What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-11-14 compared with 2023-08-01 · 290 added, 304 removed, 421 unchanged (59% of the section changed)

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publicly any forward-looking statements for any reason.

Innovations, Inc.

(“Malachite”) 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.

corporate headquarters is located in Cleveland, Ohio, with additional office locations in Rocklin, California and Fola, West Virginia.

As of August 1, 2023, we employed 38 full-time employees and engaged various consultants and professional service firms to provide us

with flexible and experienced resources to advance our corporate objectives while maintaining a cost-effective overhead structure.

strive to instill a corporate culture of honesty, integrity and respect while advancing our mission of doing well by doing good.

Malachite Innovations, Inc.

(“Malachite”) is a public company

dedicated to improving the health and wellness of people and the planet through a novel and innovative approach to impact investing.

owns and operates several complementary 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 strategic opportunities that are expected to make a positive impact on the people-planet ecosystem and generate strong investment

returns for our shareholders.

Our corporate headquarters is located in Cleveland, Ohio, with additional

office locations in Fola, West Virginia, Flatwoods, West Virginia, and Rocklin, California.

As of November 13, 2023, we employed 74 full-time

employees and engaged various consultants and professional service firms to provide us with flexible and experienced resources to advance

our corporate objectives while maintaining a cost-effective overhead structure.

We strive to instill a corporate culture of honesty, integrity

and respect while advancing our mission of doing well by doing good.

Business Segments

five operating business segments are:

(i) Environmental Services, (ii) Biochar Products and Solutions, (iii) Stream Mitigation Banking,

(iv) Environmental Security Services, and (v) Cannabinoid Drug Development.

The Stream Mitigation Banking segment did not have significant

operations in the three months ended June 30, 2023.

(i) Range Reclaim, (ii) Range Water, (iii) Range Security, (iv) Range Land, and (v) Drug Development.

about our business segments should be read together with “Part II.

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Condition and Results of Operations.”

Environmental

May 2022, the Company acquired Range Environmental Resources, Inc., a West Virginia corporation (“Range Environmental”) and

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services to mining and non-mining customers throughout the Appalachian region with the goal of returning land to pre-mining conditions

or repurposing the land for natural, commercial, agricultural or recreational use.

or repurposing the land for natural, commercial, agricultural, residential or recreational use.

The Range Reclamation Entities’ water restoration

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active mines, 141 idled or closed mines, and 40 new or activated mines.

Approximately 82% of those coal mines were located in

Appalachia (which comprises the Appalachian Mountains and is commonly known as the cultural region in the Eastern United States

stretching from the southern part of New York to the northern parts of Alabama and Georgia).

According to the EIA, there were

approximately three times as many coal mines in the United States in 2008 (compared to 2020) with approximately 89% located in

The precipitous decline in the number of operating coal mines since 2008 is due to various supply, demand and regulatory

factors, including a reduction in demand for coal as a source of electricity due to the increased use of natural gas and renewable

energy, an increase in coal production costs due to inflation and the dearth of cost-effective locations remaining for mining, and a

more stringent and costly regulatory environment, all of which have resulted in an increasingly difficult market for coal

Approximately 82% of those coal mines were located in Appalachia

(which comprises the Appalachian Mountains and is commonly known as the cultural region in the Eastern United States stretching from

the southern part of New York to the northern parts of Alabama and Georgia).

According to the EIA, there were approximately three times

as many coal mines in the United States in 2008 (compared to 2020) with approximately 89% located in Appalachia.

The precipitous decline

in the number of operating coal mines since 2008 is due to various supply, demand and regulatory factors, including a reduction in demand

for coal as a source of electricity due to the increased use of natural gas and renewable energy, an increase in coal production costs

due to inflation and the dearth of cost-effective locations remaining for mining, and a more stringent and costly regulatory environment,

all of which have resulted in an increasingly difficult market for coal producers.

2000, coal was responsible for 1,966 billion kWh of electricity generation, which represented 52% of the total electricity generation

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operating in the United States is scheduled to retire by the end of 2029 due to the high cost of operations, continued competition from

natural gas and renewable energy resources, and sustainable initiatives of energy producers.

natural gas and renewable energy resources, and sustainability initiatives of energy producers.

the reclamation of closed and inactive mine sites has not kept pace with the increase in closed and idled mine sites, thus creating a

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surety bond insurers after 1977.

the time of acquisition in May 2022, the Range Reclamation Entities had one reclamation customer, 15 pieces of owned and financed equipment,

eight pieces of leased equipment, and 12 employees, all located and operating in West Virginia.

