RANGE IMPACT, INC. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations As used in this discussion and analysis and elsewhere in this Quarterly Report, the “Company”, “we”, “us” or “our” refer to Malachite Innovations, Inc., a Nevada corporation. Cautionary Statement The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Unaudited Condensed Financial Statements and the related notes thereto contained in Part I, Item 1 of this Quarterly Report. The information contained in this Quarterly Report on Form 10-Q is not a complete description of our business or the risks associated with an investment in our common stock. We urge you to carefully review and consider the various disclosures made by us in this Quarterly Report and in our other reports filed with the Securities and Exchange Commission (the “SEC”), including our Annual Report on Form 10-K for the fiscal year ended March 31, 2021 filed on May 19, 2021, and the related audited financial statements and notes included therein. Certain statements made in this Quarterly Report on Form 10-Q constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). Forward-looking statements are projections in respect of future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “intend,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, which may cause our or our industry’s actual results, levels of activity or performance to be materially different from any future results, levels of activity or performance expressed or implied by these forward-looking statements. These risks and uncertainties include: general economic and financial market conditions; our ability to obtain additional financing as necessary; our ability to continue operating as a going concern; any adverse occurrence with respect to our business or; results of our research and development activities that are less positive than we expect; our ability to bring our intended products to market; market demand for our intended products; shifts in industry capacity; product development or other initiatives by our competitors; fluctuations in the availability and costs of raw materials required in our drug development process; other factors beyond our control; and the other risks described under the heading “Risk Factors” in our Annual Report on Form 10-K filed with the SEC on May 19, 2021. Although we believe that the expectations and assumptions reflected in the forward-looking statements we make are reasonable, we cannot guarantee future results, levels of activity or performance. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those expressed by any forward-looking statements. As a result, readers should not place undue reliance on any of the forward-looking statements we make in this report. Forward-looking statements speak only as of the date on which they are made. Except as required by law, we undertake no obligation to revise or update publicly any forward-looking statements for any reason. Company Overview Unless otherwise provided in this Quarterly Report, references to the “Company,” “we,” “us”, and “our” refer to Malachite Innovations, Inc., a Nevada corporation formed on June 29, 2007 as Legend Mining Inc., and its consolidated subsidiaries. On October 10, 2011, we completed a merger with our wholly-owned subsidiary, Stevia First Corp., whereby we changed our name from “Legend Mining Inc.” to “Stevia First Corp.” On July 15, 2016, our Board of Directors and shareholders approved a name change to “Vitality Biopharma, Inc.” On September 30, 2021, we completed a merger with our wholly-owned subsidiary, Malachite Innovations, Inc., whereby we changed our name from “Vitality Biopharma, Inc.” to “Malachite Innovations, Inc.” Malachite Innovations is a company focused on improving the health and wellness of people and the planet. We seek to accomplish this objective through the operation of two wholly-owned subsidiaries: (i) Graphium Biosciences, Inc. which is focused on developing new innovations targeting the health and wellness of people, with a particular focus on advancing our broad portfolio of over 100 glycosylated cannabinoid prodrugs and (ii) Daedalus Ecosciences, Inc. which is focused on evaluating new innovations targeting the health and wellness of the planet, with a particular focus on deploying technological innovations and eco-friendly solutions to remedy difficult environmental situations in economically challenged communities. Our corporate headquarters is located in Cleveland, Ohio. As of November 14, 2021, we employed three full-time employees, including one research professional working in our office and laboratory space in Rocklin, California. We also have, in the past, engaged the services of scientific and regulatory consultants to assist in our research and development activities, which is an approach that provides us with flexible and highly-experienced resources to advance our clinical efforts while maintaining a relatively lower overhead cost structure. Graphium Biosciences Overview Graphium Biosciences is focused on the advancement of pharmaceuticals and innovative technologies that improve the lives of patients. We seek to achieve this objective through the development of novel cannabinoid pharmaceutical prodrugs known as cannabosides. We conduct our operations using our own personnel and facilities with the support of third-party resources to advance our drug development programs. 