RANGE IMPACT, INC. 10-K

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Certain statements contained in this Annual Report are “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act, and are subject to the “safe harbor” created by these sections. Future filings with the SEC, future press releases and future oral or written statements made by us or with our approval, which are not statements of historical fact, may also contain forward-looking statements. Because such statements include risks and uncertainties, many of which are beyond our control, actual results may differ materially from those expressed or implied by such forward-looking statements. Some of the factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements can be found under the caption “Risk Factors” in Part I, Item 1A, and elsewhere in this Annual Report. The forward-looking statements speak only as of the date on which they are made, and we undertake no obligation to update such statements to reflect events that occur or circumstances that exist after the date on which they are made. The following discussion should be read in conjunction with the financial statements and the accompanying notes for the periods ended December 31, 2022 and December 31, 2021 appearing elsewhere in this Annual Report. Our actual results could differ materially from those expressed or implied in any forward-looking statements as a result of various factors, including those set forth under the caption “Risk Factors” in Part I, Item 1A. In addition, the financial statements for the year ended December 31, 2022 include the operations of the Range Reclamation Entities and also include a full year of activity, while the financial statements for the nine months ended December 31, 2021 only included nine months of activity. Plan of Operations Malachite Innovations, Inc. is a public holding company dedicated to improving the health and wellness of people and the planet through a novel and innovative approach to impact investing. Malachite owns and operates a balanced portfolio of operating businesses focused on developing long-term solutions to environmental, social and health challenges, with a particular focus on economically disadvantaged communities. Malachite takes an opportunistic approach to impact investing by leveraging its competitive advantages and looking at solving old problems in new ways. Malachite seeks to thoughtfully allocate its capital into ventures that are expected to make a positive impact on the people-planet ecosystem and generate strong investment returns for our shareholders. Critical Accounting Policies We believe the following critical accounting policies require us to make significant judgments and estimates in the preparation of our financial statements. 41 Use of Estimates and Assumptions The preparation of financial statements in conformity with generally accepted accounting principles in the United States 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 assumption 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, accruals for potential liabilities, and assumptions used in the determination of the Company’s liquidity. Actual results could differ from those estimates. Business Combinations Business combinations are accounted for using the purchase method of accounting under ASC 805, “Business Combinations.” This method requires the Company to record assets and liabilities of the businesses acquired at their estimated fair values as of the acquisition date. Any excess of the cost of the acquisition over the fair value of the net assets acquired is recorded as goodwill. Determining the fair value requires management to make estimates and assumptions including discount rates, rates of return on assets, and long-term sales growth rates. Goodwill As referenced by ASC 350 “Intangibles- Goodwill and other” (“ASC 350”), management performs its annual test for goodwill at least annually or more frequently, if impairment indicators arise. 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 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. Revenue The Company recognizes revenue under ASC 606, “Revenue from Contracts with Customers”. The core principle of the revenue standard is that a company should recognize revenue by analyzing the following five steps; (1) identify the contract with the customer; 2) identify the performance obligations in the contract; 3) determine the transaction price; 4) allocate the transaction price to the performance obligations; and 5) recognize revenue when (or as) each performance obligation is satisfied. The Company primarily invoices customers and recognizes 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 Company also invoices customers and recognizes revenue for equipment mobilization fees and materials and supplies required to complete a project. The Company invoices for the sales of chemicals and recognizes 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 Company also invoices customers for the provision of environmental security services on an agreed-upon hourly rate for each project. All revenue is recognized at a point in time. Recent Accounting Pronouncements Please refer to Footnote 1 of the accompanying financial statements for management’s discussion of recent accounting pronouncements. 42 Results of Operations Year Ended December 31, 2022 and Nine Months Ended December 31, 2021 The following table sets forth our results of operations for the year ended December 31, 2022 and the nine months ended December 31, 2021. Year Ended December 31, 2022 Nine Months Ended December 31, 2021 Revenues $ 4,832,278 $ - Cost of services 3,439,026 - Gross profit 1,393,252 - Operating Expenses: General and administrative 2,022,882 1,413,774 Research and development 470,803 298,925 Loss from operations (1,100,433 ) (1,712,699 ) Other Income: Gain on loan forgiveness 109,435 - Interest expense (81,178 ) - Other income (expense) - (270 ) Total other income (expense) 28,257 (270 ) Net loss $ (1,072,176 ) $ (1,712,969 ) Our net loss during the year ended December 31, 2022 was $1,072,176 compared to a net loss of $1,712,969 for the nine months ended December 31, 2021 (a decrease of $640,793). The Company’s revenue during the year ended December 31, 2022 was $4,832,278 and its gross profit was $1,393,252. The Company had no revenue or gross profit during the nine months ended December 31, 2021 as all of the Company’s revenue was generated by the Range Reclamation Entities acquired in May 2022. During the year ended December 31, 2022, we incurred general and administrative expenses in the aggregate amount of $2,022,882 compared to $1,413,774 incurred during the nine months ended December 31, 2021 (an increase of $609,108). General and administrative expenses generally include corporate overhead, salaries and other compensation costs, financial and administrative contracted services, consulting costs and travel expenses. The largest increase related to (i) the general and administrative expenses incurred by our Environmental Services segment of $631,820 during the year ended December 31, 2022, compared to $17,484 incurred during the nine months ended December 31, 2021 (an increase of $614,336) and (ii) higher costs related to stock compensation of $393,260 during the year ended December 