As of June 30, 2023, approximately one

year later, the businesses had four reclamation customers, 60 pieces of owned and financed equipment, and 29 employees in West Virginia.

For the full year 2021, the Range Reclamation Entities had revenues of approximately $2.5 million.

For the partial year period from May

11, 2022 to December 31, 2022, the Range Reclamation Entities had revenues of approximately $4.8 million.

For the first six months of

2023, the Range Reclamation Entities had revenues of approximately $6.9 million.

The Range Reclamation Entities have also made a significant

investment in recruiting, retaining and rewarding employees, including providing new benefits such as health insurance, paid time off,

vacation days, 401K retirement plan, and job advancement training.

The Range Reclamation Entities’ employees are their most valuable

asset, and therefore we are committed to building a best-in-class culture and financially rewarding our talented, hard-working employees

so that we can maximize the good we can do for our people and their families.

At the time of acquisition in May 2022, the Range Reclamation Entities had

one reclamation customer, 15 pieces of owned and financed equipment, eight pieces of leased equipment, and 12 employees, all located and

operating in West Virginia.

As of September 30, 2023, approximately 16 months later, the businesses had four reclamation customers, 62

pieces of owned and financed equipment, and 56 employees in West Virginia.

For the full year 2021, the Range Reclamation Entities had

revenues of approximately $2.5 million.

For the partial year period from May 11, 2022 to December 31, 2022, the Range Reclamation Entities

had revenues of approximately $4.8 million.

For the first nine months of 2023, the Range Reclamation Entities had revenues of approximately

$12.2 million.

The Range Reclamation Entities have also made a significant investment in recruiting, retaining and rewarding employees,

including providing new benefits such as health insurance, paid time off, vacation days, 401K retirement plan, and job advancement training.

The Range Reclamation Entities’ employees are their most valuable asset, and therefore we are committed to building a best-in-class

culture and financially rewarding our talented, hard-working employees so that we can maximize the good we can do for our employees and

their families.

Range Reclamation Entities are planning for continued growth in their land reclamation, water restoration and consulting businesses by

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to generate incremental sales opportunities.

We will seek to add additional people, equipment and technologies to support these ambitious

We will seek to add additional employees, equipment and technologies to support these ambitious

growth goals to ensure we successfully execute our value creation plans for the Company and our shareholders.

Products and Solutions

Preta, Inc., an Ohio corporation (“Terra Preta”), is a biochar product development and environmental solutions business started

In August 2023, the Company acquired Collins Building, which owned 105 pieces

of reclamation equipment with attachments, plus a sandstone quarry and mechanics shop located in West Virginia.

Collins Building is an

environmental services business that primarily focuses on reclaiming abandoned mine land sites for the West Virginia Department of Environmental

Protection as part of its AML Reclamation Program.

Preta, LLC, an Ohio limited liability company (“Terra Preta”), is a biochar product development and environmental solutions business started

by the Company in December 2022.

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production and sale by the end of 2024.

Mitigation Banking

December 2022, the Company formed Pristine Stream Ventures, Inc., an Ohio corporation (“Pristine Stream”) to engage in the

business of establishing “mitigation banks” throughout the Appalachian region in order to restore and preserve environmentally

degraded streams and waterways and support new economic development, with a particular focus on coal mine sites in economically disadvantaged

areas that are being repositioned for next generation industries and job creation.

mitigation bank is a stream, wetland or other aquatic resource that has been restored or preserved for the purpose of providing compensation

for environmental impacts to other aquatic resources.

A mitigation bank is created to ensure that ecological loss resulting from new

development is offset by the restoration and preservation of other nearby natural habitats so there is no net loss to the environment.

Regulatory agencies determine the number of mitigation credits that a mitigation bank may earn and sell upon the completion of each specific

restoration project, and likewise, the number of mitigation credits that a developer is required to purchase to offset the environmental

impact of the new development project.

Section 404 of the Clean Water Act, a permit from the U.S.

Army Corps of Engineers (“Army Corps”) is required to begin a

new development that impacts a wetland, stream or other aquatic resource.

