What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-10-12 compared with 2022-05-10 · 186 added, 118 removed, 242 unchanged (56% of the section changed)

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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 Transition Report on Form 10-KT for

the nine months ended December 31, 2021 filed on March 31, 2022, and the related audited financial statements and notes included therein.

Consolidated 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 Transition Report on Form

10-KT for the nine months ended December 31, 2021 filed on March 31, 2022, and the related audited financial statements and notes included

statements made in this Quarterly Report on Form 10-Q constitute “forward-looking statements” within the meaning of Section

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corporate headquarters is located in Cleveland, Ohio.

As of March 31, 2022, 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 experienced resources to advance our corporate objectives while maintaining a relatively lower overhead cost structure.

As of June 30, 2022, we employed twenty-one full-time employees, including

eighteen employees of the Range Entities, one cannabinoid research scientist working in our office and laboratory space in Rocklin,

California, and two senior executives of the Company.

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

experienced resources to advance our corporate objectives while maintaining a relatively lower overhead cost structure.

Biosciences, Inc.

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to a revenue-generating stage, we have determined that the value of our cannaboside prodrug assets would likely be maximized through

a strategic transaction such as (i) a spin-off of our Graphium Biosciences subsidiary into a new publicly-traded company infused with

sufficient funding to advance its drug development program, or (ii) a sale of Graphium Biosciences or its drug development assets to

a biotech partner with the resources necessary to advance our drug development program.

The Company is actively exploring both strategic

alternatives for its drug development assets to maximize shareholder value.

a strategic transaction such as (i) a sale of Graphium Biosciences or its assets to a biotech partner with the resources necessary to

advance our drug development program, (ii) a private capital raise directly into Graphium Biosciences to secure sufficient funding to

meaningfully advance our drug development program, or (iii) a spin-off of our Graphium Biosciences subsidiary into a new publicly-traded

company infused with sufficient funding to meaningfully advance our drug development program as a new stand-alone company.

is actively exploring all potential strategic alternatives for its drug development assets to maximize shareholder value.

Drug Designation

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believe that the Company is well-positioned from a managerial and operational perspective to pursue these business initiatives given

the experience of management in connection with other ventures successfully developing and executing various reclamation and remediation

programs at coal mines in Appalachia and creating profitable next-generation eco-friendly initiatives and stable jobs in local communities

previously reliant primarily on the highly cyclical coal mining industry.

March 2022, the Company entered into a non-binding letter of intent with the owners of Range Environmental Resources, Inc.

a West Virginia-based environmental services company operating throughout Appalachia, to purchase 80% of their shares in Range, a company

primarily focused on the reclamation of former coal mines, the remediation of non-compliant streams and waterways, and the reimagination

of challenging environmental situations into next generation industries and job-creating commercial activities.

In addition to this proposed

transaction, Company management is actively pursuing a number of other ESG-focused investment opportunities to advance this mission with

a particular focus on some of the most challenging environmental situations in disadvantaged communities.

the experience of management in connection with other successful ventures that are developing and executing various reclamation

and remediation programs at coal mines in Appalachia and creating profitable next-generation eco-friendly initiatives and stable

jobs in local communities previously reliant primarily on the highly cyclical coal mining industry.

Environmental Resources and Range Natural Resources

May 2022, we acquired the Range Entities.

The Range Entities provide land reclamation, water restoration and environmental consulting

services to mining and non-mining customers throughout the Appalachian region.

Our land reclamation services seek to return land to pre-mining

conditions or repurpose the land for natural, commercial, agricultural or recreational use.

Our water restoration services seek to improve

rivers, streams and discharges through novel and innovative treatment applications to help customers meet their various regulatory standards

and requirements.

The Range Entities also provide environmental consulting services to customers typically in connection with land reclamation

and water restoration projects and as an additional value-add service, sell water treatment chemicals manufactured by third parties to

our customers.

