| SUBSEQUENT EVENTS | 10. SUBSEQUENT
EVENTS The Company’s management has
evaluated subsequent events up to August 13, 2024, the date these consolidated financial statements were issued, pursuant to the
requirements of ASC 855 and has determined to disclose the following subsequent events. Amendment
and Restatement of Articles of Incorporation On May 9, 2024, the Company filed the Amended
and Restated Articles of Incorporation to, among other modifications, (a) increase the number of shares of capital stock which the Company
is authorized to issue to 2,000,000,000 shares, (b) authorize the issuance of up to 150,000,000 shares of “blank check” preferred
stock, the rights, preferences and privileges of which may be designated from time to time by the board of directors of the Company, and
(c) provide that special meetings of stockholders may be called only by the board of directors of the Company. Cancellation
of Prior Class A Preferred Stock and Class B Preferred Stock and Designation of New Class A Preferred Stock and Class B Preferred Stock On
May 2, 2024, the Certificates of Designation of Preferences, Rights and Limitations of the Class A Preferred Stock and Class B Preferred
Stock were cancelled with the Nevada Secretary of State. On May 9, 2024, following the filing of the Amended and Restated Articles of
Incorporation, the Company filed a Certificate of Designation of Preferences, Rights and Limitations of Class A Convertible Preferred
Stock, par value $0.01 per share (“New Class A Preferred Stock”), and a Certificate of Designation of Preferences, Rights
and Limitations of Class B Convertible Preferred Stock, par value $0.01 per share (“New Class B Preferred Stock”), with the
Nevada Secretary of State to designate 2,000 shares of the Company’s authorized and unissued preferred stock as New Class A Preferred
Stock and 10,000 shares of the Company’s authorized and unissued preferred stock as New Class B Preferred Stock, and establish
the voting powers, designations, preferences and relative participation and other rights and qualifications, limitations and restrictions
of such securities. Acquisition
of Verde and Name Change During
the year ended April 30, 2024, the Company began winding-up the business of Sensabues to reduce operating expenses associated with maintaining
the exhale breath technology patents and in connection therewith, management of the Company sought to establish a new business segment
related to the development of energy related businesses which led to the entry into the Merger Agreement. The Merger was completed effective
at 4:15 p.m., Eastern Time, on May 9, 2024 and the separate existence of Merger Sub ceased. Following the Merger, effective at 5:00 p.m.
Eastern Time, pursuant to articles of merger filed with the Nevada Secretary of State, Verde was merged with and into the Company with
the Company continuing as the surviving corporation and the Company changed its name to “Formation Minerals, Inc.”. The
Merger was accounted for as a reverse acquisition because Verde was determined to be the accounting acquirer (legal subsidiary) and the
Company was determined to be the legal acquirer (accounting acquiree) under FASB ASC Topic 805, Business Combinations. The determination
was primarily based on the evaluation of the following facts and circumstances taken into consideration:
● The pre-Merger stockholders of Verde owned a majority of the voting power of the Company on a fully diluted basis following the completion of the Merger and the other transactions contemplated in the Merger Agreement, and the stockholders of the Company and Verde immediately prior to the Merger owned approximately 32.71% and 68.29%, respectively, of the voting power conveyed by the three classes of equity interests of FOMI in the Merger, on a fully diluted basis;
● The
senior manager of Verde became the senior manager of the Company; and
● The
operations of Verde would comprise the only ongoing operations of the Company. Under
the reverse acquisition accounting, the Merger was treated as Verde issuing equity interests for the net assets of the Company with no
goodwill or intangible assets recorded. The
total fair value of consideration to effect the Merger was $11,421,249 and was composed of:
● Pursuant to the Merger, at the Effective Time, FOMI issued 6,921,350 shares of Common Stock to acquire all 2,078,599,390 outstanding shares of the common stock, par value $0.001, of Verde (the “Verde Common Stock”), based on an exchange ratio of 300.47. The fair value of the consideration effectively transferred was calculated using the number of shares of Verde Common Stock that would have been issued to the stockholders of FOMI on the date the Merger was consummated to give FOMI an equivalent ownership interest in Verde as it has in FOMI multiplying the market price of the shares of Verde Common Stock. The fair value of those shares of Verde Common Stock was determined at $11,419,946 based on the market quote on the date the Merger was consummated.
● Pursuant to the Merger Agreement, at the Effective Time, FOMI issued 1,665 shares of New Class A Preferred Stock to acquire all outstanding shares of Series A preferred stock, par value $0.001, of Verde (the “Verde Series A Preferred Stock”), which was 500,000 by using an exchange ratio of 300.47. The fair value of the consideration effectively transferred was calculated using the number of shares of Verde Series A Preferred Stock that would have been issued to the stockholders of FOMI on the date the Merger was consummated to give FOMI an equivalent ownership interest in Verde as it has in FOMI multiplying the fair value per share of Verde Series A Preferred Stock. The fair value of those shares of Verde Series A Preferred Stock was determined at $500.
● Pursuant to the Merger Agreement, at the Effective Time, FOMI issued 5,354 shares of New Class B preferred stock of FOMI to acquire all outstanding shares of Series C preferred stock, par value $0.001, of Verde (the “Verde Series C Preferred Stock”), which was 803 by using an exchange ratio of 0.15. The fair value of the consideration effectively transferred was calculated using the number of shares of Verde Series C Preferred Stock that would have been issued to the stockholders of FOMI on the date the Merger was consummated to give FOMI an equivalent ownership interest in Verde as it has in FOMI multiplying the fair value per share of Verde Series C Preferred Stock. The fair value per share of Verde Series C Preferred Stock was determined at $803. The difference, in the amount of $12,146,531,
between the fair value of consideration in the Merger and the net assets of FOMI on the date the Merger was consummated that was $(833,612)
was recognized as a reduction in equity. Verde’s unaudited financial
information is summarized below as of the date the Merger was consummated:
$
Current assets
Cash 3,704
Accounts receivable 64,257
Prepayments and other receivables 85,867
Total current assets 153,828
Non-current assets
Oil and natural gas properties 394,736
Total assets 548,564
Current liabilities
Accounts payable and accrued liabilities 754,356
Amount due to related parties 85,763
Convertible notes payable 32,583
Warrant liabilities 1,228,018
Total liabilities 2,100,720
Temporary Equity
Series C Preferred Stock 1
Series C accrued dividends 185,757
Total Temporary Equity 185,758
Stockholders' deficiency
Series A Preferred Stock 500
Common stock 2,078,600
Additional paid-in capital 16,195,788
Accumulated deficit (20,012,802 )
Total deficit (1,737,914 )
Total liability, temporary equity and stockholders' deficiency 548,564 Also in connection with the Merger, effective immediately following
the effective time of the Merger: (i) pursuant to the Merger Agreement and the side letter dated as of February 6, 2024, by and among
the Company, Verde and Spartan Capital Securities, LLC, a New York limited liability company (“Spartan”), the Company issued
to Spartan 5,000,000 shares of Common Stock in consideration of services Spartan provided to Verde; and (ii) pursuant to the Merger Agreement,
the Company issued to Li Sze Tang 23,110,000 shares of Common Stock in consideration of services provided to the Company as an advisor
in connection with the Merger and the other transactions contemplated in the Merger Agreement. Promissory
Note with 1800 Diagonal Lending LLC On
May 14, 2024 (the “Issue Date”), the Company issued and sold to 1800 Diagonal Lending LLC, a Virginia limited liability company
(“Diagonal”), a promissory note (the “Diagonal Note”) in the principal amount of $123,050 (the “Diagonal
Loan”), for a purchase price of $107,000, reflecting an original issue discount of $16,050, which matures on March 15, 2025, pursuant
to a securities purchase agreement (the “Diagonal Purchase Agreement”), dated May 14, 2024, by and between the Company
and Diagonal. In addition, the Company reimbursed Diagonal’s expenses of $7,000. A
one-time interest charge of 12% of the principal amount, or $14,766, was applied on the Issue Date to the Diagonal Loan. Accrued, unpaid
interest and outstanding principal, subject to adjustments, must be paid by the Company to Diagonal in ten (10) monthly payments of $13,781.60,
that began on June 15, 2024, for aggregate repayment amount of $137,816.00. The Company has a five (5) day grace period with respect
to each payment date. The Company has the right to accelerate payments or prepay in full at any time with no prepayment penalty. Any
amount of principal or interest on the Diagonal Note which is not paid when due shall bear interest at the rate of 22% per annum from
the date due thereof until the same is paid. Purchase
and Sale Agreement with Private Buyer On
May 22, 2024, the Company sold certain mineral and royalty interests to a private buyer for $140,000 in cash pursuant to a purchase and
sale agreement. Securities
Purchase Agreement with GHS Investments LLC On
June 10, 2024, the Company entered into a Securities Purchase Agreement (“GHS Purchase Agreement”) with GHS Investments LLC,
a Nevada limited liability company (“GHS”), for the purchase of up to 250 shares of New Class B Preferred Stock, in a private
placement at purchase price of $1,000 per share, for aggregate gross proceeds of up to $250,000 (the “GHS Financing”). Pursuant
to the GHS Purchase Agreement (i) effective June 10, 2024, the Company issued and sold 50 shares of New Class B Preferred Stock (the
“Initial Shares”) to GHS for an aggregate of $50,000 in gross proceeds (the “Initial Closing”) and issued to
GHS 100 shares of New Class B Preferred Stock (the “Commitment Shares”) as an equity incentive for the purchase of the shares
of New Class B Preferred Stock pursuant the GHS Purchase Agreement, including the potential issuance and sale of the Additional Shares
(as defined below), and (ii) GHS agreed to purchase at one or more times, up to an aggregate of 200 additional shares of New Class B
Preferred Stock (the “Additional Shares”) at the same purchase price per share at any time prior to the one year anniversary
of the date of the GHS Purchase Agreement, subject to the satisfaction or waiver of the conditions described below. Also
on June 10, 2024, in connection with the GHS Financing, the Company entered into a placement agency agreement (the “Placement Agency
Agreement”) with Icon Capital Group LLC (the “Placement Agent”), pursuant to which the Placement Agent agreed to act
as placement agent on a “reasonable best efforts” basis in connection with the GHS Financing. Pursuant to the Placement Agency
Agreement, the Company agreed to pay the Placement Agent a fee equal to 2.0% of the aggregate gross proceeds raised in the GHS Financing.
In connection with the Initial Closing, the Company paid the Placement Agent $1,000. On
August 6, 2024, GHS purchased 50 shares of New Class B Preferred Stock at the total purchase price of $50,000. In connection with this
purchase of 50 shares of New Class B Preferred Stock, the Company paid the Placement Agent a fee of $1,000. Purchase
and Sale Agreement with Private Seller On
June 27, 2024, the Company entered into a purchase and sale agreement (the “Purchase and Sale Agreement”) with a private
seller, pursuant to which the Company agreed to purchase all the rights, title and interest in and to various oil, gas, condensate, and
other hydrocarbons that may be produced and saved from the lands described in certain oil, gas and mineral leases (the “Property”),
for a purchase price of $220,000 in cash. The acquisition is subject to customary closing conditions, including the receipt of adequate
financing, and was expected to close on June 27, 2024. However, the closing date was extended 90 days to September 25, 2024. Pursuant
to the terms of the Purchase and Sale Agreement, the Company is entitled to the cash flow from oil and gas production attributable to
the Property beginning on July 1, 2024. The Company is working to secure the requisite financing to complete this acquisition. |