13 Our cannabosides are cannabinoid-glycoside prodrugs, which were discovered through application of the Company’s proprietary enzymatic bioprocessing technologies that are converted within the body after administration from an inactive molecule into a pharmacologically active drug. Currently, the Company has produced more than 100 novel cannabosides, including glycosylated tetrahydrocannabinol (THC), cannabidiol (CBD), cannabidivarin (CBDV) and cannabinol (CBN), that are covered by worldwide patent applications for composition of matter, method of production and method of use. Cannaboside Prodrugs A prodrug is a compound that, after administration, is metabolized into a pharmacologically active drug. Prodrugs are often designed to improve drug properties and reduce known or expected toxicities and adverse side effects. By using our proprietary enzymatic bioprocessing technologies, our clinical research team has developed a novel family of prodrugs by combining cannabinoid and glucose molecules. The resulting compounds, known as cannabosides, have unique commercial applications and patentable compositions of matter, which are separate and distinct from ordinary cannabinoids. The advantages of cannabosides may include: (i) administration in a convenient oral formulation, (ii) targeted delivery with release in the colon or large intestine, (iii) improved stability with limited degradation or drug metabolism, and (iv) delayed release enabling longer-lasting effects and fewer administrations by patients. Our proprietary glycosylation process, which results in adding one or more glucose molecules to compounds, may enable our new cannabosides to act as prodrugs that achieve targeted delivery of the bioactive compounds of cannabinoids to the gastrointestinal tract. Glycosylated compounds are generally more stable and water soluble, so upon ingestion, we believe they will remain intact and transit through the esophagus, stomach and upper intestine with limited absorption or degradation from stomach acids. However, once the glycosylated compounds reach the large intestine, we expect them to encounter glycoside hydrolase enzymes secreted by the human intestinal microbiota that will cleave the polar glucose residues and release the active cannabinoid compound primarily in the large intestine or colon. We have focused our research and development activities on the glycosylation of cannabinoids given their well-known positive effects on the human endocannabinoid system. Our research and development activities originally focused on the glycosylation of CBD and then later expanded into the glycosylation of THC. The use of the cannabinoid THC has been shown to provide substantial anti-inflammatory benefits on the human body, among other benefits, but is limited as a pharmaceutical option given its psychoactive and intoxicating properties. However, by glycosylating THC, we have learned through initial animal studies that the binding of glucose and THC molecules restricts the release of THC into the body’s digestive system until the prodrug reaches the large intestine, at which point the glycoside hydrolase enzymes cleave the glucose from the prodrug and the THC is released in a targeted and restricted manner. Further, we have learned through our initial animal studies that this targeted release of THC, which could be provided in very low doses to achieve physiologically beneficial results, serves as an anti-inflammatory agent in the lower gastrointestinal tract and minimizes the amount of THC absorbed into the blood stream, therefore avoiding the psychoactive and intoxicating properties that hinder the broader pharmaceutical use of THC. 14 We are developing our THC-glycoside prodrugs for the treatment of gastrointestinal diseases, including inflammatory bowel disease (IBD) and irritable bowel syndrome (IBS) because of the targeted release described previously. IBD is a frequently chronic inflammatory condition where parts of the digestive system become inflamed from an overactive immune response. The disease can lead to irreversible damage to the gastrointestinal tract and may require surgery to remove affected areas of the intestine. Two major forms of the disease are Crohn’s disease, which can affect any part of the digestive system, and ulcerative colitis, which often affects the colon or large intestine. The disease is often unpredictable with periods of painful and debilitating symptoms followed by periods of remission with limited symptoms. IBS has similar symptoms to IBD, including abdominal pain, but the underlying disease process is quite different. IBS is a functional gastrointestinal disorder that commonly affects the large intestine and is characterized by abdominal cramping, diarrhea, constipation, and pain. Currently, patients suffering from IBD are frequently prescribed anti-inflammatory drugs such as steroids, biologics and immunosuppressants, and patients suffering from IBS are prescribed antibiotics, antidepressants and gastrointestinal motility compounds, all of which often result in unwanted side effects. Our most promising THC-glycoside (VBX-100) is being developed as an oral prodrug for the treatment of IBD and IBS. VBX-100 was selected from our THC-glycoside portfolio for compatibility with commercial production techniques and the optimal prodrug delivery profile that maximizes intestinal anti-inflammatory properties while minimizing psychoactive or intoxicating effects. Initial pre-clinical studies on the efficacy of VBX-100 in animal models have shown favorable outcomes, including reduced inflammation of the gastrointestinal tract and no measurable systemic THC found in tissue examined using highly-sensitive testing equipment. Our pre-clinical development plan, which includes dose range finding studies, GLP toxicology studies, pharmacokinetic studies and other pre-clinical research, is anticipated to be completed during the 2 nd half of calendar year 2022, subject to the Company securing sufficient additional funding or entering into a strategic partnership. After our satisfactory completion of all of the prerequisite pre-clinical in vitro and in vivo studies, an Investigational New Drug (IND) application would be filed with the U.S. Food and Drug Administration (FDA) and, upon receiving FDA approval, we would initiate our Phase 1 clinical trial, subject to the Company securing sufficient additional funding or entering into a strategic partnership. In addition to our research and development activities related to our THC-glycoside compounds, we are expanding and diversifying our research and development activities to include the potential safety, efficacy and commercialization of our patented CBD-glycoside compounds. CBD has well-known anti-anxiety, anti-inflammatory and anti-microbial properties, but unlike THC, CBD is non-psychoactive and non-intoxicating. By glycosylating CBD, we can create CBD-glucose compounds that may enable a targeted and concentrated delivery of CBD in the gastrointestinal tract. Currently we are evaluating the optimal CBD-glycoside delivery mechanism, which may include an aqueous drink formulation since our glycosylation process significantly improves the water solubility of the CBD molecule. Enzymatic Processing Methods The Company originally developed its proprietary enzymatic bioprocessing technologies to attach glucose molecules to the molecules of stevia as part of our activities in the stevia processing industry. We then expanded the application of this proprietary technology to attach glucose molecules to cannabinoids, including THC and CBD. We may pursue additional opportunities to develop new products utilizing this proprietary technology. Orphan Drug Designation In January 2018, we filed a request with the FDA’s Office of Orphan Products Development (OOPD) for an Orphan Drug Designation of our VBX-100 prodrug for the treatment of pediatric ulcerative colitis. In March 2018, the OOPD denied our request based, in part, on the FDA’s decision to no longer grant Orphan Drug Designation status to drugs for pediatric subpopulations of common diseases (i.e., diseases or conditions with an overall prevalence of over 200,000), unless the use of the drug in the pediatric subpopulation meets the regulatory criteria for an orphan subset, or the disease in the pediatric subpopulation is considered a different disease from the disease in the adult population. In December 2019, we received a letter from the OOPD informing us that the FDA determined that the Company may be eligible for pediatric-subpopulation designation because we submitted our original request for an Orphan Drug Designation before the guidance Clarification of Orphan Designation of Drugs and Biologics for Pediatric Subpopulations of Common Diseases was finalized in July 2018. 15 Accordingly, in May 2020, we filed a response letter with the OOPD addressing the other deficiencies noted in the Company’s original submission in January 2018, which included, among other things (1) support for the prevalence of pediatric ulcerative colitis; (2) our scientific rationale for the specific animal models used in our pre-clinical animal studies; and (3) more comprehensive supporting documentation for the use of VBX-100 in pediatric patients with ulcerative colitis. In August 2020, we received a letter from the OOPD informing us that it was unable to grant our request for an Orphan Drug Designation status because our VBX-100 prodrug was administered before and after colitis was induced in our in vivo mouse studies, which resulted in the need for more scientific data to support the efficacy of our VBX-100 prodrug in a treatment-only setting. As a result, we were advised to perform a second in vivo mouse study in which our VBX-100 prodrug would be administered only after colitis was induced in order to provide a clear indication that the active drug was released only after ulcerative colitis was present. In May 2021, we completed the treatment-only in vivo mouse study and filed a supplemental response letter with the OOPD providing the requested in vivo treatment-only mouse study results in support of our position that VBX-100 may be effective as a treatment for pediatric ulcerative colitis. On August 9, 2021, we received a letter from the OOPD stating that we have been granted Orphan Drug Designation for our glycosylated cannabinoid VBX-100 for the treatment of pediatric ulcerative colitis. The Company is currently evaluating several regulatory pathways for the advancement of its VBX-100 prodrug through pre-clinical and clinical studies, including leveraging the benefits of the Orphan Drug Designation granted by the OOPD. Daedalus Ecosciences Overview Daedalus Ecosciences is focused on new innovations addressing the health and wellness of the planet, with a particular focus on deploying technological innovations and eco-friendly solutions to remedy difficult environmental situations in economically challenged communities. The Company is actively evaluating a number of attractive investment opportunities intended to advance this mission with a particular focus on investments that advance environmental, social and governance principles. Results of Operations Three Months Ended September 30, 2021 and September 30, 2020 Our net loss during the three months ended September 30, 2021 was $504,358 compared to a net loss of $472,932 for the three months ended September 30, 2020. We had no revenue during either the 2021 or 2020 period. During the three months ended September 30, 2021, we incurred general and administrative expenses in the aggregate amount of $436,523 compared to $374,290 incurred during the three months ended September 30, 2020 (an increase of $62,233). General and administrative expenses generally include corporate overhead, salaries and other compensation costs, financial and administrative contracted services, marketing, consulting costs and travel expenses. The majority of the increase in general and administrative costs in the period relates to legal fees, which increased to $122,079 in the period ending September 30, 2021, as compared to $40,828 in the period ending September 30, 2020 (primarily as a result of the preparation of the equity line documents and accompanying registration statement on Form S-1 filed with the Securities and Exchange Commission as well as legal fees related to our corporate restructuring), offset by a decrease in stock-based compensation which decreased to $0 in the period ending September 30, 2021, as compared to $91,059 in the period