RANGE IMPACT, INC. 10-Q

Item 1. Financial Statements (unaudited) MALACHITE INNOVATIONS, INC. CONSOLIDATED FINANCIAL STATEMENTS THREE MONTHS ENDED MARCH 31, 2022 AND 2021 (Unaudited) CONSOLIDATED UNAUDITED BALANCE SHEETS AS OF MARCH 31, 2022 AND DECEMBER 31, 2021 4 CONSOLIDATED UNAUDITED STATEMENTS OF OPERATIONS 5 CONSOLIDATED UNAUDITED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT) 6 CONSOLIDATED UNAUDITED STATEMENTS OF CASH FLOWS 7 NOTES TO THE CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS 8 3 MALACHITE INNOVATIONS, INC. CONSOLIDATED BALANCE SHEETS March 31, 2022 December 31, 2021 Assets Current Assets Cash and cash equivalents $ 44,162 $ 38,343 Prepaid expenses 884 3,884 Total current assets 45,046 42,227 Deposits 8,892 8,692 Total Assets $ 53,938 $ 50,919 Liabilities and Stockholders’ Deficit Current Liabilities Accounts payable and accrued liabilities $ 133,553 $ 82,560 Line of credit 750,000 350,000 Total liabilities 883,553 432,560 Stockholders’ Deficit Common stock, par value $ 0.001 per share; 1,000,000,000 shares authorized; 51,450,147 shares issued and outstanding 51,250 51,250 Additional paid-in-capital 48,707,787 48,707,787 Accumulated deficit ( 49,588,652 ) ( 49,140,678 ) Total stockholders’ deficit ( 829,615 ) ( 381,641 ) Total Liabilities and Stockholders’ Deficit $ 53,938 $ 50,919 See accompanying notes to the consolidated financial statements. 4 MALACHITE INNOVATIONS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) 2022 2021 Three Months Ended March 31, 2022 2021 Revenues $ - $ - Operating expenses: General and administrative 317,941 586,670 Research and development 125,730 70,637 Total operating expenses 443,671 657,307 Loss from operations ( 443,671 ) ( 657,307 ) Other income (expenses) Gain on extinguishment of liabilities - 296,653 Interest income - 23 Interest expense ( 4,303 ) - Total other income (expenses), net ( 4,303 ) 296,676 Net loss $ ( 447,974 ) $ ( 360,631 ) Basic and diluted loss per common share: $ ( 0.01 ) $ ( 0.01 ) Weighted average number of common shares outstanding Basic and diluted 51,450,147 50,840,147 See accompanying notes to the consolidated financial statements. 5 MALACHITE INNOVATIONS, INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT) THREE MONTHS ENDED MARCH 31, 2022 AND 2021 Three months ended March 31, 2022 (Unaudited) Common Stock Additional Number of shares Amount Paid-in Capital Accumulated Deficit Total Balance – December 31, 2021 51,450,147 $ 51,250 $ 48,707,787 $ ( 49,140,678 ) $ ( 381,641 ) Net loss - - - ( 447,974 ) ( 447,974 ) Balance as of March 31, 2022 (Unaudited) 51,450,147 $ 51,250 $ 48,707,787 $ ( 49,588,652 ) $ ( 829,615 ) Three months ended March 31, 2021 (Unaudited) Common Stock Additional Number of shares Amount Paid-in Capital Accumulated Deficit Total Balance – December 31, 2020 50,840,147 $ 50,640 $ 48,128,153 $ ( 47,067,078 ) $ 1,111,715 Balance 50,840,147 $ 50,640 $ 48,128,153 $ ( 47,067,078 ) $ 1,111,715 Fair value of vested stock options - - 112,310 - 112,310 Net loss - - - ( 360,631 ) ( 360,631 ) Balance as of March 31, 2021 (Unaudited) 50,840,147 $ 50,640 $ 48,240,463 $ ( 47,427,709 ) $ 863,394 Balance 50,840,147 $ 50,640 $ 48,240,463 $ ( 47,427,709 ) $ 863,394 See accompanying notes to the consolidated financial statements. 6 MALACHITE INNOVATIONS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) 2022 2021 Three Months Ended March 31, 2022 2021 Cash flows from operating activities Net loss $ ( 447,974 ) $ ( 360,631 ) Adjustments to reconcile net loss to net cash used in operating activities Fair value of vested stock options - 112,310 Gain on extinguishment of liabilities - ( 296,653 ) Operating lease expense - 22,817 Changes in operating assets and liabilities: Prepaid expense and other current assets 3,000 10,000 Deposits ( 200 ) 16,655 Accounts payable and accrued liabilities 50,993 ( 38,638 ) Operating lease liability - ( 23,194 ) Net cash used in operating activities ( 394,181 ) ( 557,334 ) Cash flows from financing activities: Proceeds from line of credit 400,000 - Net cash provided by financing activities 400,000 - Net increase (decrease) in cash 5,819 ( 557,334 ) Cash and cash equivalents - beginning of period 38,343 1,441,471 Cash and cash equivalents - end of period $ 44,162 $ 884,137 Supplemental disclosure of cash flow information: Cash paid during the period for: Interest $ 4,303 $ - Income taxes $ - $ - See accompanying notes to the consolidated financial statements. 