ESG Opportunities

Company is actively pursuing a number of other ESG-focused investment opportunities to advance its mission with a particular focus on

some of the most challenging environmental situations in disadvantaged communities.

of Operations

Months Ended March 31, 2022 and March 31, 2021

net loss during the three months ended March 31, 2022 was $447,974 compared to a net loss of $360,631 for the three months ended March

We had no revenue from continuing operations during either the 2022 or 2021 period.

the three months ended March 31, 2022, we incurred general and administrative expenses in the aggregate amount of $317,941, compared

to $586,670 incurred during the three months ended March 31, 2021 (a decrease of $268,729).

Months Ended June 30, 2022 and June 30, 2021

net loss during the three months ended June 30, 2022 was $443,186 compared to a net loss of $612,235 for the three months ended June

Our revenue during the three months ended June 30, 2022 was $639,359 and our gross profit was $64,952.

We had no revenue during

the three months ended June 30, 2021.

the three months ended June 30, 2022, we incurred general and administrative expenses in the aggregate amount of $380,326, compared to

$514,437 incurred during the three months ended June 30, 2021 (a decrease of $134,111).

General and administrative expenses generally

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costs and travel expenses.

The majority of the decrease in general and administrative costs in the period relates to stock-based compensation

which decreased to $0 in the period ending March 31, 2022, as compared to $112,310 in the period ending March 31, 2021, expense related

to directors and officers insurance, which decreased to $120,390 during the period ending March 31, 2022, from $219,125 during the 2021

period (a decrease of $98,735), and legal fees, which decreased to $3,746 in the period ending March 31, 2022, as compared to $81,476

in the period ending March 31, 2021 (a decrease of $77,730).

addition, during the three months ended March 31, 2022, we incurred research and development costs of $125,730, compared to $70,637

during the three months ended March 31, 2021 (an increase of $55,093).

This increase resulted from an increase in wages related to research

and development, which increased to $84,311 in the period ending March 31, 2022, as compared to $48,919 in the period ending March 31,

2021 (an increase of $35,392), and legal fees, which increased to $31,617 during the three months ended March 31, 2022, from $0 during

the three months ended March 31, 2021.

the three months ended March 31, 2022, we recorded total net other expense in the amount of $4,303, compared to total net other income

recorded during the three months ended March 31, 2021, in the amount of $296,676.

This difference was primarily attributable to the gain

on extinguishment of liabilities of $296,653 recorded during the three months ended March 31, 2021.

increase in net loss attributable to common stockholders during the three months ended March 31, 2022 compared to the three months ended

March 31, 2021 in an amount equal to $87,343 is primarily due to the recognition of gains on the extinguishment of liabilities

in the amount of $296,676 during the three months ended March 31, 2021, compared to no gains recognized during the three months ended

March 31, 2022, offset by (i) a $268,729 decrease in general and administrative expenses during the three months ended March 31, 2022

compared to the three months ending March 31, 2021, and (ii) a $55,093 increase in research and development expenses during three months

ended March 31, 2022, compared to the three months ended March 31, 2021.

The majority of the decrease in general and administrative costs relates to professional fees which decreased

to $11,790 during the three months ended June 30, 2022, as compared to $145,000 during the three months ended June 30, 2021 (a decrease

of $133,210), and stock-based compensation which decreased to $0 during the three months ended June 30, 2022, as compared to $39,456

during the three months ended June 30, 2021.

addition, during the three months ended June 30, 2022, we incurred research and development costs of $107,823, compared to $97,812 during

the three months ended June 30, 2021 (an increase of $10,011).

This increase resulted from an increase in legal fees allocated to research

and development, which increased to $13,961 in the period ended June 30, 2022, as compared to $0 in the period ended June 30, 2021.

the three months ended June 30, 2022, we recorded total net other expense in the amount of $19,989, compared to total net other income

recorded during the three months ended June 30, 2021, in the amount of $14.

This difference was attributable to the interest expense

of $19,989 incurred during the three months ended June 30, 2022, as compared to $0 in the three months ended June 30, 2021.

the three months ended June 30, 2022, we had a net loss of $443,186 compared to a net loss of $612,235 during the three months ended

June 30, 2021.