31, 2022, compared to $297,984 during the nine months ended December 31, 2021 (an increase of $95,276). We recorded wages in the amount of $392,344 during the year ended December 31, 2022 compared to $418,519 during the December 31, 2021 period (a decrease of $26,175, which was primarily due to the reallocation of certain salaries to research and development during the year ended December 31, 2022). During the year ended December 31, 2022, we incurred research and development expenses of $470,803 compared to $298,925 incurred during the nine months ended December 31, 2021 (an increase of $171,878). The Company’s research and development personnel expenses were $331,202 during the year ended December 31, 2022, compared to $175,417 for the nine months ended December 31, 2021, (an increase of $155,785, due to the shorter period of time included in the December 31, 2021 period offset by the reallocation in 2022 of certain salaries from general and administrative expenses to research and development expenses). We also recorded $7,083 related to stock-based compensation in our research and development expenses during the nine months ended December 31, 2021 and no such expenses during the year ended December 31, 2022. During the year ended December 31, 2022, we recorded other income of $28,257, consisting of a gain on loan forgiveness of $109,435 offset by interest expense of $81,178, compared to other expense of $270 during the nine months ended December 31, 2021 (an increase of $28,527). 43 The decrease in net loss for the year ended December 31, 2022 compared to the nine months ended December 31, 2021 is primarily due to the gross profit of $1,393,252 earned during the year ended December 31, 2022, arising from the operations of the Range Reclamation Entities acquired in May 2022. The Company had no gross profit for the nine months ended December 31, 2021. Liquidity and Capital Resources We have incurred losses since inception resulting in an accumulated deficit of $50,212,854. As of December 31, 2022, we had total current assets of $1,424,638, primarily comprised of cash in the amount of $442,369 and accounts receivable of $981,385. As of December 31, 2022 we had total current liabilities of $1,553,009, consisting of the current portion of long-term debt in the amount of $1,319,201 and accounts payable of $233,808. As a result, on December 31, 2022, the Company had negative working capital of $(128,371). At December 31, 2021, the Company had negative working capital of $(390,333). As of December 31, 2022, the Company had long-term assets of $6,805,827, comprised of net equipment assets of $6,045,514, goodwill of $751,421, and deposits of $8,892. As of December 31, 2022, the Company had long-term liabilities of $3,738,013, comprised of long-term debt, net of current portion. As of December 31, 2021, the Company had long-term assets of $8,692, comprised of deposits, and no long-term liabilities. Sources of Capital Based on the Company’s current corporate strategy, its net operating losses for the 12 months following December 31, 2022 are expected to be approximately $1,200,000, which is comprised of general operating and research and development expenses partially offset by revenue generated by the Range Reclamation Entities. Based on the Company’s cash balance of $442,369, $1,000,000 available under its revolving credit line, and its estimated net operating losses of approximately $1,200,000 for the 12-month period ending December 31, 2023, the Company expects to have sufficient funds to operate its business over the next 12 months. The Company expects to generate positive cash flow from its operating businesses, other than its Cannabinoid Drug Development business, but may also seek additional financing and other sources of capital to accelerate the funding and execution of its growth strategy and value creation plan. Our estimated total expenditures for the 12-month period ending December 31, 2023 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. Until such time as our operating businesses are cash flow positive, we expect to continue funding our operations, at least in part, through equity and debt financings. 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 which, in turn, 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. 45 Net Cash Used in Operating Activities The Company has not historically generated positive cash flows from operating activities. While the Company has been generating revenue as a result of the acquisition of the Range Reclamation Entities in May 2022, we are still not yet generating positive cash flows from operating activities on a consolidated basis. For the year ended December 31, 2022, net cash used in operating activities was $603,778 compared to net cash used in operating activities of $1,365,744 for the nine months ended December 31, 2021. This decrease was primarily attributable to a lower net loss of $1,072,176 for the year ended December 31, 2022 compared to a net loss of $1,712,969 for the nine months ended December 31, 2021 and an increase in the cash adjustment for depreciation expense of $395,543 during the year ended December 31, 2022 compared to no depreciation expense during the nine months ended December 31, 2021. Net cash used in operating activities during the year ended December 31, 2022, consisted primarily of a net loss of $1,072,176, offset by stock-based compensation of $393,260 and depreciation of $395,543. Net cash used in operating activities during the nine months ended December 31, 2021 consisted primarily of a net loss of $1,712,969, partially offset by $297,984 related to stock-based compensation. Net Cash Used in Investing Activities For the year ended December 30, 2022, net cash used in investing activities was $6,547,230, which consisted primarily of $5,813,057 for equipment purchased by the Range Reclamation Entities and $750,000 paid in connection with the acquisition of the Range Reclamation Entities. No net cash was used in or provided by investing activities during the nine months ended December 31, 2021. Net Cash Provided By Financing Activities For the year ended December 31, 2022, net cash provided by financing activities was $7,555,034, compared to net cash provided from financing activities of $519,950 during the nine months ended December 31, 2021. Net cash provided by financing activities for the year ended December 31, 2022 consisted of $3,250,000 received from the issuance of common stock and warrants, proceeds of $5,091,177 from long-term debt, offset by the payoff of an SBA Disaster Loan of $158,815, the payoff of a revolving line of credit of $350,000 and repayment of long-term debt of $277,328. The cash provided during the nine months ended December 31, 2021 was a result of the issuance of common stock and warrants under an equity line in the amount of $169,950 and proceeds of $350,000 from long-term debt. 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. Item 7A. Quantitative and Qualitative Disclosures About Market Risk Not applicable. Item 8. Financial Statements and Supplementary Data The financial statements required by this item are set forth at the end of this Annual Report beginning on page F-1 and are incorporated herein by reference. Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure None.