The Army Corps, following the guidance set forth by the EPA,

will grant a permit if the applicant:

(i) takes all practicable steps to avoid an adverse impact to a wetland, stream, or other aquatic

resource, (ii) minimizes unavoidable damage to a wetland, stream, or other aquatic resource, and (iii) compensates for permanent destruction

of a wetland, stream, or other aquatic resource by creating a new comparable aquatic resource, or by restoring a degraded one.

a wetland, stream or aquatic resource is permanently destroyed as part of a project, the developer must either restore or preserve a

new wetland, stream or aquatic resource, or purchase available credits from a qualified and approved mitigation bank that has already

restored or preserved a wetland, stream or aquatic resource in a qualifying hydrological unit code (“HUC”) zone.

States Geological Survey created HUC zones based on a hierarchical land area classification system incorporating surface hydrological

features in a standard, uniform graphical framework.

HUC zone requirements are used to ensure a restored waterway is proximally located

to an impacted waterway so that the no net-loss principle incorporates a geographic factor.

mitigation can be accomplished through three options approved by the Army Corps:

(i) the developer purchases appropriate credits from

an approved mitigation bank, (ii) the developer pays into an approved in-lieu fee fund, or (iii) the developer performs the requisite

amount of aquatic restoration.

The Army Corps determines, on a case-by-case basis, the appropriate compensation option and amount of

compensation mitigation required by a developer to off-set unavoidable adverse effects to the aquatic environment.

In determining the

amount of compensation mitigation, the Army Corps will consider the functional loss at the development site, the expected functional

gain at the mitigation site, the net loss of aquatic resource surface area, risk and uncertainty of the mitigation project, and loss

of natural habitat.

Stream is planning to establish mitigation banks throughout the Appalachian region to earn mitigation credits which Pristine Stream would

later sell to developers to allow them to offset the impact of development activities in similar geographical areas.

Pristine Stream

plans to identify and select qualifying aquatic sites, work closely with applicable federal and state regulatory agencies, and use the

Range Reclamation Entities to repair and restore damaged waterways to earn mitigation credits that can be sold by Pristine Stream.

Stream is currently analyzing the supply and demand dynamics of many HUC zones throughout the Appalachian region to determine the optimal

areas of focus for its new mitigation banks, and anticipates initiating its first mitigation banking project in Appalachia by the end

Environmental

Security Services

Security Resources, Inc., an Ohio corporation (“Range Security”), is an environmental security services business started

Security Resources, LLC, an Ohio limited liability company (“Range Security”), is an environmental security services business started

by the Company in November 2022.

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attract next generation industries once the mining is complete.

March 2023, Range Security was engaged by its first customer for environmental security services covering a 13,000-acre coal mine site

in West Virginia.

Range Security has hired seven new security professionals, and is focusing its recruitment efforts on military veterans,

police officers, and other professionals with security experience.

Range Security has purchased two fuel-efficient utility task vehicles

for ground surveillance and a thermal-imaging drone for aerial surveillance, all of which use significantly less fuel and electricity

to operate than traditional security vehicles and provide a much broader coverage range with a substantially lower carbon footprint.

Range Security is also in the process of establishing satellite-based wireless service to support video surveillance and enable a mobile

technology solution used by our security professionals to provide real-time evidence of visual security checks.

Range Security plans

to expand its security service business onto several additional mine sites prior to the end of 2023, with a particular focus on locations

with valuable infrastructure being repurposed into non-coal multi-use complexes with attractive job growth prospects and next generation

industry opportunities.

In March 2023, Range Security was engaged by its first customer for environmental

security services covering a 13,000-acre coal mine site in Central West Virginia.

In October 2023, Range Security was engaged by its second

customer for environmental security services covering a 16,000-acre coal mine site in Eastern Kentucky.

Range Security has hired 15 new

security professionals, and is focusing its recruitment efforts on military veterans, police officers, and other professionals with security

Range Security has purchased two fuel-efficient utility task vehicles for ground surveillance and a thermal-imaging drone

for aerial surveillance, all of which use significantly less fuel and electricity to operate than traditional security vehicles and provide

a much broader coverage range with a substantially lower carbon footprint.

Range Security is also in the process of establishing satellite-based

wireless service to support video surveillance and enable a mobile technology solution used by our security professionals to provide real-time

evidence of visual security checks.