7 MALACHITE INNOVATIONS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS THREE MONTHS ENDED MARCH 31, 2022 AND 2021 (Unaudited) 1. BUSINESS OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Malachite Innovations, Inc. (the “Company”, “we”, “us” or “our”), was incorporated in the State of Nevada on June 29, 2007. Originally founded in 2007 as Legend Mining Inc., the Company began operations as a mineral extraction exploration business. In 2011, the Company changed its name to Stevia First Corp. and pursued a new strategy focused on developing stevia-based additives for the food and beverage industry. In 2015, the Company changed its name to Vitality Biopharma, Inc. and pursued a new strategy focused on developing cannabinoid-based prodrugs anticipated to treat inflammatory conditions of the gastrointestinal tract by unlocking the therapeutic properties of cannabinoids but without their unwanted psychoactive side effects. In October 2021, the Company changed its name to Malachite Innovation, Inc. and reorganized its corporate structure and created the following two wholly-owned operating subsidiaries: (i) Graphium Biosciences, Inc., a Nevada corporation (“Graphium”), into which the Company contributed all of its drug development assets; and (ii) Daedalus Ecosciences, Inc., a Nevada corporation (“Daedalus”). Graphium plans to focus its business activities on the health and wellness of people, with a particular focus on advancing our broad portfolio of over 100 glycosylated cannabinoid prodrugs. Daedalus plans to focus its business activities on the health and wellness of the planet through ESG investments, with a particular focus on deploying technological innovations and eco-friendly solutions to remedy difficult environmental situations in economically challenged communities. Going Concern The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying financial statements, during the three months ended March 31, 2022, the Company incurred a net loss of $ 447,974 and used $ 394,181 of cash in our operating activities. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year of the date that the financial statements are issued. The financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern. The ability to continue as a going concern is dependent on the Company attaining and maintaining profitable operations in the future and/or raising additional capital to meet its obligations and repay its liabilities arising from normal business operations when they come due. We estimate as of March 31, 2022, we had sufficient funds to operate the business for 15 months as $250,000 of our $1,000,000 revolving line of credit secured in December 2021 was then available and $4,830,050 of the $5,000,000 equity financing line secured in August 2021 with an institutional investor was available via equity issuances through December 31, 2022. Although our existing cash balances and the availability of funds under our equity financing line are estimated to be sufficient to fund our currently planned level of operations, we are actively seeking additional financing and other sources of capital to fund our planned future operations at a lower cost of capital. However, these estimates could differ if we encounter unanticipated difficulties, or if our estimates of the amount of cash necessary to operate our business prove to be wrong, and we use our available financial resources faster than we currently expect. No assurance can be given that any future financing or capital, if needed, will be available or, if available, that it will be on terms that are satisfactory to the Company. We do not presently have significant revenue to fund our business from our operations, and will need to obtain most of our necessary funding from external sources in the near term. Since inception, the Company has experienced recurring operating losses and negative operating cash flows, and we have funded our operations primarily through equity and debt financings, and we expect to continue to rely on these sources of capital in the near term, with longer-term funding expected to come from revenue and profits from the anticipated ESG operations of our Daedalus Ecosciences subsidiary. Based on the availability of the equity financing line and additional financing available under our revolving credit facility, the Company believes it will have enough funds to ensure continuing operations as a stand-alone entity for a period of at least one year from the issuance of these consolidated financial statements. However, if we raise additional funds by issuing equity or convertible debt securities, our existing stockholders’ ownership will be diluted, and obtaining commercial loans would increase our liabilities and future cash commitments. If we cannot raise the money that we need in order to continue to develop our business, we will be forced to delay, scale back or eliminate some or all of our proposed operations. 