Verde Resources: Building the Future of Infrastructure with Biochar and Carbon Credits (OTCQB: VRDR) - VRDR Stock Research Report

## Executive Summary / Key Takeaways * Verde Resources (OTCQB: VRDR) is undergoing a strategic transformation, shifting its focus from historical ventures like mining and CBD distribution to become a pioneer in net zero road construction and building materials, leveraging its proprietary biochar technology. * The company's core technology, the Catalytic Biofraction Process, converts biomass waste into valuable bio-products, including high-quality biochar, which is central to its innovative Biochar-Asphalt and other low-carbon construction materials. * Recent operational milestones, particularly the NCAT test track demonstration, have validated the technology's performance, showing a 50% increase in installation efficiency and achieving the world's first Puro.earth-certified Carbon Removal Credits from asphalt applications (8 tons sequestered, 8 tons of CORCs issued and sold). * Strategic partnerships with industry leaders like C-Twelve, Ergon, NCAT, Puro.earth, and GECA Environment are crucial to VRDR's commercialization strategy, aiming for widespread adoption of its "Verde Net Zero Blueprint" and unlocking significant revenue streams from both product sales and carbon credits. * While recent financial results show substantial revenue growth in the new business segment, overall net losses have increased due to higher operating expenses, highlighting the early-stage nature of the transition and the need for successful commercialization to achieve profitability and address liquidity risks, including identified weaknesses in internal controls. ## A Foundation Transformed: Pioneering Net Zero Infrastructure Verde Resources, Inc. (OTCQB: VRDR), initially incorporated in 2010, has undergone a significant strategic pivot, shedding its historical focus on ventures like mining and CBD distribution to address the urgent global challenges of climate change and environmental dehydration. The company is now firmly positioned as a leader in the burgeoning field of net zero road construction and building materials. This transformation is centered around leveraging its proprietary technology to create sustainable infrastructure solutions that offer both environmental benefits and economic value. The core of VRDR's new direction lies in its Catalytic Biofraction Process, an advanced second-generation pyrolysis technology. This process utilizes a proprietary catalyst to depolymerize palm biomass waste, such as empty fruit bunches and palm kernel shells, at temperatures ranging from 350°C to 500°C. The output is a suite of commercially valuable bio-products, including bio-oil, wood vinegar, biochar, and bio-syngas, all derived from non-food feedstock. This technology is foundational to the company's mission to support the industry's seamless transition to zero emissions, or "TransitionToZero." In the competitive landscape of building materials and infrastructure, VRDR operates as a smaller, specialized player. While large global companies like Newmont (TICKER:NEM) dominate traditional resource extraction with vast scale and advanced automation, and mid-cap players like Gold Resource Corporation (TICKER:GORO) focus on cost-effective extraction across broader geographies, VRDR is carving out a niche in the sustainable segment. Its competitive advantages stem primarily from its differentiated technology and early-mover position in biochar-enhanced construction materials. The Catalytic Biofraction Process offers a unique method for producing high-quality biochar from waste, providing a distinct input material for its products. However, VRDR faces inherent disadvantages typical of smaller, transitioning companies when compared to larger, established players. These include limitations in scale, potentially higher operating costs per unit compared to highly optimized large-scale operations, and the significant financial resources required for widespread market penetration and technology deployment. The company's strategy is to mitigate these disadvantages through targeted partnerships and focusing on the unique value proposition of its "Verde Net Zero Blueprint," which integrates low-carbon technologies with a carbon credit generation model. This approach aims to differentiate VRDR by offering not just sustainable materials but also quantifiable carbon removal benefits that align with global decarbonization goals and potentially create a significant, separate revenue stream. ## Technological Edge and Quantifiable Impact VRDR's technological differentiation is central to its investment thesis. The Catalytic Biofraction Process is designed to produce biochar with specific properties suitable for construction applications. When integrated with a proprietary binder, this biochar forms the basis of VRDR's net zero building materials, including its flagship Biochar-Asphalt technology. The stated aims of this technology are ambitious: to provide superior performance, enhance environmental sustainability, and generate Carbon Removal and Avoidance Credits. Recent operational milestones provide concrete evidence of the technology's potential. A key achievement was the successful demonstration at the National Center for Asphalt Technology (NCAT) Test Track in December 2024, in collaboration with C-Twelve Australia. This demonstration showcased the ability to retrofit an existing Hot Mixed Asphalt (HMA) plant to produce cold-based Biochar-Asphalt, even in winter conditions, without requiring heat or solvents. This innovative production method resulted in a remarkable 50% increase in installation efficiency compared to traditional methods. Beyond efficiency, the environmental benefits are quantifiable. The NCAT demonstration successfully sequestered approximately 8 tons of carbon. This led to the issuance of 8 tons of Puro.earth-certified Carbon Removal Credits (CORCs), which VRDR believes represents an industry first for asphalt applications. These CORCs were subsequently pre-purchased by a large global financial institution focused on Carbon Dioxide Removals (CDRs), validating the market's interest in this new asset class. Furthermore, earlier work at the NCAT test track (Stage 1 in August 2024), incorporating Nature Plus Inc.'s (NPI) TerraZyme technology, demonstrated a reduction of Portland cement usage by over 60%, the complete elimination of carbon-intensive hydrated lime, and a substantial reduction in trucking requirements by utilizing in-situ materials. These metrics highlight the tangible cost savings and environmental benefits offered by VRDR's integrated solutions. The company's R&D efforts, including co-developing new net-zero and carbon-negative IP products with Zym-Tec, are aimed at further enhancing performance and expanding the application of its technology. The strategic intent is to achieve the highest level of certification from NCAT, which is expected to drive widespread adoption by Departments of Transportation (DOTs) across the United States. The potential for generating substantial Carbon Removal Credits from these applications is anticipated to create a significant and separate revenue stream, adding a unique dimension to VRDR's business model beyond traditional material sales. ## Strategic Partnerships Driving Commercialization VRDR's pathway to commercialization is heavily reliant on strategic partnerships that validate its technology and open doors to wider market adoption. The collaboration with the National Center for Asphalt Technology (NCAT) is paramount, serving as a crucial third-party validation platform. The ongoing 3-year Performance Testing Project at the NCAT Test Track, backed by a minimum funding commitment of $750,000 from VRDR, is designed to provide the rigorous performance data necessary to secure the highest level of certification. Achieving this certification is seen as a critical step for driving widespread adoption by DOTs and the federal DOT across the United States. The partnership with Puro.earth is equally vital for monetizing the environmental benefits of VRDR's technology. As a registered Carbon Removal Credit supplier, VRDR is positioned to generate revenue from the CORCs produced by its operations and licensed applications. The successful issuance and sale of the first 8 tons of CORCs from the NCAT demonstration in April 2025 underscore the tangible nature of this revenue potential. To further support this, VRDR has engaged GECA Environment, an internationally recognized firm expert in carbon valorization and sequestration, to provide strategic support for carbon credit monetization, including project development and brokerage. Commercialization efforts are being accelerated through key industry collaborations. The 10-year exclusive partnership signed with C-Twelve Pty Ltd in May 2025 grants VRDR the rights to utilize C-Twelve's proprietary binder and biochar asphalt mixed designs in North America, including the right to file U.S. patents under the Verde brand. This partnership, which followed a successful joint installation at NCAT, is aimed at commercializing low carbon asphalt technology across the U.S. Additionally, an MOU signed with Ergon Asphalt & Emulsions in June 2025 further advances the commercialization pathway for low-carbon road materials, building on prior collaboration on innovative emulsions. The selection of VRDR by one of the world's largest building materials companies in August 2024 to scale its Biochar-Asphalt technology is a significant endorsement and is expected to lead to a strategic licensing partnership, potentially unlocking substantial growth. Beyond the U.S. market, VRDR is exploring opportunities in Malaysia, where its BioFraction facility is located. Ongoing discussions with PLUS Malaysia (TICKER:PLUS), the country's largest highway operator, signal growing regional demand for biochar applications. This potential demand, coupled with expected certifications from U.S. initiatives, could enable the resumption of normal operations at the Borneo facility with potential for significant scale-up. To support its strategic initiatives and enhance visibility within the investment community, VRDR has also engaged AUM Media Inc. for capital markets, investor relations, and media relations advisory, including preparations for a planned uplisting to NASDAQ. These interconnected partnerships and initiatives form the backbone of VRDR's strategy to transition from an early-stage technology developer to a commercial-scale provider of sustainable infrastructure solutions. ## Financial Performance Reflecting Transition and Investment Examining VRDR's financial performance for the nine months ended March 31, 2025, reveals a company in the midst of a significant transition, marked by both promising growth in its new focus area and increased investment in its future. Revenue for the nine months ended March 31, 2025, saw a substantial increase to $128,690 compared to just $7,853 in the same period of 2024. This dramatic ~1538.7% growth is primarily attributed to the new business line focused on Biochar Asphalt Premix sales, replacing the prior period's revenue from renewable commodities and compost spreading. Correspondingly, the cost of revenue increased to $59,303 from $7,012, resulting in a gross profit of $69,387 in 2025, an impressive ~8150.5% increase from the $841 gross profit in 2024. Despite the strong top-line and gross profit growth in the new segment, overall profitability remains challenged by significant operating expenses. Selling, general, and administrative (SG&A) expenses surged by 134% to $4.37 million for the nine months ended March 31, 2025, up from $1.87 million in the prior year. Key drivers for this increase included a substantial special bonus of $1.25 million awarded to the CEO and increased share-based compensation for non-employees ($997,468) and employees ($294,012), reflecting investments in leadership and talent aligned with the strategic shift. Other operating expenses also appeared in 2025 ($152,273) due to re-categorization of plant maintenance costs.

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The combination of increased revenue and significantly higher operating expenses resulted in a net loss of $3.49 million for the nine months ended March 31, 2025, compared to a net loss of $1.94 million in the same period of 2024. While the core operating segment (Trading and production of building materials) showed increased revenue and gross profit, its operating loss also widened to $3.61 million. The Holding of real property segment recorded a profit before tax of $457,666 in 2025, primarily driven by one-time gains from an insurance claim ($481,513) and the disposal of property, plant, and equipment ($163,644), a notable improvement from a loss of $36,375 in 2024, but this segment's assets significantly decreased due to the property disposal. The Licensing segment remained largely inactive in terms of revenue generation. \ From a liquidity perspective, as of March 31, 2025, VRDR held cash and cash equivalents of $689,363 and deposits with banks totaling $1.80 million, providing approximately $2.49 million in readily available funds.

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\ The company maintained a positive net current asset position of $2.52 million and positive shareholders' equity of $37.94 million. However, cash flow from operations remains negative, with net cash used in operating activities increasing to $2.59 million for the nine months ended March 31, 2025, up from $1.36 million in the prior year, reflecting the higher net loss.

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\ Net cash provided by investing activities was strong at $2.68 million, primarily due to proceeds from asset disposals and insurance recoveries. Net cash provided by financing activities was $325,052, mainly from stock issuances offset by debt and lease repayments. While current liquidity appears sufficient to meet immediate obligations, the ongoing operating losses and cash burn indicate a reliance on future financing activities or successful commercialization to sustain operations and fund growth initiatives. ## Risks and Outlook Despite the promising technological advancements and strategic partnerships, VRDR faces notable risks. The company has an accumulated deficit of $16.97 million, and its future profitability is explicitly contingent upon the successful commercialization and licensing of its technologies, a process that inherently carries uncertainty. The recent assessment of internal controls over financial reporting identified them as not effective, highlighting areas needing improvement such as board oversight, segregation of duties, and financial reporting team capacity. While management is taking steps to address these, including recent appointments of a new CFO and Director, effective internal controls are crucial for financial reliability and investor confidence. Concentration risk is also present, with one customer accounting for 97% of revenue in the production and distribution segment and one vendor accounting for 18% of direct costs in the same segment for the nine months ended March 31, 2025. This dependency could impact financial stability if these relationships change. Furthermore, the company is exposed to economic and political risks in its operating geographies (U.S. and Malaysia) and globally, including potential impacts from geopolitical tensions. Fluctuations in exchange rates, particularly the MYR/USD rate, could also affect reported financial results. As an early-stage player introducing new products, the potential risk of business failure associated with market adoption and execution challenges remains pertinent. Looking ahead, management expresses confidence in the commercialization pathway, anticipating that the upcoming pilot project will lead to a strategic licensing partnership. The long-term vision involves licensing the Verde Net Zero Blueprint globally, particularly targeting nations committed to Net Zero targets by 2050. The success of the NCAT Project and the attainment of high-level certification are expected to be key catalysts for widespread adoption by U.S. DOTs, unlocking the potential for significant revenue from both material sales and the substantial Carbon Removal Credits generated. Discussions with PLUS Malaysia (TICKER:PLUS) also signal potential for scaling operations in Asia. For investors, the core thesis revolves around VRDR's potential to disrupt the traditional infrastructure market with its sustainable, biochar-enhanced materials and unique carbon credit generation model. The recent operational successes and strategic partnerships provide tangible evidence of progress. However, the company is still in the early stages of commercialization, operating at a loss with significant cash burn from operations. The ability to successfully execute its commercialization strategy, secure licensing agreements, effectively monetize carbon credits, and strengthen internal controls will be critical factors determining its future success and addressing the inherent risks. ## Conclusion Verde Resources is navigating a transformative period, pivoting towards the high-growth, impactful sector of sustainable infrastructure. Leveraging its proprietary Catalytic Biofraction Process and Biochar-Asphalt technology, the company has demonstrated the potential for significant operational efficiencies and, notably, the generation of verifiable carbon removal credits – a pioneering achievement in the asphalt industry. Strategic partnerships are actively building the framework for commercialization and global licensing of its innovative "Verde Net Zero Blueprint." While recent financial results reflect the early investment phase, showing increased revenue in the new segment alongside higher operating expenses and net losses, the company maintains a positive working capital position supported by recent financing and asset disposals. The path forward is contingent on successful execution of pilot projects, securing key licensing agreements, and effectively scaling operations and carbon credit monetization. Investors considering VRDR should weigh the significant potential of its differentiated technology and market opportunity against the execution risks, financial requirements, and the need for continued operational and governance improvements as the company matures.