UNITED STATES

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PART I - FINANCIAL INFORMATION

ITEM 1. CONDENSED FINANCIAL STATEMENTS

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VERDE BIO HOLDINGS INC.

Condensed Consolidated Balance Sheets

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VERDE BIO HOLDINGS INC.

Condensed Consolidated Statements of Operations

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VERDE BIO HOLDINGS INC.

(FORMERLY APPIPHANY TECHNOLOGIES HOLDINGS CORP.)

Consolidated Statements of Stockholder’s Deficit

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VERDE BIO HOLDINGS INC.

(FORMERLY APPIPHANY TECHNOLOGIES HOLDINGS CORP.)

Consolidated Statements of Stockholder’s Deficit

(Expressed in US dollars)

For the nine months ended January 31, 2020 and 2021

(The accompanying notes are an integral part of these condensed consolidated interim financial statements)

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VERDE BIO HOLDINGS INC.

Condensed Consolidated Statements of Cashflow

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VERDE BIO HOLDINGS INC.

Notes to the Condensed Consolidated Interim Financial Statements

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VERDE BIO HOLDINGS INC.

Notes to the Condensed Consolidated Interim Financial Statements

(Expressed in US dollars)

(unaudited)

2.Summary of Significant Accounting Policies (continued) 

(b)Use of Estimates (continued) 

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 January 31, 2021, the Company had 96,564,081 (April 30, 2020– 39,994,463) potentially dilutive common shares outstanding.

(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, derivative liabilities and amounts due to related parties. The fair value of cash is determined based on Level 1 inputs. The fair value of the derivative liabilities are determined based on Level 3 inputs. There were no transfers into or out of “Level 3” during the periods presented. 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.

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.  

January 31, 2021

April 30, 2020

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VERDE BIO HOLDINGS INC.

Notes to the Condensed Consolidated Interim Financial Statements

(Expressed in US dollars)

(unaudited)

2.Summary of Significant Accounting Policies (continued) 

(e)Oil and Gas Properties 

The Company utilizes the full-cost method of accounting for petroleum and natural gas properties.  Under this method, the Company capitalizes all costs associated with acquisition, exploration, and development of oil and natural gas reserves, including leasehold acquisition costs, geological and geophysical expenditures, lease rentals on undeveloped properties and costs of drilling of productive and non-productive wells into the full cost pool on a country-by-country basis. When the Company obtains proven oil and gas reserves, capitalized costs, including estimated future costs to develop the reserves proved and estimated abandonment costs, net of salvage, will be depleted on the units-of-production method using estimates of proved reserves. The costs of unproved properties are not amortized until it is determined whether or not proved reserves can be assigned to the properties. Until such determination is made, the Company assesses annually whether impairment has occurred, and includes in the amortization base drilling exploratory dry holes associated with unproved properties.

The Company applies a ceiling test to the capitalized cost in the full cost pool. The ceiling test limits such cost to the estimated present value, using a ten percent discount rate, of the future net revenue from proved reserves based on current economic and operating conditions. Specifically, the Company computes the ceiling test so that capitalized cost, less accumulated depletion and related deferred income tax, do not exceed an amount (the ceiling) equal to the sum of: The present value of estimated future net revenue computed by applying current prices of oil and gas reserves (with consideration of price changes only to the extent provided by contractual arrangements) to estimated future production of proved oil and gas reserves as of the date of the latest balance sheet presented, less estimated future expenditures (based on current cost) to be incurred in developing and producing the proved reserves computed using a discount factor of ten percent and assuming continuation of existing economic conditions; plus the cost of property not being amortized; plus the lower of cost or estimated fair value of unproven properties included in the costs being amortized; less income tax effects related to differences between the book and tax basis of the property. For unproven properties, the Company excludes from capitalized costs subject to depletion, all costs directly associated with the acquisition and evaluation of the unproved property until it is determined whether or not proved reserves can be assigned to the property. Until such a determination is made, the Company assesses the property at least annually to ascertain whether impairment has occurred. In assessing impairment, the Company considers factors such as historical experience and other data such as primary lease terms of the property, average holding periods of unproved property, and geographic and geologic data. The Company adds the amount of impairment assessed to the cost to be amortized subject to the ceiling test.

(f)Revenue Recognition 

The Company derives revenues from the sale of oil and gas. In accordance with ASC 606, “Revenue from Contracts with Customers”, the Company recognizes revenue by applying the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied.

(g)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.

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VERDE BIO HOLDINGS INC.

Notes to the Condensed Consolidated Interim Financial Statements

(Expressed in US dollars)

(unaudited)

3.Oil and Gas Property 

On July 19, 2020, the Company signed a purchase agreement for a 50% right, title and interest to certain oil and gas properties located in the United States in exchange for 10,000,000 shares of common stock of the Company with fair value of $245,000 which was determined based on the fair value of the Company’s common shares on the date of issuance on August 10, 2020.

On September 21, 2020, the Company signed a purchase agreement for a 100% right, title and interest to certain oil and gas properties located in the United States for consideration of 5,000,000 shares of common stock of the Company with a fair value of $126,500 which was issued subsequently (see Note 12). The fair value of the common shares was based on October 1, 2020, which was the date when the shares were issuable and the acquisition agreement closed on January 28, 2021 when title to the properties transferred to the Company.  During the period ended January 31, 2021, the Company received royalty interest of $2,319.

4.Related Party Transactions 

(a)During the nine months ended January 31, 2021, the Company incurred $204,000 (2020 - $nil) in management fees to the President and Director of the Company which was paid in common shares (see note 9). 

(b)During the nine months ended January 31, 2021, the Company incurred $nil (2020 - $33,000) in management fees to the former President and Director of the Company, which was paid in Convertible Preferred Series B shares (see Note 8). 