8 Basis of Presentation The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Graphium Biosciences, Inc., Daedalus Ecosciences, Inc., and Vitality Healthtech, Inc. (dissolved in May 2021), and have been prepared in accordance with accounting principles generally accepted in the United States of America. Intercompany balances and transactions have been eliminated in consolidation. The Company’s fiscal year end is December 31. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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. The more significant estimates and assumptions by management include, among others, assumptions used in valuing assets acquired in business acquisitions, reserves for accounts receivable, assumptions used in valuing equity instruments issued for services, the valuation allowance for deferred tax assets, and accruals for potential liabilities. Actual results could differ from those estimates. Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less at the date of acquisition to be cash equivalents. From time to time, the Company’s cash account balances exceed the balances covered by the Federal Deposit Insurance System. The Company has never suffered a loss due to such excess balances. Income Taxes The Company follows the asset and liability method of accounting for income taxes. Under this method, deferred income tax assets and liabilities are recognized for the estimated tax consequences attributable to differences between the financial statement carrying values and their respective income tax basis (temporary differences). The effect on deferred income tax assets and liabilities of a change in tax rates is recognized as income (loss) in the period that includes the enactment date. Leases The Company determines whether a contract is, or contains, a lease at inception. Right-of-use assets represent the Company’s right to use an underlying asset during the lease term, and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized at lease commencement based upon the estimated present value of unpaid lease payments over the lease term. The Company uses its incremental borrowing rate based on the information available at lease commencement in determining the present value of unpaid lease payments. The Company had no lease commitments for longer than one year as of March 31, 2022. The laboratory space lease in Rocklin, California was renewed in March 2022 and ends on March 31, 2023. 9 Stock-Based Compensation The Company periodically issues stock options and restricted stock awards to employees and non-employees in non-capital raising transactions for services. The Company accounts for such grants issued and vesting based on ASC 718, Compensation-Stock Compensation whereby the value of the award is measured on the date of grant and recognized for employees as compensation expense on the straight-line basis over the vesting period. Recognition of compensation expense for non-employees is in the same period and manner as if the Company had paid cash for the services. 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 is 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. Basic and Diluted Loss Per Share Basic loss per share is computed by dividing the net loss applicable to common stockholders by the weighted average number of outstanding common shares during the period. Shares of restricted stock are included in the basic weighted average number of common shares outstanding from the time they vest. Diluted loss per share is computed by dividing net loss applicable to common stockholders by the weighted average number of common shares outstanding plus the number of additional common shares that would have been outstanding if all dilutive potential common shares had been issued. Shares of restricted stock are included in the diluted weighted average number of common shares outstanding from the date they are granted unless they are antidilutive. Diluted loss per share excludes all potential common shares if their effect is anti-dilutive. The following potentially dilutive shares were excluded from the shares used to calculate diluted earnings per share as their inclusion would be anti-dilutive: SCHEDULE OF ANTIDILUTIVE SECURITIES EXCLUDED FROM COMPUTATION OF EARNINGS PER SHARE March 31, 2022 December 31, 2021 Options 6,752,544 6,882,544 Warrants 646,668 646,668 Total 7,399,212 7,529,212 Patents and Patent Application Costs Although the Company believes that its patents and underlying technology have continuing value, the amount of future benefits to be derived from the patents is uncertain. Accordingly, patent costs are expensed as incurred. Research and Development Research and development costs consist primarily of fees paid to consultants and outside service providers, patent fees and costs, and other expenses relating to the acquisition, design, development and testing of the Company’s treatments and product candidates. Research and development costs are expensed as incurred. Fair Value of Financial Instruments FASB ASC 825, “Financial Instruments” requires that the Company disclose estimated fair values of financial instruments. Financial instruments held by the Company include, among others, accounts payable. The carrying amounts reported in the balance sheets for assets and liabilities qualifying as financial instruments are a reasonable estimate of fair value. 10 Segments As of October 1, 2021, we began operating under two segments: (i) Graphium Biosciences, Inc., a wholly-owned subsidiary of the Company, will report the operating results of our health and wellness innovations serving people, with a particular focus on advancing our broad portfolio of over 100 glycosylated cannabinoid prodrugs, and (ii) Daedalus Ecosciences, Inc., a wholly-owned subsidiary of the Company, will report the operating results of our health and wellness innovations serving the planet, with a particular focus on deploying technological innovations and eco-friendly solutions to remedy difficult environmental situations in economically challenged communities. In accordance with the “Segment Reporting” Topic of the ASC, the Company’s chief operating decision maker has been identified as the Chief Executive Officer, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. Existing guidance, which is based on a management approach to segment reporting, establishes requirements to report selected segment information quarterly and to report annually entity-wide disclosures about products and services, major customers, and the countries in which the entity holds material assets and reports revenue. All material operating units qualify for aggregation under “Segment Reporting” due to their similar customer base and similarities in: economic characteristics; nature of products and services; and procurement, manufacturing, and distribution processes.. Recent Accounting Pronouncements In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments . ASU 2016-13 requires entities to use a forward-looking approach based on current expected credit losses to estimate credit losses on certain types of financial instruments, including trade receivables. This may result in the earlier recognition of allowances for losses. ASU 2016-13 is effective for the Company beginning April 1, 2023, and early adoption is permitted. The Company does not believe the potential impact of the new guidance and related codification improvements will be material to its financial position, results of operations and cash flows. 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. 2. STOCK OPTIONS A summary of the Company’s stock option activity during the three months ended March 31, 2022 is as follows: SUMMARY OF STOCK OPTION ACTIVITY Shares Weighted Average Exercise Price Balance outstanding at December 31, 2021 6,882,544 $ 0.69 Granted - - Exercised - - Expired ( 130,000 ) 1.00 Cancelled - - Balance outstanding at March 31, 2022 6,752,544 $ 0.68 Balance exercisable at March 31, 2022 6,752,544 $ 0.68 11 A summary of the Company’s stock options outstanding and exercisable as of March 31, 2022 is as follows: SCHEDULE OF STOCK OPTIONS OUTSTANDING AND EXERCISABLE Number of Options Weighted Average Exercise Price Weighted Average Grant- date Stock Price Options Outstanding, March 31, 2022 1,150,000 $ 0.277 $ 0.277 750,000 $ 0.30 $ 0.30 2,000,000 $ 0.35 $ 0.35 1,664,542 $ 0.50 $ 0.50 128,000 $ 0.96 $ 0.96 350,834 $ 1.50 - 1.95 $ 1.50 - 1.95 607,500 $ 2.00 - 2.79 $ 2.00 - 2.79 83,334 $ 3.10 - 3.80 $ 3.10 - 3.80 18,334 $ 4.00 - 4.70 $ 4.00 - 4.70 6,752,544 Options Exercisable, March 31, 2022 1,150,000 $ 0.277 $ 0.277 750,000 $ 0.30 $ 0.30 2,000,000 $ 0.35 $ 0.35 1,664,542 $ 0.50 $ 0.50 128,000 $ 0.96 $ 0.96 350,834 $ 1.50 - 1.95 $ 1.50 - 1.95 607,500 $ 2.00 - 2.79 $ 2.00 - 2.79 83,334 $ 3.10 - 3.80 $ 3.10 - 3.80 18,334 $ 4.00 - 4.70 $ 4.00 - 4.70 6,752,544 There is no remaining unamortized cost of the outstanding stock-based awards at March 31, 2022. At March 31, 2022, the 6,752,544 outstanding stock options had no intrinsic value. 