The decrease in net loss attributable to common stockholders of $169,049 is primarily due to the gross profit of $64,952

earned during the three months ended June 30, 2022, compared to gross profit of $0 earned during the three months ended June 30, 2021.

Additionally, professional fees decreased by $133,210 in the three months ended June 30, 2022, as compared to the three months ended

June 30, 2021.

Months Ended June 30, 2022 and June 30, 2021

net loss during the six months ended June 30, 2022 was $891,160 compared to a net loss of $972,866 for the six months ended June 30,

Our revenue during the six months ended June 30, 2022 was $639,359 and our gross profit was $64,952.

We had no revenue or gross

profit during the six months ended June 30, 2021.

the six months ended June 30, 2022, we incurred general and administrative expenses in the aggregate amount of $698,267, compared to

$1,101,635 incurred during the six months ended June 30, 2021 (a decrease of $403,368).

The majority of the decrease in general and administrative

costs relates to stock-based compensation which decreased to $0 during the six months ended June 30, 2022, as compared to $130,516 during

the six months ended June 30, 2021, professional fees which decreased to $12,540 during the six months ended June 30, 2022, as compared

to $145,000 during the six months ended June 30, 2021 (a decrease of $132,460), and legal fees, which decreased to $75,000 during the

six months ended June 30, 2022, as compared to $181,395 during the six months ended June 30, 2021 (a decrease of $106,395).

addition, during the six months ended June 30, 2022, we incurred research and development costs of $233,553, compared to $168,449 during

the six months ended June 30, 2021 (an increase of $65,104).

This increase resulted from an increase in wages related to research and

development, which increased to $167,836 in the period ended June 30, 2022, as compared to $97,361 in the period ended June 30, 2021

(an increase of $70,475), and legal fees, which increased to $45,578 during the six months ended June 30, 2022, from $0 during the six

months ended June 30, 2021.

These costs were offset by a decrease in stock-based compensation which decreased to $0 during the six months

ended June 30, 2022, as compared to $28,333 during the six months ended June 30, 2021.

the six months ended June 30, 2022, we recorded total net other expense in the amount of $24,292, compared to total net other income

of $297,218 recorded during the six months ended June 30, 2021.

This difference was primarily attributable to the gain on extinguishment

of liabilities of $296,653 recorded during the six months ended June 30, 2021.

the six months ended June 30, 2022, we had a net loss of $891,160 compared to a net loss of $972,866 during the six months ended June

The decrease in net loss attributable to common stockholders of $81,706 is primarily due to the recognition of gains on the

extinguishment of liabilities in the amount of $296,653 during the six months ended June 30, 2021, compared to no gains recognized during

the six months ended June 30, 2022, offset by a $403,368 decrease in general and administrative expenses during the six months ended

June 30, 2022 compared to the six months ended June 30, 2021, and a $65,104 increase in research and development expenses during the

six months ended June 30, 2022, compared to the six months ended June 30, 2021.

and Capital Resources

have incurred losses since inception resulting in an accumulated deficit of $49,588,652 as of March 31, 2022, and further losses are

anticipated in the development of our business.

of March 31, 2022, we had total current assets of $45,046.

Our total current assets as of March 31, 2022 were comprised of cash in the

amount of $44,162 and prepaid expenses in the amount of $884.

Our total current liabilities as of March 31, 2022 were $883,553, represented

by $750,000 due under a revolving credit line and accounts payable of $133,553 including a $33,440 lease payment attributable to our

now-dissolved wholly-owned subsidiary, The Control Center, Inc., for which Malachite Innovations, Inc.

is not responsible.

on March 31, 2022, we had negative working capital of $838,507.

We had no long-term liabilities as of March 31, 2022.

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 March 31, 2022 are expected to be approximately $1,800,000, which is comprised of general operating and research

and development expenses.