(c)As at January 31, 2021, the Company owed the President and Director of the Company $63,120 (April 30, 2020 - $19,056). The amount is unsecured non-interest bearing, and due on demand.  

5. Notes Payable  

(a) As at January 31, 2021, the Company owed $3,626 (April 30, 2020 - $3,626) in notes payable to non-related parties. Under the terms of the notes, the amounts are unsecured, bear interest at 6% per annum, and were due on July 31, 2016. The notes bear a default interest rate of 18% per annum.   

(b)  As at January 31, 2021, the Company owed $10,000 (April 30, 2020 - $10,000) in notes payable to non-related parties. Under the terms of the note, the amount is unsecured, bears interest at 5% per annum, and was due on July 6, 2017. The note bears a default interest rate of 12% per annum.

(c)As at January 31, 2021, the Company owed $2,500 (April 30, 2020 - $2,500) in notes payable to non-related parties. Under the terms of the note, the amount is unsecured, bears interest at 5% per annum, and was due on February 1, 2018. The note bears a default interest rate of 12% per annum. 

(d)As at January 31, 2021, the Company owed $15,000 (April 30, 2020 - $15,000) in notes payable to a non-related party. The note payable was issued as a commitment fee and was recorded to additional paid-in capital. Under the terms of the note, the amount is unsecured, bears interest at 8% per annum, and was due on September 15, 2017. The note bears a default interest rate of 20% per annum. 

   (e)On May 7, 2020, the Company received $22,917 (April 30, 2020 - $nil) in notes payable to a non-related party. The note payable was issued as a Small Business Administration Paycheck Protection from Wells Fargo SBA Lending. Under the terms of the note, the amount is unsecured, bears fixed interest at 1% per annum, and is due on May 7, 2022.  

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VERDE BIO HOLDINGS INC.

Notes to the Condensed Consolidated Interim Financial Statements

(Expressed in US dollars)

(unaudited)

6.Convertible Debentures 

(a)On February 13, 2017, the Company issued a convertible debenture, to a non-related party, for proceeds of $105,000. Pursuant to the agreement, the note was issued with an original issue discount and as such the purchase price was $94,500. Under the terms of the debenture, the amount is unsecured, bears interest at 10% per annum, and was due on November 13, 2017. The debenture is convertible into common shares of the Company at a conversion price equal to 60% of the lowest trading price of the Company’s common stock of the ten prior trading days immediately preceding the issuance of the note. In the event of default, the conversion price decreases to 50% of the lowest trading price of the Company’s common stock of the ten prior trading days immediately preceding the issuance of the note and the interest rate increases to 20%. During the nine months ended January 31, 2021, the Company issued 1,115,335 shares of common stock for the conversion of $8,990 principal and $7,740 of accrued interest and the loan was fully converted.  

Due to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and Hedging”. The fair value of the derivative liability resulted in a discount to the note payable of $105,000, of which $20,000 of the discount resulted from debt issuance costs. The carrying value of the convertible note was accreted over the term of the convertible note up to the face value of $105,000. As at January 31, 2021, the carrying value of the note was $nil (April 30, 2020 - $8,990).  

(b)On February 24, 2017, the Company issued a convertible debenture, to a non-related party, for proceeds of $33,000. Under the terms of the debenture, the amount is unsecured, bears interest at 12% per annum pre-default and 20% per annum thereafter, and was due on November 30, 2017. The debenture is convertible into common shares of the Company at a conversion price equal to 58% of the average of the lowest two trading prices of the Company’s common stock of the fifteen prior trading days immediately preceding the issuance of the note.  

Due to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and Hedging. As at January 31, 2021, the loan was in default and the carrying value of the note was $93,965 (April 30, 2020 - $93,965). As at January 31, 2021, the Company has recorded derivative liability of $187,461 (April 30, 2020 – $229,203).

(c)On May 9, 2017, the Company issued a convertible debenture, to a non-related party, totaling $36,450. Pursuant to the agreement, the note was issued with an original issue discount and as such the purchase price was $30,000. Under the terms of the debenture, the amount is unsecured, bears interest at 10% per annum, and was due on February 9, 2018. The debenture is convertible into common shares of the Company at a conversion price equal to 60% of the lowest trading price of the Company’s common stock of the past ten trading days prior to notice of conversion. In the event of default, the conversion price decreases to 50% of the lowest trading price of the Company’s common stock of the ten prior trading days immediately preceding the issuance of the note and the interest rate increases to 20%. During the nine months ended January 31, 2021, the Company issued 5,650,000 shares of common stock for the conversion of $ 8,773 principal and $31,149 of accrued interest. 

Due to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and Hedging”. The fair value of the derivative liability resulted in a discount to the note payable of $36,450, of which $6,450 of the discount resulted from debt issuance costs. The carrying value of the convertible note was accreted over the term of the convertible note up to the face value of $36,450. As at January 31, 2021, the loan was in default and the carrying value of the note was $55,579 (April 30, 2020 - $64,352).  As at January 31, 2021, the Company has recorded derivative liability of $83,033 (April 30, 2020 - $208,701).  

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VERDE BIO HOLDINGS INC.

Notes to the Condensed Consolidated Interim Financial Statements

(Expressed in US dollars)

(unaudited)

6.Convertible Debentures (continued) 

(d)On June 28, 2017, the Company issued a convertible debenture, to a non-related party, totaling $57,250. Pursuant to the agreement, the note was issued with an original issue discount and as such the purchase price and proceeds received was $49,500. Under the terms of the debenture, the amount is unsecured, bears interest at 12% per annum, and was due on March 28, 2018. The debenture is convertible into common shares of the Company at a conversion price equal to the lesser of the 50% of the lowest trading price of the Company’s common stock of the past twenty-five trading days prior to notice of conversion or the issuance of the note. In the event of default, the interest rate increases to 24%. During the year ended April 30, 2020, the Company issued 417,948 shares of common stock for the conversion of $18,044 of the accrued interest and $3,000 of conversion fees and finance costs. During the nine months ended January 31, 2021, the Company issued 3,939,700 shares of common stock for the conversion of $4,796 principal, $15,871 of accrued interest and $500 of conversion fees and finance costs. 

Due to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and Hedging”. The fair value of the derivative liability resulted in a discount to the note payable of $57,250, of which $7,750 of the discount resulted from debt issuance costs. The carrying value of the convertible note was accreted over the term of the convertible note up to the face value of $57,250. As at January 31, 2021, the loan was in default and the carrying value of the note was $50,544 (April 30, 2020 - $55,341) and recorded derivative liability of $70,558 (April 30, 2020 - $148,430).  

(e)On July 19, 2017, the Company issued a convertible debenture, to a non-related party, in the amount of $33,333. Pursuant to the agreement, the note was issued with an original issue discount and as such the purchase price was $28,000. Under the terms of the debenture, the amount is unsecured, bears interest at 12% per annum, and was due on July 19, 2018. The debenture is convertible into common shares of the Company at a conversion price equal to 50% of the lowest trading price of the Company’s common stock of the past twenty-five trading days prior to notice of conversion or the issuance of the note. In the event of default, the interest rate increases to 24%. During the year ended April 30, 2020, the Company issued 377,664 shares of common stock for the conversion of $8,196 of the note and $3,212 of accrued interest. 

Due to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and Hedging”. The fair value of the derivative liability resulted in a discount to the note payable of $33,333, of which $5,333 of the discount resulted from debt issuance costs. The carrying value of the convertible note was be accreted over the term of the convertible note up to the face value of $33,333. As at January 31, 2021, the loan was in default, the carrying value of the note was $1,203 (April 30, 2020 - $1,203) and recorded derivative liability of $8,869 (April 30, 2020 - $7,896).  

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VERDE BIO HOLDINGS INC.

Notes to the Condensed Consolidated Interim Financial Statements

(Expressed in US dollars)

(unaudited)

6.Convertible Debentures (continued) 

(g)On September 28, 2017, the Company issued a convertible debenture, to a non-related party, in the amount of $33,333. Pursuant to the agreement, the note was issued with an original issue discount and as such the purchase price was $25,500. Under the terms of the debenture, the amount is unsecured, bears interest at 12% per annum, and was due on September 28, 2018. The debenture is convertible into common shares of the Company at a conversion price equal to the lesser of the 50% of the lowest trading price of the Company’s common stock of the past twenty-five trading days prior to notice of conversion or the issuance of the note. In the event of default there is a penalty of 10% of the principal balance of the outstanding note and the interest rate increases to 24%. 

Due to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and Hedging”. The fair value of the derivative liability resulted in a discount to the note payable of $33,333, of which $7,833 of the discount resulted from debt issuance costs. The carrying value of the convertible note was accreted over the term of the convertible note up to the face value of $33,333. As at January 31, 2021, the loan was in default, the carrying value of the note was $36,666 (April 30, 2020 - $36,666) and recorded derivative liability of $66,599 (April 30, 2020 - $131,830).  

Included in the convertible debenture agreement is a back end note for up to $33,333 (with the same amount of proceeds, original issue discount, maturity date, interest rate and conversion terms as the convertible debenture mentioned above).  As of January 31, 2021, and at the date of filing, no proceeds have been received on the back-end note.

(h)On November 8, 2017, the Company issued a convertible debenture, to a non-related party, in the amount of $33,000, which was the second tranche of the October 4, 2017 Agreement. Pursuant to the agreement, the note was issued with an original issue discount and as such the purchase price was $30,000. Under the terms of the debenture, the amount is unsecured, bears interest at 10% per annum, and was due on August 8, 2018. The debenture is convertible into common shares of the Company at a conversion price equal to the lesser of the 50% of the lowest trading price of the Company’s common stock of the past ten trading days prior to notice of conversion or the issuance of the note. In the event of default, the conversion price decreases to 40% of the lowest trading price of the Company’s common stock of the ten prior trading days immediately preceding the issuance of the note and the interest rate increases to 20%.  

Due to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and Hedging”. The fair value of the derivative liability resulted in a discount to the note payable of $33,000, of which $3,000 of the discount resulted from debt issuance costs. The carrying value of the convertible note was accreted over the term of the convertible note up to the face value of $33,000. As at January 31, 2021, the loan was in default, the carrying value of the note was $53,084 (April 30, 2020 - $53,084) and recorded derivative liability of $167,546 (April 30, 2020 - $219,765).

(i)On December 26, 2017, the Company issued a convertible debenture, to a non-related party, in the amount of $33,000, which was the final tranche of the October 4, 2017 Agreement. Pursuant to the agreement, the note was issued with an original issue discount and as such the purchase price was $30,000. Under the terms of the debenture, the amount is unsecured, bears interest at 10% per annum, and was due on September 26, 2018. The debenture is convertible into common shares of the Company at a conversion price equal to the lesser of the 50% of the lowest trading price of the Company’s common stock of the past ten trading days prior to notice of conversion or the issuance of the note. In the event of default, the conversion price decreases to 40% of the lowest trading price of the Company’s common stock of the ten prior trading days immediately preceding the issuance of the note and the interest rate increases to 20%. 

Due to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and Hedging”. The fair value of the derivative liability resulted in a discount to the note payable of $33,000, of which $3,000 of the discount resulted from debt issuance costs. The carrying value of the convertible note was accreted over the term of the convertible note up to the face value of $33,000. As at January 31, 2021, the loan was in default, the carrying value of the note was $53,084 (April 30, 2020 - $53,084) and recorded derivative liability of $137,768 (April 30, 2020 - $231,308).

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VERDE BIO HOLDINGS INC.