3. WARRANTS A summary of warrants to purchase common stock during the three months ended March 31, 2022 is as follows: SUMMARY OF WARRANTS ACTIVITY Shares Weighted Average Exercise Price Balance outstanding at December 31, 2021 646,668 $ 1.08 Granted - - Exercised - - Expired/Cancelled - - Balance outstanding and exercisable at March 31, 2022 646,668 $ 1.08 At March 31, 2022, the 646,668 outstanding stock warrants had no intrinsic value. 4. LINE OF CREDIT In November 2021, the Company secured a revolving line of credit with a bank with a limit of $ 1,000,000 . The line of credit has a maturity date of November 30, 2022 , and bears interest at one percent ( 1 % ) above the prime rate. As of March 31, 2022, the balance due under the line of credit was $ 750,000 . 5. GAIN ON EXTINGUISHMENT OF ADVANCE In July 2018, the Company received a payment from a third party in the amount of $ 296,653 . Since the Company has not been able to confirm the nature of this payment, it had previously recorded this payment as an advance that was included in current liabilities. At March 31, 2021, the Company, after consultation with outside legal counsel, determined that any claim to recover that advance was time barred by the statute of limitations and the Company recorded relief of this liability and a gain from debt extinguishment of $ 296,653 during the three months ended March 31, 2021. 6. COMMITMENTS AND CONTINGENCIES The Company received a letter in February 2021 from counsel for the Company’s director’s and officer’s insurance carrier (the “insurer”) demanding that the Company reimburse the insurer for sums advanced by the insurer to a former director of the Company as defense costs in connection with a claim purportedly arising under a previous directors and officers insurance policy. The Company believes it has no liability for this claim on the basis of, among other things, Nevada law, the Company’s governing documents and the language of the policy. Accordingly, as of March 31, 2022, no contingent liability has been recorded in the Company’s consolidated statements of financial condition for this matter. 12 7. SEGMENT INFORMATION ASC 280, “Segment Reporting” establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organizational structure as well as information about services, categories, business segments and major customers in financial statements. The Company has two reportable segments that are based on the following business units: Cannabinoid Prodrug Operations and ESG Operations. In accordance with the “Segment Reporting” Topic of the ASC, the Company’s chief operating decision maker has been identified as the Chief Executive Officer, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. Existing guidance, which is based on a management approach to segment reporting, establishes requirements to report selected segment information quarterly and to report annually entity-wide disclosures about products and services, major customers and the countries in which the entity holds material assets and reports revenue. All material operating units qualify for aggregation under “Segment Reporting” due to their similar customer base and similarities in: economic characteristics; nature of products and services; and procurement, manufacturing and distribution processes. The Company operates two reportable business segments: ● Cannabinoid Prodrug Operations – research and development primarily related to the Company’s cannabinoid pharmaceuticals ● Environmental, Social and Governance (ESG) Operations – development of 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 had no inter-segment sales for the periods presented. Summarized financial information concerning the Company’s reportable segments is shown as below: By Categories SUMMARY OF REPORTABLE SEGMENT TABLE TEXT BLOCK For the three months ended March 31, 2022 Cannabinoid Prodrug Operations ESG Operations Corporate Total Net loss $ ( 125,730 ) $ ( 20,717 ) $ ( 301,527 ) $ ( 447,974 ) Total assets 8,334 - 45,604 53,938 Capital expenditures for long-lived assets $ - $ - $ - $ - For the three months ended March 31, 2021 Cannabinoid Prodrug Operations ESG Operations Corporate Total Net loss $ ( 70,637 ) $ - $ ( 289,994 ) $ ( 360,631 ) Total assets - - 896,934 896,934 Capital expenditures for long-lived assets $ - $ - $ - $ - 8. SUBSEQUENT EVENTS In April 2022, the Company drew a total of $ 100,000 on the line of credit described in Note 4 to fund ordinary course operations. 13