borneo Oil Corporation Sdn, Borneo Oil Berhad, Taipan International Limited, Borneo Energy Sdn Bhd, Victoria Capital Sdn Bhd, Makin Teguh Sdn Bhd, J. Ambrose & Partners, SB Resorts Sdn Bhd, SB Supplies & Logistics Sdn Bhd, Borneo Eco Food Sdn. Bhd.) totaling $325,125 as of September 30, 2025. These are ordinary business advances, bear no interest or collateral, and are repayable on demand.
• Amount due to director Mr. Jack Wong of $107,830 as of September 30, 2025, representing the remaining balance of a $1.25 million special bonus. This amount is being repaid through monthly installments deducted from the bonus, with no cash exchange involved in the property purchase transaction.
• Rental income from Mr. Jack Wong of $13,846 for the three months ended September 30, 2024 (none in 2025).
• Interest expense paid to Borneo Oil Corporation Sdn of $1,738 for the three months ended September 30, 2024 (none in 2025).
• Oregon Biochar Solutions is a related party through Karl Strahl, Chief Operating Officer, who was appointed as a director in May 2025.
• Sundea Pty Ltd, an affiliate designated by C-Twelve, received 1,500,000 shares of common stock.
• Aegis Ventures Limited, an affiliate designated by AUM Media Inc, received 4,656,550 shares of common stock.

Stakeholder Impact

• Shareholders face potential dilution from ongoing and future capital raises, and the significant net loss impacts current shareholder value, though the Ergon partnership and carbon credit monetization offer long-term growth potential.
• Employees benefit from share-based compensation plans, but operational shifts, such as the temporary cessation of the Borneo plant, could impact certain roles.
• Customers will gain access to upgraded BioAsphalt formulations and sustainable road construction materials through Ergon's extensive distribution network.
• Suppliers of biochar and other materials may see increased demand as the company's commercialization efforts scale up.
• Creditors may view the $2 million investment from Ergon as a positive for liquidity, but ongoing operational losses and the need for future capital raises could present concerns regarding financial stability.

Next Steps

• Achieve full launch and integration of the upgraded BioAsphalt formulation into commercial channels.
• Focus on successful commercialization of solutions in the United States, its most strategic market.
• Execute production planning and distribution of materials through Ergon's established sales channels across the United States, Canada, and Mexico.
• Negotiate minimum purchase amounts with Ergon for calendar years beginning January 1, 2027.
• Expand the Verde Net Zero Blueprint globally, targeting infrastructure and materials companies in countries aligned with the Paris Climate Agreement.
• Seek funding for operations over the next twelve months through additional public and private offerings of securities.
• Pursue a potential listing of common stock on a national exchange and a concurrent public offering.
• Fund the C-Twelve Loan (at least $2 million) and an additional $1 million fee to C-Twelve within 30 days of uplisting to a U.S. national exchange, or by July 31, 2026, to avoid breach.
• Continue to enhance the internal control environment and remediate identified material weaknesses.
• The NCAT Performance Testing Project is expected to conclude on September 30, 2027, with the first draft of the final report expected in Spring 2027.
• Continue testing the efficacy and exploring potential applications of the TerraZyme technology at NCAT.
• Continue collaboration with NPI on future initiatives, including soil stabilization and material development, carbon removal credits, certification and compliance, and exclusive rights to distributing TerraZyme, if the NPI MOU is successful.
• Engage in ongoing discussions with PLUS Malaysia regarding the growing demand for biochar in the region.

Key Dates

Recommendation

While the company faces significant financial challenges, including a widening net loss and substantial revenue decline, the strategic partnership with Ergon and the validation of its BioAsphalt technology by NCAT represent crucial steps towards commercialization. The $2 million investment from Ergon and the potential for carbon credit monetization offer future upside. However, the current financial performance is weak, and the company's ability to successfully execute its commercialization strategy and raise additional capital remains uncertain. The material weaknesses in internal controls also present a governance concern. A 'Hold' recommendation reflects the balance between the high-risk current financial state and the long-term potential from its innovative sustainable technology and strategic partnerships.

Keywords

BioAsphalt, carbon removal credits, sustainable pavement, biochar, Ergon, SEC filing, 10-Q, renewable commodities, road construction materials, carbon sequestration, NCAT, Puro.earth, Verde V24, licensing agreement, private placement, financial results, net zero blueprint, corporate governance