Notes to the Condensed Consolidated Interim Financial Statements

(Expressed in US dollars)

(unaudited)

6.Convertible Debentures (continued) 

(j)On March 15, 2019, the Company issued a convertible debenture, to a non-related party, in the amount of $36,000. Pursuant to the agreement, the note was issued with an original issue discount and as such the purchase price was $30,000. Under the terms of the debenture, the amount is unsecured, bears interest at 10% per annum (20% default interest rate), and is due on December 15, 2019. The debenture is convertible into common shares of the Company at a conversion price equal to the lesser of the 65% of the lowest trading price of the Company’s common stock of the past twenty trading days prior to notice of conversion or the issuance of the note. During the quarter ended January 31, 2021, the Company incurred $nil (April 30, 2020 - $21,995) in default penalties that were added to the principal of the note.  

Due to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and Hedging”. The fair value of the derivative liability resulted in a discount to the note payable of $36,000, of which $6,000 of the discount resulted from debt issuance costs. The carrying value of the convertible note will be accreted over the term of the convertible note up to the face value of $36,000. As at January 31, 2021, the loan was in default, the carrying value of the note was $57,995 (April 30, 2020 - $57,995) and recorded derivative liability of $93,245 (April 30, 2020 - $127,967).

(k)On September 12, 2019, the Company issued a convertible debenture, to a non-related party, in the amount of $33,000. Pursuant to the agreement, the note was issued with an original issue discount of $3,000 and as such the purchase price was $30,000. Under the terms of the debenture, the amount is unsecured, bears interest at 10% per annum (20% default interest rate), and due on June 12, 2020, which was extended until June 12, 2021.  The debenture is convertible into common shares at a conversion price of $0.078 per share. Upon default, the note will accrue interest at 20% per annum, incur penalties up to 150% of the principal and accrued interest balance, and will have a variable exercise price of 65% of the lowest closing prices in the 20 trading days prior to conversion.  The Company evaluated the convertible notes for a beneficial conversion feature in accordance with ASC 470-20 “Debt with Conversion and Other Options” and determined that there was a beneficial conversion features as the conversion price was below the closing stock price on the commitment date. The Company recognized the intrinsic value of the embedded beneficial conversion feature of $30,462 as additional paid-in capital and reduced the carrying value of the convertible note to $2,538. The carrying value will be accreted over the term of the convertible notes up to their face value of $33,000. In the event of default, the conversion price decreases to 45% of the lowest trading price of the Company’s common stock of the twenty prior trading days immediately preceding the issuance of the note and the interest rate increases to 20%.  

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VERDE BIO HOLDINGS INC.

Notes to the Condensed Consolidated Interim Financial Statements

(Expressed in US dollars)

(unaudited)

6.Convertible Debentures (continued) 

As at January 31, 2021, the carrying value of the convertible notes was $28,193 (April 30, 2020 - $18,852) and had an unamortized discount of $nil (April 30, 2020 - $9,341). During the nine months ended January 31, 2021, the Company recorded accretion expense of $9,341 (April 30, 2020 - $9,454).

(m)On January 14, 2020, the Company issued a convertible debenture, to a non-related party, in the amount of $35,000. Pursuant to the agreement, the note was issued with an original issue discount of $5,000 and as such the purchase price was $30,000. Under the terms of the debenture, the amount is unsecured, bears interest at 10% per annum (20% default interest rate), and is due on October 14, 2020, which was extended to April 14, 2021. The debenture is convertible into common shares of the Company at a conversion price of $0.06 per share. Upon default, the note will accrue interest at 20% per annum, incur penalties up to 150% of the principal and accrued interest balance, and will have a variable exercise price of 65% of the lowest closing prices in the 20 trading days prior to conversion.  The Company evaluated the convertible notes for a beneficial conversion feature in accordance with ASC 470-20 “Debt with Conversion and Other Options”. The Company determined that the conversion price was below the closing stock price on the commitment date, and the convertible notes contained a beneficial conversion feature.  

The Company recognized the intrinsic value of the embedded beneficial conversion feature of $23,333 as additional paid-in capital and reduced the carrying value of the convertible note to $11,667. The carrying value will be accreted over the term of the convertible notes up to their face value of $35,000.

As at January 31, 2021, the carrying value of the convertible notes was $35,000 (April 30, 2020 - $17,983) and had an unamortized discount of $nil (April 30, 2020 - $17,017). During the nine months ended January 31, 2021, the Company recorded accretion expense of $17,017 (April 30, 2020 - $6,316).

(n)On January 23, 2020, the Company issued a convertible debenture, to a non-related party, in the amount of $34,000, which was the first tranche of a convertible debenture totaling $68,000. Pursuant to the agreement, the note was issued with an original issue discount of $8,000 and as such the purchase price was $60,000. On January 23, 2020, the Company received the first tranche totaling $30,000 and recognized an original issue discount of $4,000. Under the terms of the debenture, the amount is unsecured, bears interest at 10% per annum (20% default interest rate), and is due on October 23, 2020, which was extended to April 23, 2021. The debenture is convertible into common shares of the Company at a conversion price of $0.048 per share. Upon default, the note will accrue interest at 20% per annum, incur penalties up to 150% of the principal and accrued interest balance, and will have a variable exercise price of 65% of the lowest closing prices in the 20 trading days prior to conversion.  The Company evaluated the convertible notes for a beneficial conversion feature in accordance with ASC 470-20 “Debt with Conversion and Other Options”. The Company determined that the conversion price was below the closing stock price on the commitment date, and the convertible notes contained a beneficial conversion feature. The Company recognized the intrinsic value of the embedded beneficial conversion feature of $22,667 as additional paid-in capital and reduced the carrying value of the convertible note to $11,333. The carrying value will be accreted over the term of the convertible notes up to their face value of $34,000. 

As at January 31, 2021, the carrying value of the convertible notes was $34,000 (April 30, 2020 - $16,836) and had an unamortized discount of $nil (April 30, 2020 - $17,164). During the nine months ended January 31, 2021, the Company recorded accretion expense of $17,164 (April 30, 2020 - $5,503).

(o)On March 4, 2020, the Company issued a convertible debenture, to a non-related party, in the amount of $34,000. This is the second tranche of the January 23, 2020 convertible note. Pursuant to the agreement, the note was issued with an original issue discount of $4,250 and as such the purchase price was $29,750. Under the terms of the debenture, the amount is unsecured, bears interest at 10% per annum (20% default interest rate), and is due on December 4, 2020, which was extended to June 30, 2021. The debenture is convertible into common shares of the Company at a conversion price of $0.048 per share. Upon default, the note will accrue interest at 20% per annum, incur penalties up to 150% of the principal and accrued interest balance, and will have a variable exercise price of 65% of the lowest closing prices in the 20 trading days prior to conversion.  The Company evaluated the convertible notes for a beneficial conversion feature in accordance with ASC 470-20 “Debt with Conversion and Other Options”. The Company determined that the conversion price was below the closing stock price on the commitment date, and the convertible notes contained a beneficial conversion feature. 

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VERDE BIO HOLDINGS INC.

Notes to the Condensed Consolidated Interim Financial Statements

(Expressed in US dollars)

(unaudited)

6.Convertible Debentures (continued) 

The Company recognized the intrinsic value of the embedded beneficial conversion feature of $29,750 as additional paid-in capital and reduced the carrying value of the convertible note to $4,250. The carrying value will be accreted over the term of the convertible notes up to their face value of $34,000.

As at January 31, 2021, the carrying value of the convertible note was $34,000 (April 30, 2020 - $6,720) and had an unamortized discount of $nil (April 30, 2020 - $27,280). During the nine months ended January 31, 2021, the Company recorded accretion expense of $27,280 (April 30, 2020 - $2,470).

(p)  On March 25, 2020, the Company issued a convertible debenture, to a non-related party, in the amount of $13,000. Pursuant to the agreement, the note was issued with an original issue discount of $3,000 and as such the purchase price was $10,000. Under the terms of the debenture, the amount is unsecured, bears interest at 10% per annum (20% default interest rate), and is due on December 25, 2020 which was extended to June 30, 2021. The debenture is convertible into common shares of the Company at a conversion price of $0.018 per share. Upon default, the note will accrue interest at 20% per annum, incur penalties up to 150% of the principal and accrued interest balance, and will have a variable exercise price of 65% of the lowest closing prices in the 20 trading days prior to conversion. As at January 31, 2021, the carrying value of the convertible note was $34,000 (April 30, 2020 - $6,720) and had an unamortized discount of $nil (April 30, 2020 - $27,280). During the nine months ended January 31, 2021, the Company recorded accretion expense of $27,280 (April 30, 2020 - $2,470).

The Company evaluated the convertible notes for a beneficial conversion feature in accordance with ASC 470-20 “Debt with Conversion and Other Options”. The Company determined that the conversion price was below the closing stock price on the commitment date, and the convertible notes contained a beneficial conversion feature.

The Company recognized the intrinsic value of the embedded beneficial conversion feature of $12,500 as additional paid-in capital and reduced the carrying value of the convertible note to $500. The carrying value will be accreted over the term of the convertible notes up to their face value of $13,000.

As at January 31, 2021, the carrying value of the convertible note was $13,000 (April 30, 2020 - $849) and had an unamortized discount of $nil (April 30, 2020 - $12,151). During nine months ended January 31, 2021, the Company recorded accretion expense of $12,151 (April 30, 2020 - $349).

(q) On May 28, 2020, the Company issued a convertible debenture, to a non-related party, in the amount of $20,000 as a financing fee related to the Equity Purchase Agreement discussed in Note 10. Under the terms of the debenture, the amount is unsecured, bears interest at 10% per annum (20% default interest rate), and is due on February 28, 2021. The debenture is convertible into common shares of the Company at a conversion price of $0.01 per share. Upon default, the note will accrue interest at 20% per annum, incur penalties up to 150% of the principal and accrued interest balance, and will have a variable exercise price of 65% of the lowest closing prices in the 20 trading days prior to conversion. As at January 31, 2021, the carrying value of the convertible note was $34,000 (April 30, 2020 - $6,720) and had an unamortized discount of $nil (April 30, 2020 - $27,280). During the nine months ended January 31, 2021, the Company recorded accretion expense of $27,280 (April 30, 2020 - $2,470).  

The Company evaluated the convertible notes for a beneficial conversion feature in accordance with ASC 470-20 “Debt with Conversion and Other Options”. The Company determined that the conversion price was below the closing stock price on the commitment date, and the convertible notes contained a beneficial conversion feature.

The Company recognized the intrinsic value of the embedded beneficial conversion feature of $19,500 as additional paid-in capital and reduced the carrying value of the convertible note to $500. The carrying value will be accreted over the term of the convertible notes up to their face value of $20,000.

As at January 31, 2021, the carrying value of the convertible note was $7,664. (April 30, 2020 - $nil) and had an unamortized discount of $12,336 (April 30, 2020 - $nil). During the nine months ended January 31, 2021, the Company recorded accretion expense of $7,162 (April 30, 2020 - $nil).

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VERDE BIO HOLDINGS INC.

Notes to the Condensed Consolidated Interim Financial Statements

(Expressed in US dollars)

(unaudited)

6.Convertible Debentures (continued) 

(r) On September 10, 2020, the Company issued a convertible debenture, to a non-related party, in the amount of $35,000. Pursuant to the agreement, the note was issued with an original issue discount of $5,000 and as such the purchase price was $30,000. Under the terms of the debenture, the amount is unsecured, bears interest at 10% per annum (20% default interest rate), and is due on June 10, 2021. The debenture is convertible into common shares of the Company at a conversion price of $0.0132 per share. Upon default, the note will accrue interest at 20% per annum, incur penalties up to 150% of the principal and accrued interest balance, and will have a variable exercise price of 65% of the lowest closing prices in the 20 trading days prior to conversion. As at January 31, 2021, the carrying value of the convertible note was $34,000 (April 30, 2020 - $6,720) and had an unamortized discount of $nil (April 30, 2020 - $27,280). During the nine months ended January 31, 2021, the Company recorded accretion expense of $27,280 (April 30, 2020 - $2,470).

The Company evaluated the convertible notes for a beneficial conversion feature in accordance with ASC 470-20 “Debt with Conversion and Other Options”. The Company determined that the conversion price was below the closing stock price on the commitment date, and the convertible notes contained a beneficial conversion feature.

The Company recognized the intrinsic value of the embedded beneficial conversion feature of $23,030 as additional paid-in capital and reduced the carrying value of the convertible note to $11,970. The carrying value will be accreted over the term of the convertible notes up to their face value of $35,000.

As at January 31, 2021, the carrying value of the convertible note was $20,960 (April 30, 2020 - $nil) and had an unamortized discount of $14,040 (April 30, 2020 - $nil). During the nine months ended January 31, 2021, the Company recorded accretion expense of $8,990 (2020 - $nil).

(s)  On November 3, 2020, the Company issued a convertible debenture, to a non-related party, in the amount of $35,000. Pursuant to the agreement, the note was issued with an original issue discount of $5,000 and as such the purchase price was $30,000. Under the terms of the debenture, the amount is unsecured, bears interest at 10% per annum (20% default interest rate), and is due on August 3, 2021. The debenture is convertible into common shares of the Company at a conversion price of $0.0118 per share. Upon default, the note will accrue interest at 20% per annum, incur penalties up to 150% of the principal and accrued interest balance, and will have a variable exercise price of 65% of the lowest closing prices in the 20 trading days prior to conversion. The Company evaluated the convertible notes for a beneficial conversion feature in accordance with ASC 470-20 “Debt with Conversion and Other Options”. The Company determined that the conversion price was below the closing stock price on the commitment date, and the convertible notes contained a beneficial conversion feature. 

The Company recognized the intrinsic value of the embedded beneficial conversion feature of $29,322 as additional paid-in capital and reduced the carrying value of the convertible note to $5,678. The carrying value will be accreted over the term of the convertible notes up to their face value of $35,000.

As at January 31, 2020, the carrying value of the convertible note was $10,267 (April 30, 2020 - $nil) and had an unamortized discount of $24,733 (April 30, 2020 - $nil). During the nine months ended October 31, 2020, the Company recorded accretion expense of $4,589 (2020 - $nil).

(t)On January 6, 2021, the Company issued a convertible debenture, to a non-related party, in the amount of $55,500. Pursuant to the agreement, the note was issued with an original issue discount of $3,500 and as such the purchase price was $52,000. Under the terms of the debenture, the amount is unsecured, bears interest at 12% per annum (22% default interest rate), and is due on January 6, 2022. The debenture may be convertible at any time after 180 days of the date of issuance into common shares of the Company at a conversion price equal to the lesser of the 58% of the lowest trading price of the Company’s common stock of the past twenty trading days prior to notice of conversion or the issuance of the note. The note has a prepayment penalty during the first 180 days of up to 140% of the principal balance.   

    Due to this provision, the Company considered whether the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and Hedging”. As the note was not convertible until 180 days following issuance, no derivative liability was initially recognized.  

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VERDE BIO HOLDINGS INC.

Notes to the Condensed Consolidated Interim Financial Statements

(Expressed in US dollars)

(unaudited)

6.Convertible Debentures (continued) 

(u)  On December 22, 2020, the Company issued a convertible debenture, to a non-related party, in the amount of $30,556. Pursuant to the agreement, the note was issued with an original issue discount and as such the purchase price was $25,000. Under the terms of the debenture, the amount is unsecured, bears interest at 10% per annum (5% default interest rate), and is due on June 22, 2021. On January 1, 2021, the maturity date was amended to 50 calendar days after the origination date.  The debenture is convertible into common shares of the Company at a conversion price equal to 50% of the average of the two lowest trading prices of the Company’s common stock of the past twenty-five trading days prior to notice of conversion or the issuance of the note. During the nine months ended January 31, 2021, the Company made a cash repayment of $34,883, which resulted in penalty of $14,793. 

Due to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and Hedging”. The carrying value of the convertible note will be accreted over the term of the convertible note up to the face value of $30,556. As at January 31, 2021, the carrying value of the note was $10,465 (April 30, 2020 - $nil) and recorded derivative liability of $9,540 (April 30, 2020 - $nil).

7.Derivative Liability 

The Company records the fair value of the of the conversion price of the convertible debentures disclosed in Note 6 in accordance with ASC 815, Derivatives and Hedging. The fair value of the derivative was calculated using a Binomial model. The fair value of the derivative liability is revalued on each balance sheet date with corresponding gains and losses recorded in the consolidated statement of operations. During the nine months ended January 31, 2021, the Company recorded a gain on the change in fair value of derivative liability of $265,095 (January 31, 2020 – loss of $460,346). As at January 31, 2021, the Company recorded a derivative liability of $995,538 (April 30, 2020 - $1,605,568).

A summary of the activity of the derivative liability is shown below:

8.Convertible Preferred Series B Stock Liability 

On June 13, 2019, the Company designated 1,000,000 shares of preferred stock as Series B. The holders of Series B preferred shares are not entitled to receive dividends except as may be declared by the Board at its sole and absolute discretion. Each Series B preferred share is convertible into common shares according to the following formula: the Stated Value of $1.10 per share of Series B preferred stock divided by the closing price of the Common Stock on the day prior to the conversion. Holders of Series B preferred stock shall not have voting rights.

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VERDE BIO HOLDINGS INC.

Notes to the Condensed Consolidated Interim Financial Statements

(Expressed in US dollars)

(unaudited)

9.Common Shares 

Authorized: 5,000,000,000 common shares with a par value of $0.01 per share.

On February 14, 2020, the Company effected a reverse stock split on basis of 1 new common share for every 100 old common shares. The impact of these reverse stock split has been applied on a retroactive basis to all periods presented.

On May 22, 2020, the Company issued 20,000,000 common shares valued at $204,000 for management services to the President and Director of the Company.

On May 22, 2020, the Company issued 4,000,000 common shares valued at $40,800 for consulting services.

On May 22, 2020, the Company issued 500,000 common shares with valued at $5,100 for legal services.

On June 5, 2020, the Company issued 1,313,800 common shares with a fair value of $92,097 for the conversion of $5,412 of accrued interest, $55,340 of convertible notes payable, conversion fees of $500 and derivative liability of $82,030 and resulting in loss on settlement of debt of $4,155.

On June 5, 2020, the Company issued 91,300 common shares with a fair value of $6,400 for the conversion of $1,370 accrued interest, and derivative liability of $5,031 and resulting in gain on settlement of debt of $nil.

On June 10, 2020, the Company issued 250,000 common shares for proceeds of $5,000.

On June 29, 2020, the Company issued 1,024,035 common shares with a fair value of $37,889 for the conversion of $8,990 of convertible notes payable, accrued interest of $6,370 and derivative liability of $25,681 and gain on settlement of debt of $3,152.

On July 1, 2020, the Company issued 1,000,000 common shares as private placement with the par value of $1,000 and received proceeds of $20,000.

On August 10, 2020, the Company issued 10,000,000 common shares pursuant to the terms of the oil and gas option agreement valued at $245,000.  See Note 3.

On August 10, 2020, the Company issued 1,250,000 common shares as private placement with the par value of $1,250 and received proceeds of $25,000.

On August 19, 2020, the Company issued 1,200,000 common shares with a fair value of $20,400 for the conversion of accrued interest of $9,060 and gain on settlement of debt of $7,759.

On October 5, 2020, the Company issued 4,801,500 shares of common stock with a fair value of $96,030 for the conversion of 87,300 shares of Series B preferred stock (see Note 8).

On October 9, 2020, the Company issued 2,000,000 shares of common stock with a fair value of $52,400 for the conversion of accrued interest of $13,100 and loss on settlement of debt of $28,958.

On December 22, 2020, the Company issued 913,756 shares of common stock with at fair value of $27,413 for Commitment fee for Equity Purchase Agreement (see Note 6).

On December 28, 2021, the Company issued 2,450,000 common shares with a fair value of $105,350 for the conversion of $8,989 of accrued interest, $8,773 of convertible notes payable, and derivative liability of $96,394 and resulting in gain on settlement of debt of $8,806.

On January 21, 2021, the Company issued 2,625,900 common shares with a fair value of $65,910 for the conversion of $10,459 of accrued interest, $4,796 of convertible notes payable, conversion fees of $500 and derivative liability of $54,546 and resulting in gain on settlement of debt of $4,391.

On January 25, 2021, the Company issued 1,501,500 shares of common stock with a fair value of $30,031 for the conversion of 27,300 shares of Series B preferred stock (see Note 8).

On January 28, 2021, the Company issued 1,900,000 common shares for proceeds of $19,000.

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VERDE BIO HOLDINGS INC.

Notes to the Condensed Consolidated Interim Financial Statements

(Expressed in US dollars)

(unaudited)

9.Common Shares (continued) 

Subscription Payable 

On January 26, 2021, the Company settled $50,000 of accounts payable and accrued liabilities with the issuance of 5,000,000 common shares with a fair value of $135,000, resulting in a loss on settlement of debt of $85,000.  

On January 28, 2021, the Company issued 5,000,000 common shares relating to the closing of the acquisition of oil and gas property for $126,500.  Refer to Note 3. The common shares were issued subsequent to January 31, 2021.  Refer to Note 12. 

10.Preferred Shares 

Authorized: 10,000,000 preferred shares with a par value of $0.001 per share

Convertible Preferred Series A stock

On April 18, 2017, the Company designated 500,000 shares of preferred stock as Series A. The holders of Series A preferred shares are entitled to receive dividends equal to the amount of the dividend or distribution per share of common stock payable multiplied by the number of shares of common stock the shares of Series A preferred shares held by such holder are convertible into. Each Series A preferred shares is convertible at a factor of 10,000 Series A shares for one common share.  Each holder of Series A preferred shares is entitled to cast 10,000 votes for every one Series A preferred share held.  

Convertible Preferred Series B stock – see Note 8

11.Commitments and Contingencies 

On May 28, 2020, the Company and an unrelated party entered into equity financing agreement, whereby the investor shall 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 (see Note 9) As of January 31, 2020, no common shares have been sold pursuant to the equity financing agreement.

On February 5, 2020, the Company signed a joint venture agreement (the “Joint Venture”) for a 25% share in the Hemp seed and genetics industry. The Company has committed to contribute $300,000 to the joint venture on a to be mutually agreed upon schedule. Additionally, the Company will issue 1,500,000 common shares to the other members of the joint venture as compensation for their initial contributions. On May 11, 2020, the Joint Venture was cancelled.  

12.Subsequent Events 

Subsequent to January 31, 2021, the Company issued 97,550,000 common shares for proceeds of $975,000 to various third party investors.  