ending September 30, 2020. In addition, during the three months ended September 30, 2021, we incurred research and development costs of $67,838, compared to $98,829 during the three months ended September 30, 2020 (a decrease of $30,991). The majority of this decrease resulted from a reduction in stock-based compensation which decreased to $0 in the period ending September 30, 2021, as compared to $21,250 in the period ending September 30, 2020. During the three months ended September 30, 2021, we recorded total net other income in the amount of $3, compared to total net other income recorded during the three months ended September 30, 2020 in the amount of $187, all of which related to interest income in both periods. This resulted in a net loss of $504,358 during the three months ended September 30, 2021 compared to a net loss of $472,932 during the three months ended September 30, 2020. Six Months Ended September 30, 2021 and September 30, 2020 Our net loss during the six months ended September 30, 2021 was $1,116,593 compared to a net loss of $1,213,170 for the six months ended September 30, 2020. We had no revenue during either the 2021 or 2020 period. During the six months ended September 30, 2021, we incurred general and administrative expenses in the aggregate amount of $950,960 compared to $947,543 incurred during the six months ended September 30, 2020 (an increase of $3,417). General and administrative expenses generally include corporate overhead, salaries and other compensation costs, financial and administrative contracted services, marketing, consulting costs and travel expenses. We incurred professional fees of $197,500 during the six months ending September 30, 2021, compared to $120,000 during the six months ending September 30, 2020 and legal fees of $221,998 during the six months ending September 30, 2021, compared to $80,585 during the six months ending September 30, 2020 (the increase as a result of the preparation of the equity line documents and accompanying registration statement on Form S-1 filed with the Securities and Exchange Commission as well as legal fees related to our corporate restructuring and proxy statement). These expenses were offset by costs in the period related to stock-based compensation which decreased to $39,456 in the six months ending September 30, 2021, as compared to $199,181 in the period ending September 30, 2020. 16 In addition, during the six months ended September 30, 2021, we incurred research and development costs of $165,650, compared to $266,293 during the six months ended September 30, 2020 (a decrease of $100,643). The majority of this decrease resulted from a reduction in wages which decreased to $96,885 in the period ending September 30, 2021, as compared to $141,360 in the period ending September 30, 2020, and a reduction in stock-based compensation which decreased to $7,083 in the period ending September 30, 2021, as compared to $38,055 in the period ending September 30, 2020. During the six months ended September 30, 2021, we recorded total net other income in the amount of $17, compared to total net other income recorded during the six months ended September 30, 2020 in the amount of $666, all of which related to interest income during both periods. Liquidity and Capital Resources We have incurred losses since inception resulting in an accumulated deficit of $48,544,302 as of September 30, 2021, and further losses are anticipated in the development of our business. As of September 30, 2021, we had total current assets of $57,425 which were comprised exclusively of cash. Our total current liabilities as of September 30, 2021 were $155,671, which included a lease obligation of $33,440 attributable to a now dissolved wholly-owned subsidiary for which the Company is not responsible. As a result, on September 30, 2021, we had negative working capital of $(98,246). We had no long-term liabilities as of September 30, 2021. Sources of Capital We do not expect to generate any revenue in the near term. Based on our current corporate strategy, our total expenditures for the 12 months following September 30, 2021 are expected to be approximately $2,000,000, which is comprised of research and development and general operating expenses. Based on our cash balance of $57,425 and the availability of $4,881,000 under our $5,000,000 equity line as of September 30, 2021, and our estimated total expenditures of approximately $2,000,000 for the 12-month period ending September 30, 2022, we expect to have sufficient funds to operate our business over the next 12 months. We are also actively seeking additional financing and other sources of capital to fund our planned future operations at a lower cost of capital, including through a revolving line of credit with a financial institution. Our estimated total expenditures for the 12-month period ending September 30, 2022 could increase if we encounter unanticipated expenses in connection with operating our business as presently planned. In addition, our estimates of the amount of cash necessary to fund our business may prove to be too low, and we could spend our available financial resources much faster than we currently expect. If we cannot raise the capital necessary to continue to develop our business, we will be forced to delay, scale back or eliminate some or all of our proposed operations. If any of these were to occur, there is a substantial risk that our business would fail. Since inception, we have primarily funded our operations through equity and debt financings, and expect to continue to do so for the foreseeable future. However, additional funds may not be available when needed, on acceptable terms, or at all. If we issue equity or convertible debt securities to raise additional funds, our existing stockholders may experience substantial dilution, and the new equity or debt securities may have rights, preferences and privileges senior to those of our existing stockholders. If we incur additional debt, it may increase our leverage relative to our earnings or to our equity capitalization, requiring us to incur additional interest expense. Obtaining commercial loans, assuming those loans are available, would increase our liabilities and future cash commitments. If we pursue capital through alternative sources, such as collaborations or other similar arrangements, we may be forced to relinquish rights to our proprietary technology or other intellectual property and which could result in our receipt of only a portion of any revenue that may be generated from a partnered product or business. Moreover, regardless of the manner in which we seek to raise capital, we may incur substantial costs in those pursuits, including investment banking fees, legal fees, accounting fees, printing and distribution expenses and other related costs. 17 Net Cash Used in Operating Activities We have not generated positive cash flows from operating activities. For the six months ended September 30, 2021, net cash used in operating activities was $945,712 compared to net cash used in operating activities of $1,134,773 for the six months ended September 30, 2020. This decrease was primarily attributable to an increase in accounts payable, partially offset by a decrease in the expenses recorded for stock-based compensation related to stock options. Net cash used in operating activities during the six months ended September 30, 2021 consisted primarily of a net loss of $1,116,593, offset by $46,539 related to stock-based compensation and $122,231 related to an increase in accounts payable. Net cash used in operating activities during the six months ended September 30, 2020 consisted primarily of a net loss of $1,213,170, and a decrease in accounts payable of $160,326 offset by $237,237 related to stock-based compensation. Net Cash Used in Investing Activities During the six months ended September 30, 2021 and September 30, 2020, no net cash was used in or provided by investing activities. Net Cash Provided By Financing Activities During the six months ended September 30, 2021, net cash provided from financing activities was $119,000, compared to net cash provided by financing activities of $96,988 during the six months ended September 30, 2020. The cash provided during the 2021 period was a result of the issuance of common stock and warrants under an equity line and during the 2020 period, a result of the issuance of a note payable. 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 would be material to stockholders. Critical Accounting Policies Our financial statements and accompanying notes included in this report have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) applied on a consistent basis. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and 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. 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 the estimates made by management. We believe the following critical accounting policies require us to make significant judgments and estimates in the preparation of our consolidated financial statements included in this report: Use of Estimates and Assumptions The preparation of financial statements in conformity with U.S. GAAP 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 of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates. The more significant estimates and assumption by management include, among others, the fair value of shares issued for services, the fair value of options and warrants, and assumptions used in the valuation of our outstanding derivative liabilities. 18 Share-Based Payments The Company periodically issues stock options, warrants, and shares of common stock as share-based compensation to employees and non-employees in non-capital raising transactions for services and for financing costs. The Company accounts for such grants issued and vesting based on FASB ASC 718, Compensation – Stock Compensation (Topic 718) whereby the value of the award is measured on the date of grant and recognized as compensation expense on a straight-line basis over the vesting period. The Company recognizes the fair value of stock-based compensation within its Statements of Operations with classification depending on the nature of the services rendered. The fair value of the Company’s stock options and warrants are estimated using the Black-Scholes-Merton Option Pricing model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the stock options or restricted stock, and future dividends. Compensation expense is recorded based upon the value derived from the Black-Scholes-Merton Option Pricing model and based on actual experience. The assumptions used in the Black-Scholes-Merton Option Pricing model could materially affect compensation expense recorded in future periods. The Company issues stock options and warrants, shares of common stock, and equity interests as share-based compensation to employees and non-employees. The Company accounts for its share-based compensation to employees in accordance with FASB ASC 718, Compensation – Stock Compensation. Stock-based compensation cost is measured at the grant date, based on the estimated fair value of the award, and is recognized as expense over the requisite service period. In June 2021, the Company’s Board of Directors approved the Company’s 2021 Stock Incentive Plan (the “2021 Plan”) and reserved 10,000,000 shares of the Company’s common stock for issuance pursuant to the 2021 Plan. The shareholders of the Company approved the 2021 Plan on August 12, 2021, at the Company’s annual stockholder meeting. All of the outstanding options as of September 30, 2021, were issued under the Company’s 2012 Stock Incentive Plan, which will expire on February 3, 2022. Recent Accounting Pronouncements Please refer to Footnote 1 of the accompanying financial statements for management’s discussion of recent accounting pronouncements. Item 3. Quantitative and Qualitative Disclosures About Market Risk Not Applicable.