8-K: Verde Resources Seals Exclusive North American Deal with Ergon

Verde Resources' subsidiary, Verde Renewables, has signed a 10-year exclusive license agreement with Ergon Asphalt & Emulsions for its proprietary BioAsphalt technology across North America, alongside a $2 million equity financing term sheet from Ergon.

Summary

• Verde Renewables, a wholly-owned subsidiary, entered into a 10-year exclusive license agreement with Ergon Asphalt & Emulsions, Inc. for its proprietary cold mix biochar asphalt emulsifying agent, Verde V24, in the United States, Canada, and Mexico.
• Ergon, the largest asphalt marketer in North America, will use, manufacture, commercialize, market, sell, and distribute products containing Verde V24, agreeing to purchase Verde V24 from Verde at a fixed price (subject to CPI adjustments).
• Verde will provide Ergon with 40% of its share of carbon removal credits generated from the mixing of the final carbon sequestering BioAsphalt surface material, provided the biochar is purchased from Verde.
• An initial 15-month go-to-market period has no minimum purchase requirements for Ergon; minimum purchase amounts will be negotiated annually starting January 1, 2027.
• An addendum to the Joint Development Agreement with C-Twelve Pty Ltd. (manufacturer of Verde V24) was signed, expanding Verde's exclusive distribution territory to include Canada and Mexico.
• Verde agreed to pay C-Twelve an additional $1 million in exclusive licensing fees for the expanded territories, to be paid concurrently with a previously agreed $2 million loan, totaling $3 million.
• This $3 million payment to C-Twelve is contingent on Verde's common stock listing on a U.S. national exchange and must be funded within 30 days of such listing, or by July 31, 2026, otherwise C-Twelve can declare a breach.
• A potential conditional fee payment to C-Twelve in 2027 is based on agreed minimum liters of Verde V24 purchased.
• Verde and Ergon also executed a non-binding term sheet for a $2 million equity financing from Ergon into Verde, expected to close in October 2025.
• Verde's BioAsphalt is described as burnerless, placeable year-round, odorless, and the first in the world to generate verified Carbon Removal Credits, certified through Puro.earth.
• The global asphalt market is valued at over $175 billion, with a significant portion concentrated in North America.

Sentiment

Score: 8

Explanation: The filing details a significant strategic partnership with a major industry player, Ergon, for exclusive distribution across North America, coupled with a potential equity investment. This substantially enhances Verde's market reach and credibility. While there are financial obligations and key person risks, the overall outlook for commercialization and environmental impact is highly positive.

Positives

• Secured a 10-year exclusive license agreement with Ergon Asphalt & Emulsions, the largest asphalt marketer in North America, for Verde V24 in the U.S., Canada, and Mexico.
• Ergon's extensive North American footprint and industry expertise provide a strong commercial partner for scaling Verde's technologies.
• The agreement includes a revenue-sharing mechanism for carbon removal credits (40% to Ergon from Verde's share), aligning incentives for sustainability.
• A non-binding term sheet for a $2 million equity investment from Ergon demonstrates confidence in Verde's technology and strengthens the strategic alliance.
• Expansion of Verde's exclusive distribution territory with C-Twelve to include Canada and Mexico, enhancing market reach.
• Verde's BioAsphalt technology offers significant environmental benefits (carbon sequestering, burnerless production, year-round placement, odorless) and economic advantages (extended paving seasons, reduced GHG emissions).
• Early validation from the National Center for Asphalt Technology (NCAT) supports the efficacy of Verde's low-emission construction innovation.
• BioAsphalt is the first in the world to generate verified Carbon Removal Credits, positioning Verde as a pioneer in climate-positive road materials.

Negatives

• Verde is required to pay an additional $1 million in exclusive licensing fees to C-Twelve for the expanded territories, plus the previously agreed $2 million loan, totaling $3 million, contingent on a U.S. national exchange listing.
• Failure to fund the $3 million to C-Twelve by July 31, 2026, if a listing doesn't occur, could result in a material breach of the Joint Development Agreement.
• The $2 million equity financing from Ergon is currently a non-binding term sheet, meaning it is not guaranteed to close or may close on different terms.
• Ergon has no minimum purchase requirements for Verde V24 during the initial 15-month go-to-market period, and future minimums are subject to good faith negotiation, meaning sales volume is not guaranteed initially.
• The license agreement can be terminated by Ergon if CEO Jack Wong or COO Eric Bava are removed from their positions for reasons other than voluntary resignation or termination for cause, posing a key person risk.

Risks

• Dependence on Ergon as Verde's exclusive North American distributor.
• Risk that Ergon may not sell Verde-enabled products in sufficient volume to generate meaningful revenue for Verde.
• The contemplated $2 million equity investment by Ergon may not be consummated on terms beneficial to Verde, or at all.
• Commercial relationship between Verde and Ergon may face challenges leading to material adverse effects on Verde.
• Failure to fund the $3 million to C-Twelve by July 31, 2026, could lead to a material breach of the Joint Development Agreement.
• Key person risk: Ergon can terminate the license if CEO Jack Wong or COO Eric Bava are removed from their roles (unless for cause or voluntary resignation).
• Future minimum purchase amounts from Ergon are subject to negotiation and not guaranteed, especially after the initial 15-month period.