On February 2, 2021, the Company issued a convertible promissory note to an unrelated party for $43,500. Pursuant to the agreement. The Note contains an interest rate of twelve percent (12%) per annum and has a maturity date of February 2, 2022. The amounts due under the Note are convertible at any time after 180 days at a rate of 58% of the market price, defined as the lowest Trading Price for the Common Stock during the twenty (20) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date.

On February 8, 2021, the Company issued 1,736,842 shares of common stock for the conversion of 30,000 shares of Series B preferred stock.

On February 9, 2021, the Company issued 5,000,000 shares of common stock pursuant to the terms of the oil and gas option agreement valued at $126,500.

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VERDE BIO HOLDINGS INC.

Notes to the Condensed Consolidated Interim Financial Statements

(Expressed in US dollars)

(unaudited)

12.Subsequent Events (continued) 

On February16, 2021, the Company issued 3,751,900 shares of common stock for the conversion for the conversion of $764 accrued interest, conversion fees of $500 and derivative liability of $19,896.

On February 22, 2021, the Company issued 2,926,000 shares of common stock for the conversion for the conversion of $27,431accrued interest.

On March 3, 2021, the Company issued 2,926,000 shares of common stock for the conversion for the conversion of $2,832 accrued interest and derivative liability of $19,259.

On March 16, 2021, the Company acquired certain overriding royalty interests of various oil and gas properties in exchange for $152,000.

On March 11, 2021, the Company issued 1,580,384 shares of common stock for the conversion for the conversion of $37 accrued interest and derivative liability of $8,455.

During March 2021, the Company issued 8,052,054 shares of common stock for the conversion of 110,000 shares of Series B preferred stock.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATION

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Nine Months Ended January 31, 2021 and 2020

During the nine months ended January 31, 2021, the Company recorded operating expenses of $542,392 compared to operating expenses of $131,825 for the nine months ended January 31, 2020.  The increase in operating expenses is due to an increase in professional fees of $88,343 due to an increase in audit and legal fees as well as costs incurred for additional filings relating to our Forms S-1 and 1A, $40,800 increase in consulting fees, $165,970 increase in management fees, and an increase in general and administrative fees of $113,885 due to an increase in day-to-day operating costs relating to our acquisition of oil and gas rights.  

Net loss for the nine months ended January 31, 2021 was $613,938 compared to a net loss of $1,023,870 during the nine months ended January 31, 2020.  In addition to operating expenses, during the nine months ended January 31, 2021, the Company incurred a gain of $265,095 for the change in fair value of the derivative liabilities offset by a loss of $52,656 on the extinguishment of convertible debt and interest expense of $258,891.  Comparatively, the Company incurred a loss of $460,346 on the change in fair value of the derivative liability, interest and accretion expense of $141,079 and a loss on the extinguishment of debt of $290,620 for the nine months ended January 31, 2020.   

For the nine months ended January 31, 2021, the Company recorded a basic and diluted loss per share of $0.02 compared with a basic and diluted net loss per share of $0.72 per share for the nine months ended January 31, 2020.

Liquidity and Capital Resources

As of January 31, 2021, the Company's total asset balance was $388,766 compared to $1,631 as of April 30, 2020. The increase in total assets was due to the acquisition of oil and gas rights for $375,414 during the period.

As of January 31, 2021, the Company had total liabilities of $2,706,410 compared with total liabilities of $3,136,509 as at April 30, 2020. The decrease in total liabilities was due to a decrease in the fair value of derivative liabilities of $610,030 and the conversion of convertible preferred Series B stock into shares of common stock during the period resulting in a reduction of liabilities of $126,060.  The decrease was offset by an increase in accounts payable of $65,156 and an increase of related party debt of $44,064 due to lack of sufficient cash flow to repay outstanding obligations as they become due as well as an increase in convertible debentures of $173,854 as the Company relied on more convertible debt financing during the current period to support its ongoing operating cash flows.  

As of January 31, 2021, the Company had a working capital deficit of $2,693,058 compared with $3,134,878 as of April 30, 2020.  The change in working capital deficit was due to the conversion of preferred series B stock into common shares of the Company in the amount of $56,822 offset by an increase in deficit due to insufficient operating cash flows which resulted in an increase in accounts payable and amounts due to related parties during the current fiscal period.    

Cash Flow from Operating Activities

During the nine months ended January 31, 2021, the Company used $214,648 of cash for operating activities compared with $83,053 of cash for operating activities during the nine months ended January 31, 2020. The increase in cash used for operating activities was due to an increase operating activity compared to the prior year.

Cash Flow from Investing Activities

During the nine months ended January 31, 2021, the Company used $3,914 on costs relating to investments in its oil and gas wells.  The Company did not have any investing activities during the nine months ended January 31, 2020.  

Cash Flow from Financing Activities

During the nine months ended January 31, 2021, the Company received $230,283 of cash from financing activities consisting of $69,000 from the issuance of common stock, $137,000 from the issuance of new convertible debentures,

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$42,250 from advances, and $22,917 in the form of an SBA paycheck protection loan compared to $115,630 received during the nine months ended January 31, 2020 which included $115,630 from convertible debentures.  

Going Concern

We have not attained profitable operations and are dependent upon obtaining financing to pursue any extensive acquisitions and activities. At January 31, 2021, the Company has not recognized significant revenue, has a working capital deficit of $2,693,058, and has an accumulated deficit of $8,135,683. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These condensed consolidated 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.

On March 11, 2020, 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 is not currently determinable but management continues to monitor the situation.

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.

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ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 4.  CONTROLS AND PROCEDURES

ITEM 1.  LEGAL PROCEEDINGS.

ITEM 1A. RISK FACTORS.

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ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.

ITEM 4.  MINE SAFETY DISCLOSURES.

ITEM 5.  OTHER INFORMATION.

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ITEM 6.  EXHIBITS

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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.

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: