NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS

JANUARY 31, 2024

NOTE 1 - ORGANIZATION AND BUSINESS OPERATIONS

Natural Resource Holdings, Inc. (the “Company”) was incorporated in Nevada on April 19, 2016. We were a development stage company that intended to develop an online beauty sample subscription service.

On November 26, 2020, the Company completed an acquisition of working interests in certain mining properties. The mining property right was fully impaired during the year ended April 30, 2022.

On October 18, 2022, majority of the Company’s shareholders approved a reverse stock split of our issued and outstanding shares of common stock on a basis of up to twenty (20) old shares for one (1) new share of common stock. The reverse stock split was approved by FINRA for approval on February 21, 2023. The financial statements retroactively reflect the reverse stock split.

On January 8, 2023, the Company entered into an agreement with a surveying consulting firm for mining and mineral exploration and surveying services on Potter County, PA Utica Shale area oil and gas properties.

On February 14, 2023, the Company’s name changed to Natural Resources Holdings, Inc. and the Company trading symbol changed to “NRHI” effective March 21, 2023.

We are currently focusing on mining business.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited interim financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the nine months ended January 31, 2024 are not necessarily indicative of the results that may be expected for the year ending April 30, 2024. Notes to the unaudited interim financial statements that would substantially duplicate the disclosures contained in the audited financial statements for fiscal year 2023 have been omitted. This report should be read in conjunction with the audited financial statements and the footnotes thereto for the fiscal year ended April 30, 2023 included in the Company’s Form 10-K as filed with the Securities and Exchange Commission on July 31, 2023.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Fair Value of Financial Instruments

ASC 820 “Fair Value Measurements and Disclosures” establishes a three-tier fair value hierarchy, which prioritizes the inputs in measuring fair value. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market.

These tiers include:

Level 1: defined as observable inputs such as quoted prices in active markets;

Level 2: defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and

Level 3: defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

The carrying value of accounts payable and accrued liabilities, accrued interest, current portion of long-term debt, other party loan and loan from director approximates its fair value due to their short-term maturity. 

Mining Property

Costs of lease, exploration, carrying and retaining unproven mineral properties are expensed as incurred. The Company expenses all mineral exploration costs as incurred as it is still in the exploration stage. If the Company identifies proven and probable reserves in its investigation of its properties and upon development of a plan for operating a mine, it would enter the development stage and capitalize future costs until production is established. When a property reaches the production stage, the related capitalized costs are amortized on a units-of-production basis over the proven and probable reserves following the commencement of production.

Interest expense allocable to the cost of developing mining properties and to construct new facilities is capitalized until assets are ready for their intended use.

To date, the Company has not established the commercial feasibility of any exploration prospects; therefore, all exploration costs are being expensed.

ASC 930-805, “Extractive Activities-Mining: Business Combinations” states that mineral rights consist of the legal right to explore, extract, and retain at least a portion of the benefits from mineral deposits. Mining assets include mineral rights which are considered tangible assets under ASC 930-805. ASC 930-805 requires that mineral rights be recognized at fair value as of the acquisition date. As a result, the direct costs to acquire mineral rights are initially capitalized as tangible assets. Mineral rights include costs associated with acquiring patented and unpatented mining claims.

ASC 930-805 provides that in measuring the fair value of mineral assets, an acquirer should take into account both:

The Company assesses the carrying costs of the capitalized mineral properties for impairment under ASC 360-10, “Impairment of long-lived assets”, and evaluates its carrying value under ASC 930-360, “Extractive Activities - Mining”, annually. An impairment is recognized when the sum of the expected undiscounted future cash flows is less than the carrying amount of the mineral properties. Impairment losses, if any, are measured as the excess of the carrying amount of the mineral properties over its estimated fair value.

Based on the Company’s evaluation, no impairment has been recorded on the mineral properties for the period ended January 31, 2024.

On January 8, 2023, the Company incurred mining exploration expense of $8,500 for surveying services on Potter County, PA Utica Shale area oil and gas properties performed during January and February 2023.

During the three months ended January 31, 2024, the Company purchased a mining claim (the Montreal Star Property) of $34,487 and a mining claim (Union Park 002) of $4,750.

Intangible Assets

The Company accounts for intangible assets (including mining right) in accordance with ASC 350 “Intangibles-Goodwill and Other.”

ASC 350 requires that goodwill and other intangibles with indefinite lives be tested for impairment annually or on an interim basis if events or circumstances indicate that the fair value of an asset has decreased below its carrying value. In addition, ASC 350 requires that goodwill be tested for impairment at the reporting unit level (operating segment or one level below an operating segment) on an annual basis and between annual tests when circumstances indicate that the recoverability of the carrying amount of goodwill may be in doubt. Application of the goodwill impairment test requires judgment, including the identification of reporting units, assigning assets and liabilities to reporting units, assigning goodwill to reporting units, and determining the fair value. Significant judgments required to estimate the fair value of reporting units include estimating future cash flows, determining appropriate discount rates and other assumptions. Changes in these estimates and assumptions or the occurrence of one or more confirming events in future periods could cause the actual results or outcomes to materially differ from such estimates and could also affect the determination of fair value and/or goodwill impairment at future reporting dates.

The cost of intangible assets with determinable useful lives is amortized to reflect the pattern of economic benefits consumed, either on a straight-line or accelerated basis over the estimated periods benefited. Patents, technology and other intangibles with contractual terms are generally amortized over their respective legal or contractual lives. When certain events or changes in operating conditions occur, an impairment assessment is performed and lives of intangible assets with determinable lives may be adjusted.

Revenue Recognition

The Company recognized revenue from the sales of mineral products produced from mining operations in accordance with ASC 606,”Revenue Recognition” following the five steps procedure:

Step 1: The contract has been signed by both parties or when the invoice has been generated and provided to the customer

Step 2: The performance obligations are stated or implied in the contract or invoice

Step 3: The transaction price has been identified in the contract or invoice

Step 4: The Company has allocated the transaction price to the performance obligations pursuant to the contract or invoice

Step 5: The Company satisfied the performance obligations when the mineral products delivered to the purchaser

The Company recognized revenue from the royalty revenue in accordance with ASC 606,”Revenue Recognition” following the five steps procedure:

Step 1: The contract has been signed by both parties for royalty fees

Step 2: The performance obligations are stated or implied in the contract

Step 3: The transaction price has been identified in the contract

Step 4: The Company has allocated the transaction price to the performance obligations pursuant to the contract

Step 5: The Company has satisfied the performance obligations at the same period as the sales that generate the royalty payment.

Inherent in the fair value calculation of an ARO are numerous assumptions and judgments including the ultimate settlement amounts, inflation factors, credit adjusted discount rates, timing of settlement, and changes in the legal, regulatory, environmental and political environments. To the extent future revisions to these assumptions impact the fair value of the existing ARO liability, a corresponding adjustment is made to the mining property balance. Settlements greater than or less than amounts accrued as ARO are recorded as a gain or loss upon settlement.

Income Tax

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance on deferred tax assets is established when management considers it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Tax benefits from an uncertain tax position are only recognized if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate resolution. Interest and penalties related to unrecognized tax benefits are recorded as incurred as a component of income tax expense. The Company has not recognized any tax benefits from uncertain tax positions for any of the reporting periods presented.

The Company has not filed income tax returns from year ended April 30, 2016 through April 30, 2020. $25,000 annual late tax filing interest and penalty was accrued for an aggregate amount of $125,000.

Related Party Balances and Transactions

The Company follows FASB ASC 850, “Related Party Disclosures,” for the identification of related parties and disclosure of related party transaction. (Note 5)

Basic and Diluted Income (Loss) Per Share

The Company computes income (loss) per share in accordance with FASB ASC 260, “Earnings per Share” which requires presentation of both basic and diluted earnings per share on the face of the statement of operations. Basic loss per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of outstanding common shares during the period. Diluted income (loss) per share gives effect to all dilutive potential common shares outstanding during the period. Dilutive loss per share excludes all potential common shares if their effect is anti-dilutive.

As of January 31, 2024 and January 31, 2023, convertible notes were dilutive instruments and were not included in the calculation of diluted loss per share as their effect would be antidilutive:

As of January 31, 2024 and January 31, 2023, the total convertible shares from convertible notes totaling $126,667 and $209,531 issued to an unaffiliated party from February 4, 2022 through January 31, 2024 with conversion rate of $0.35 per shares was 361,906 shares and 598,659 shares. (Note 6)

Recent accounting pronouncements

In August 2020, the FASB issued ASU 2020-06, ASC Subtopic 470-20 “Debt-Debt with “Conversion and Other Options” and ASC subtopic 815-40 “Hedging-Contracts in Entity’s Own Equity”. The standard reduced the number of accounting models for convertible debt instruments and convertible preferred stock. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting; and, (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. ASU2020-06 removes from U.S. GAAP the separation models for (1) convertible debt with a cash conversion feature (“CCF”) and (2) convertible instruments with a beneficial conversion feature (“BCF”). With the adoption of ASU2020-06, entities will not separately present in equity an embedded conversion feature these debts. The amendments in this update are effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company has chosen to early adopt this standard on its year ended April 30, 2022 financial statements and did not record BCF on the issuance of convertible notes with conversion rate below the Company’s market stock price on the date of note issuance.

In June 2016, the FASB issued Accounting Standards Update No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which introduced the expected credit losses methodology for the measurement of credit losses on financial assets measured at amortized cost basis, replacing the previous incurred loss methodology. In November 2019, the FASB issued ASU 2019-10 highlighted the adoption timeline. For smaller reporting entities, Topic 326 is effective for annual periods beginning after December 15, 2022, including interim periods within those fiscal years, of which is effective for the Company on April 1, 2023. The adoption of this standard did not have a material impact on the Company's financial statements.

Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future financial statements.

Management has considered all recent accounting pronouncements issued. The Company’s management believes that these recent pronouncements will not have a material effect on the Company’s financial statements.

NOTE 3 - GOING CONCERN

The Company’s financial statements have been prepared assuming that it will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.

As reflected in the financial statements, the Company had an accumulated deficit of $2,442,817. For the nine months ended January 31, 2024, the Company suffered from a net loss of $2,027,693 and working capital deficit of $153,164.

The Company is attempting to commence operations and generate sufficient revenue; however, the Company’s cash position may not be sufficient to support the Company’s daily operations. Management intends to raise additional funds by way of a private or public offering. While the Company believes in the viability of its strategy to commence operations and generate sufficient revenue and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate sufficient revenue and its ability to raise additional funds by way of a public or private offering.

The financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

The Company has acquired the mining property rights on the two mining properties which consist of the legal right to explore, extract and also expect to retain at least a portion of the benefits from mineral deposits. The plan is to start drilling tests and the mining operations will commence once it is viable to do so. Currently, the Company is in the process of engaging an exploration company to handle the project. The surveying and exploration proposals consist of drilling vertical holes into the ground to identify the best locations to mine. There are proposals to drill from 6 to 50 holes, and the Company is still evaluating the proposals to find the best plan. The Company estimates the exploration stage will start between May to October 2024 and development stage will start before October 2024 upon successful conclusion of exploration stage.

NOTE 5 - RELATED PARTY TRANSACTIONS

On July 1, 2021, the Company issued a promissory note of $153,913 to the Company’s director for previous operating expenses of $28,913 and acquisition of mining interest of $125,000 which were paid by the director on the Company’s behalf as of April 30, 2021. The note is unsecured with annual interest rate of 2% and has a mature date of December 31, 2022.

In December 2020, the Company acquired several gold mining claims in Canada. The Company planned for exploration on the properties. Due to Covid and economic downturn, the Company was unable to proceed with the mining property exploration. Upon the expiration of the two years term of the property mining rights, the Company decided not to extend beyond the original term of the mining rights and was fully impaired during year ended April 30, 2022.

On July 31, 2021, the Company issued a promissory note of $2,822 for the amount the related party paid to the vendors on behalf of the Company during the three months ended July 31, 2021. The note is unsecured with annual interest rate of 2% and has a mature date of December 31, 2022.

On October 31, 2021, the Company issued a promissory note of $11,450 for the amount the related party paid to the vendors on behalf of the Company during the three months ended October 31, 2021. The note is unsecured with annual interest rate of 2% and has a mature date of December 31, 2022.

On January 31, 2022, the Company issued a promissory note of $7,021 for the amount the related party paid to the vendors on behalf of the Company during the three months ended January 31, 2022. The note is unsecured with annual interest rate of 2% and has a mature date of December 31, 2022.

On February 4, 2022, the Company’s director sold the promissory notes with aggregate principal of $175,206 and accrued interest of $1,956 to an unaffiliated party. (Note 5)

On June 7, 2023, the Company issued 5,000,000 shares of common stock to the Director of the Company valued at $2,000,000 as management salary for the period from September 29, 2020 to September 28, 2022. (Note 8)

On February 11, 2022, the Company entered into an agreement with the unaffiliated note holder of the promissory note of $175,206 sold to him on February 4, 2022 for the amendment of the promissory note to convertible note which bears annual interest rate of 2%, has a maturity date of December 31, 2025 and is convertible at $0.35 per share for the Company common stock. With the adoption of ASU2020-06, the Company did not record beneficial conversion feature (“BCF”) on the convertible note. The Company assessed the note amendment for a debt extinguishment or modification in accordance with ASC 470-50. Although the change in fair value of the note from the note amendment was calculated at 3% which fell below 10% of the carrying value of the original convertible note, the additional of a note conversion feature indicates the note amendment is regarded as a note extinguishment. On February 11, 2022, gain on note extinguishment of $13,344 and note discount of $13,344 was recognized. On September 13, 2023, the Company issued 500,000 shares of common stock for the conversion of principal amount of $175,000. (Note 8) As of January 31, 2024, the convertible note payable was $206.

On April 30, 2022, the Company issued a convertible note of $2,500 for the amount the unaffiliated party paid to the vendors on behalf of the Company during the three months ended April 30, 2022. The note bears annual interest rate of 2%, has a maturity date of December 31, 2025 and is convertible at $0.35 per share for the Company common stock.

On July 31, 2022, the Company issued a convertible note of $7,600 for the amount the unaffiliated party paid to the vendors on behalf of the Company during the three months ended July 31, 2022. The note bears annual interest rate of 2%, has a maturity date of December 31, 2025 and is convertible at $0.35 per share for the Company common stock.

On October 31, 2022, the Company issued a convertible note of $11,725 for the amount the unaffiliated party paid to the vendors on behalf of the Company during the three months ended October 31, 2022. The note bears annual interest rate of 2%, has a maturity date of December 31, 2025 and is convertible at $0.35 per share for the Company common stock.

On January 31, 2023, the Company issued a convertible note of $12,500 for the amount the unaffiliated party paid to the vendors on behalf of the Company during the three months ended January 31, 2023. The note bears annual interest rate of 2%, has a maturity date of December 31, 2025 and is convertible at $0.35 per share for the Company common stock.

On April 30, 2023, the Company issued a convertible note of $15,755 for the amount the unaffiliated party paid to the vendors on behalf of the Company during the three months ended April 30, 2023. The note bears annual interest rate of 2%, has a maturity date of December 31, 2025 and is convertible at $0.35 per share for the Company common stock.

On July 31, 2023, the Company issued a convertible note of $14,394 for the amount the unaffiliated party paid to the vendors on behalf of the Company during the three months ended July 31 2023. The note bears annual interest rate of 2%, has a maturity date of December 31, 2025 and is convertible at $0.35 per share for the Company common stock.

On October 31, 2023, the Company issued a convertible note of $13,550 for the amount the unaffiliated party paid to the vendors on behalf of the Company during the three months ended October 31, 2023. The note bears annual interest rate of 2%, has a maturity date of December 31, 2025 and is convertible at $0.35 per share for the Company common stock.

On January 31, 2024, the Company issued a convertible note of $48,437 for the amount the unaffiliated party paid to the vendors on behalf of the Company during the three months ended January 31, 2024. The note bears annual interest rate of 2%, has a maturity date of December 31, 2025 and is convertible at $0.35 per share for the Company common stock.

During the nine months ended January 31, 2024 and 2023, interest expense of $2,310 and $2,862 was incurred, respectively.

During the nine months ended January 31, 2024 and 2023, amortization on note discount of $2,583 and $2,583 was incurred, respectively.

As of January 31, 2024 and April 30, 2023, the convertible notes payable, net of note discount of $6,550 and $9,133, was $120,117 and $216,153, respectively.

NOTE 7 - LOAN PAYABLE

The Company has outstanding long-term loan payable of $6,973 and $6,973 as of January 31, 2024 and April 30, 2023, respectively. The loan payable is unsecured with annual interest rate of 6% and had an original maturity date of April 20, 2020. The maturity date is extended through April 20, 2025.

Interest expense was $316 and $316 for the nine months ended January 31, 2024 and 2023, respectively.

As of January 31, 2024 and April 30, 2023, accrued interest was $2,439 and $2,123 respectively.

NOTE 8 - STOCKHOLDER’S EQUITY

The Company has 75,000,000, $0.001 par value shares of common stock authorized.

On October 18, 2022, the sole director of the Company approved a reverse stock split of our issued and outstanding shares of common stock on a basis of up to twenty (20) old shares for one (1) new share of common stock. The reverse stock split was approved by FINRA for approval on February 21, 2023. The financial statements retroactively reflect the reverse stock split.

On June 7, 2023, the Company issued 5,000,000 shares of common stock to the Director of the Company valued at $2,000,000 as management salary for the period from September 29, 2020 to September 28, 2022. (Note 5)

On September 13, 2023, the Company issued 500,000 shares of common stock for the conversion of convertible debts of $175,000. (Note 6)

As of January 31, 2024 and April 30, 2023, the Company had 5,709,891 shares and 209,891 shares issued and outstanding, respectively.