Future Outlook

Verde Resources anticipates significant growth and market penetration in the North American asphalt industry through its exclusive partnership with Ergon, aiming to accelerate the adoption of its carbon-sequestering BioAsphalt technology. The company expects to secure a $2 million equity investment from Ergon and expand its manufacturing capabilities with C-Twelve, contingent on a U.S. national exchange listing. Future minimum purchase obligations with Ergon will be negotiated annually starting in 2027, with a focus on scaling low-carbon solutions across the continent.

Management Comments

• "Our milestone commercial collaboration with industry leader Ergon marks a major achievement in our mission to bring innovative solutions to market and accelerate decarbonization across emission-intensive infrastructure." Jack Wong, CEO of Verde Resources.
• "Together with Ergon, we will deliver transformative, common-sense solutions that will redefine the roads of the future for the benefit of both the environment and the economy." Jack Wong, CEO of Verde Resources.
• "Ergon's deep industry expertise and extensive North American footprint make them not only the best in the business, but also the ideal commercial partner for us to scale the impact of Verde's technologies." Jack Wong, CEO of Verde Resources.
• "Our agreement with Verde strengthens Ergon's ability to deliver sustainable, next-generation technologies to the road construction industry." Patrick Nation, President of Ergon Asphalt & Emulsions.
• "We are excited to integrate Verde's solutions and work to accelerate the adoption and commercialization of the end product over the next year, with the goal of enhancing how roads are built in a sustainable way without compromising quality or reliability." Patrick Nation, President of Ergon Asphalt & Emulsions.
• "Verde's technologies align seamlessly with our ongoing commitment to sustainable solutions and long-term growth strategy, and we are excited to bring these solutions to our customers and partners efficiently, effectively, and with strong business discipline across North America." Patrick Nation, President of Ergon Asphalt & Emulsions.

Industry Context

The global asphalt market, valued at over $175 billion with a significant North American presence, is undergoing a transformation towards sustainable and low-carbon solutions. Verde Resources' partnership with Ergon, a leading asphalt marketer, positions it at the forefront of this shift, leveraging its BioAsphalt technology to address the industry's need for reduced greenhouse gas emissions and carbon sequestration. This alliance aligns with broader trends of infrastructure investment converging with carbon markets, aiming to redefine road construction as a climate-positive activity.

Comparison to Industry Standards

• Verde's BioAsphalt is highlighted as the first in the world to generate verified Carbon Removal Credits, certified through Puro.earth, setting a new benchmark for climate-positive road materials.
• The technology allows for burnerless production and year-round placement, even in winter, which contrasts with traditional asphalt methods requiring heat and solvents, offering operational flexibility and reduced energy consumption.
• Early validation from the National Center for Asphalt Technology (NCAT) suggests the technology meets or exceeds performance standards for low-emission construction innovation.
• The partnership with Ergon, the largest asphalt marketer in North America, provides a significant competitive advantage in scaling distribution compared to smaller, emerging sustainable material providers.

Management Changes

Corporate Governance

Legal Proceedings

• NA

Related Party Transactions

• NA

Stakeholder Impact

• Shareholders: Potential for increased revenue and market share through the Ergon partnership, enhanced credibility, and a strategic equity investment. However, there is a dilution risk from potential equity raise and financial obligations to C-Twelve.
• Employees: Potential for growth and expansion, particularly in technical and support roles related to the licensed technology and carbon accounting.
• Customers (Ergon's customers): Access to innovative, environmentally sustainable, and potentially more cost-effective BioAsphalt products with verified carbon removal credits.
• Suppliers (C-Twelve): Guaranteed payments (loan and fees) and potential for increased purchase volumes of Verde V24, enhancing manufacturing capabilities.
• Regulatory Bodies: Positive impact from promoting sustainable infrastructure and carbon sequestration, aligning with environmental goals.

Next Steps

• Closing of the $2 million equity financing from Ergon (expected October 2025).
• Verde's common stock listing on a U.S. national exchange, triggering the $3 million payment to C-Twelve.
• Initial 15-month go-to-market period with Ergon (no minimum purchase requirements).
• Negotiation of minimum purchase amounts with Ergon for calendar years starting January 1, 2027.
• Potential conditional fee payment to C-Twelve in 2027 based on purchase volumes.
• Ongoing technical services and support to Ergon for monitoring, reporting, and verification of carbon sequestration.
• Good faith negotiations for agreements on other Verde technologies (e.g., TerraZyme) with Ergon.

Key Dates

Recommendation

The exclusive 10-year licensing agreement with Ergon, a dominant player in the North American asphalt market, represents a transformative strategic alliance for Verde Resources. This partnership provides a robust distribution channel and significant market validation for Verde's innovative carbon-sequestering BioAsphalt technology. The accompanying non-binding term sheet for a $2 million equity investment from Ergon further solidifies this confidence. While there are financial commitments to C-Twelve and key person risks, the potential for scaling a pioneering climate-positive material in a multi-billion dollar industry, coupled with early validation from NCAT and verified carbon credits, positions Verde for substantial long-term growth and market leadership. The risks associated with minimum purchase negotiations and the non-binding nature of the equity raise are outweighed by the strategic advantages and market opportunity.

Keywords

BioAsphalt, carbon sequestering, road materials, asphalt emulsion, Verde V24, Ergon, license agreement, carbon credits, sustainable infrastructure, decarbonization, SEC filing, VRDR