Based on our cash balance of $44,162, the availability of $4,830,050 under our $5,000,000 equity financing

line and $250,000 available under our revolving credit line as of March 31, 2022, and our estimated total expenditures of

approximately $1,800,000 for the 12-month period ending March 31, 2023, we expect to have sufficient funds to operate our business

over the next 12 months.

We also expect to obtain additional financing and other sources of capital to fund our planned

future operations.

estimated total expenditures for the 12-month period ending March 31, 2023 could increase if we encounter unanticipated expenses in connection

have incurred losses since inception resulting in an accumulated deficit of $50,031,838 as of June 30, 2022.

of June 30, 2022, we had total current assets of $2,964,609, comprised primarily of cash in the amount of $1,866,289, and accounts receivable

and other receivables of $1,097,436.

Our total current liabilities as of June 30, 2022 were $1,791,448, consisting of $850,000 due under

a revolving credit line, the current portion of our long-term debt in the amount of $392,708, and accounts payable of $548,740, which

includes a $33,440 lease payment attributable to our now-dissolved wholly-owned subsidiary, The Control Center, Inc., for which we are

not responsible.

As a result, on June 30, 2022, we had working capital of $1,173,161.

of June 30, 2022, we had long-term assets of $2,560,690, which were comprised of net property and equipment of $1,680,438, goodwill of

$751,421, operating lease asset of $119,939, and deposits of $8,892.

As of June 30, 2022, we had long-term liabilities of $1,256,652,

which were comprised of long-term debt, net of current portion of $865,674, notes payable of $271,039, and operating lease liability

on our current corporate strategy, our total expenditures for the 12 months following June 30, 2022 are expected to be approximately

$1,800,000, which is comprised of general operating and research and development expenses.

Based on our cash balance of $1,866,289, $150,000

available under our revolving credit line as of June 30, 2022, $4,830,050 available under our equity financing line, revenues being generated

by the Range Entities, and our estimated total expenditures of approximately $1,800,000 for the 12-month period ending June 30, 2023,

we expect to have sufficient funds to operate our business over the next 12 months.

We expect to generate funds from our ESG operations,

but may also seek additional financing and other sources of capital to accelerate the funding and execution of our growth strategy and

value creation plan.

estimated total expenditures for the 12-month period ending June 30, 2023 could increase if we encounter unanticipated expenses in connection

with operating our business as presently planned.

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inception, we have primarily funded our operations through equity and debt financings.

We expect to continue to fund our operations primarily

through equity and debt financings in the foreseeable future.

However, sources of 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 or to fund, in whole or in part, acquisitions in furtherance of our business strategy, 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 pay additional interest expenses.

Obtaining commercial loans, assuming those loans would be 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 glycosylated cannabinoid technology or other intellectual property and 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.

The Company has revenue earned from its investment

in the Range Entities that we expect will fund their ongoing operations and provide excess cash to fund all or a portion of additional

ESG investments made by Daedalus in the future.

We may also supplement our funding through equity and debt financings in the future.

However, sources of 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 or to fund, in whole or in part, acquisitions

in furtherance of our business strategy, 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 pay additional interest expenses.

Obtaining commercial

loans, assuming those loans would be 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 glycosylated

cannabinoid technology or other intellectual property and 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.

Cash Used in Operating Activities

have not generated positive cash flows from operating activities.

For the three months ended March 31, 2022, net cash used in operating

activities was $394,181 compared to net cash used in operating activities of $557,334 for the three months ended March 31, 2021.

decrease was primarily attributable to a gain on extinguishment of liabilities of $296,653 recognized during the three months ended March

31, 2021, and 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 three months ended March 31, 2022 consisted primarily of a net loss

of $447,974, offset by an increase in accounts payable of $50,993.

Net cash used in operating activities during the three months ended

March 31, 2021 consisted primarily of a net loss of $360,631, and a gain on extinguishment of liabilities of $296,653, partially offset

by $112,310 related to stock-based compensation.

have not historically generated positive cash flows from operating activities.

For the six months ended June 30, 2022, net cash used

in operating activities was $845,068 compared to net cash used in operating activities of $1,120,035 for the six months ended June 30,

This decrease was primarily attributable to a gain on extinguishment of liabilities of $296,653 recognized during the six months

ended June 30, 2021, and an increase in accounts payable of $192,628 during the six months ended June 30, 2022, partially offset by a

decrease in the expenses recorded for stock-based compensation related to stock options of $158,849 during the six months ended June

Net cash used in operating activities during the six months ended June 30, 2022, consisted primarily of a net loss of $891,160

and an increase of unbilled receivables of $230,929, offset by an increase in accounts payable of $192,628 and a decrease in accounts

receivable of $273,412.

Net cash used in operating activities during the six months ended June 30, 2021, consisted primarily of a net

loss of $972,866, and a gain on extinguishment of liabilities of $296,653, partially offset by $158,849 related to stock-based compensation.

Cash Used in Investing Activities

the three months ended March 31, 2022 and March 31, 2021, no net cash was used in or provided by investing activities.

the six months ended June 30, 2022, net cash used in investing activities was $1,842,006.

Net cash used in investing activities during

the six months ended June 30, 2022, consisted primarily of equipment purchases totaling $1,107,833 and cash paid for the acquisition

of Range Environmental of $750,000.

No net cash was used in or provided by investing activities during the six months ended

June 30, 2021.

Cash Provided By Financing Activities

the three months ended March 31, 2022, net cash provided from financing activities was $400,000, from a revolving credit line.

the three months ended March 31, 2021, no net cash was used in or provided by financing activities.

the six months ended June 30, 2022, net cash provided from financing activities was $4,515,020, consisting of $3,000,000 received from

the issuance of common stock and warrants, proceeds of $1,015,020 from long-term debt and $500,000 from a revolving line of credit.

the six months ended June 30, 2021, no net cash was used in or provided by financing activities.

Sheet Arrangements

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for services and for financing costs.

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.

Company’s revenue recognition policies will follow the guidance of Accounting Standards Codification (ASC) 606, Revenue from

Contracts with Customers .

ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms

of contracts, which includes (1) identifying the contracts or agreements with a customer, (2) identifying our performance obligations

in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance

obligations, and (5) recognizing revenue as each performance obligation is satisfied.

The Company accounts for such grants issued and vesting based on FASB 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.

Company’s revenue recognition policies will follow the guidance of FASB ASC 606 “ Revenue from Contracts with Customers .”

FASB ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of contracts, which includes

(1) identifying the contracts or agreements with a customer, (2) identifying our performance obligations in the contract or agreement,

(3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing

revenue as each performance obligation is satisfied.

The Range Entities primarily invoice

customers and recognize revenue on a periodic basis for equipment and labor hours provided to a customer on a particular job based on

an agreed-upon hourly rate sheet or a fixed amount for a project.

The Range Entities also invoice customers and recognize revenue for equipment

mobilization fees and materials and supplies required to complete a project.

The Range Entities invoice for the sales of chemicals and recognize

revenue when the products are delivered to the customer’s designated site.

Costs for equipment, labor and chemicals are generally

expensed as incurred since the projects are generally short-term and not subject to a contract.

The Range Entities’ performance obligations

are satisfied at the point in time when the services are performed or when products are received by the customer, which is when the customer

has title and the significant risks and rewards of ownership.

The Range Entities do not have any significant financing components as payment

is received within a commercially reasonable time after the point of sale.

Costs incurred to obtain a contract will be expensed as incurred

when the amortization period is less than a year.

Shipping and handling amounts paid by the customers are included in revenue.

Contract modifications are routine

in the performance of the Range Entities’ contracts.

Contracts are often modified to account for changes in contract specifications or

requirements.

In most instances, contract modifications are a result of changes in the scope of work, or the products or services required

to complete the contract and are customarily approved in advance by the customer.

Accounting Pronouncements

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis