Apogee 21 Holdings, Inc.

What they do

Verde Bio Holdings, Inc. acquires and develops onshore oil and gas properties, focusing on non-operating working interests and royalty interests. The company does not drill or operate wells; it earns royalty revenues from production on leased acreage without bearing drilling or operating costs. Since September 2020, it has completed 18 purchases of mineral, royalty, and surface properties.

Revenue drivers

• Oil and gas royalty interests — Primary revenue source; dividends from production on acquired mineral and royalty interests.
• Non-operated working interests — Selective investments in working interests, relying on operators' expertise; not a primary focus.
• Surface properties — Occasional purchases of surface properties; not a separate revenue stream identified in filings.

Recent performance

For the nine months ended January 31, 2024, royalty revenues were $211,181, down from $794,578 in the prior-year period, attributed to lower oil and gas prices and property sales. The three-month period ended January 31, 2024 saw royalty revenues of $75,991 vs. $170,312 a year earlier. Net loss for the three months was $1,493,092, including a $1,070,842 charge from settling related party debts with Jack County property. Operating cash flow used in operations was $943,209 for the nine months. As of January 31, 2024, total assets were $1.9M, liabilities $1.6M, and cash $11,561.

Strategy

Management focuses on acquiring high-probability, lower-risk onshore oil and gas properties, leveraging operators' technical expertise. The company aims to grow through strategic purchases of royalty and non-operating working interests to eventually reduce reliance on equity or debt financing. In December 2023, it entered a merger agreement with SensaSure Technologies Inc., with a plan to form a minerals pure-play company; the merger is expected to close in Q2 2024.

Risks

• Cash flow insufficiency — The company requires higher royalty revenues to fund operations without external financing; current cash flow is negative.
• Dependence on oil and gas prices — Revenues are directly tied to production volumes and commodity prices; recent declines in prices reduced royalty revenues significantly.
• Regulatory and environmental exposure — Extensive government regulation could limit production rates, affect prices, or impose environmental costs.
• Merger execution risk — The pending merger with SensaSure may not close as anticipated or on the expected timeline, subject to conditions and waivers.

Outlook

Management expects the merger with SensaSure Technologies to close in the second calendar quarter of 2024, pending satisfaction of closing conditions. The company continues to evaluate property acquisitions and may need to raise additional capital via equity or debt to fund expansion. No forward-looking guidance on revenue or profitability was provided.