Range Security plans to expand its security service business onto several additional mine sites prior

to the end of 2023, with a particular focus on locations with valuable infrastructure being repurposed into non-coal multi-use complexes

with attractive job growth prospects and next generation industry opportunities.

Range Land, LLC, an Ohio limited

liability company (“Range Land”), is a land acquisition company started by the Company in August 2023.

Range Land is focused

on acquiring former mine lands with the goal of reclaiming and repurposing the sites for non-fossil fuel uses, including commercial, industrial,

residential and recreational developments.

Range Land is specifically interested in renewable energy facilities, innovative agricultural

installations, and projects focused on improving the quality and condition of our air, land and waterways.

According to industry estimates,

Appalachia contains nearly one million acres of abandoned, idled and non-performing mine sites that are burdened with significant land

reclamation and water restoration obligations.

Many of these troubled mine sites are subject to mining permits and associated reclamation

bonds, which as a result, prevents the land from being repurposed for non-mining uses until the land has been reclaimed and the permits

and bonds have been released by the applicable state’s environmental protection department.

Water quality is a particularly challenging

issue since a permit can only be released if the site has at least 12-months of compliant water samples without active chemical treatment,

which heightens the need for water restoration solutions to help transition former mine land to non-mining uses.

The Company, through it several

operating businesses, has assembled the internal resources and capabilities to reclaim land, restore waterways, install innovative water

treatment solutions, and secure the mine site to protect the significant historical investment in infrastructure.

In additional to these

in-house capabilities, the Company and its operating businesses also possess deep knowledge and expertise about the permit and bond release

process, which is a critical step necessary to unlock the underlying value of the former mine land for non-fossil fuel uses.

is actively reviewing several mine sites throughout Appalachia to acquire, reclaim and repurpose in order to improve the land and create

non-fossil fuel economic development opportunities for disadvantaged local coal communities.

In September 2023, Range Land,

through its wholly owned subsidiary CLV Azurite Land, LLC, an Ohio limited liability company (“CLV Azurite”), acquired through

three transactions over 1,900 acres of surface interest at an idled mine complex in West Virginia.

CLV Azurite is in active discussions

with the holder of the permits and bonds associated with the acquired land to ensure that the acquired surface acreage can be repurposed

for alternative non-fossil fuel uses.

Concurrently, CLV Azurite is in active discussions with an experienced and well-capitalized development

partner to convert the former mine land into a large solar energy facility on a majority of the acquired surface acreage.

an arrangement, CLV Azurite would be the landlord and the solar developer-operator would be the tenant required to pay CLV Azurite a

negotiated lease payment on a per acre basis.

Drug Development

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diversion control standards.

are working closely with a third-party contract research organization to develop a detailed drug development plan to advance our leading

drug candidate, VBX-100, through Phase II clinical trials by the end of 2025, subject to receipt of sufficient funding, which is currently

estimated to be approximately $12.0 million.

The Company is actively seeking to raise the necessary funding to advance our leading drug

candidate, VBX-100.

If we are successful in raising the necessary capital and advancing VBX-100 through Phase II clinical studies, then

we would seek to maximize shareholder value by either selling our drug development assets to a strategic purchaser or raising additional

capital to advance VBX-100 through Phase III clinical trials.

We are working closely with a third-party contract research organization

to develop a detailed drug development plan to advance our leading drug candidate, VBX-100, through Phase II clinical trials by the end

of 2026, subject to receipt of sufficient funding, which is currently estimated to be approximately $15.0 million.

The Company is actively

seeking to raise the necessary funding by issuing new common shares of Graphium to investors to advance our leading drug candidate, VBX-100.

If we are successful in raising the necessary capital and advancing VBX-100 through Phase II clinical studies, then we would seek to maximize

shareholder value by either selling our drug development assets to a strategic purchaser or raising additional capital to advance VBX-100

through Phase III clinical trials.

Investing Strategy

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financial returns for shareholders.

impact investing strategy provides an opportunity for our dedicated team to address pressing environmental, social and economic challenges,

such as climate change, air and water pollution, educational inequality and economic disparity, through the development of technology-based

By actively directing investment capital towards businesses that are working to create positive environmental, social and

economic outcomes, our impact investing strategy can meaningfully contribute to an improved people-planet ecosystem and a healthier and

happier way of life.

have a particular interest in providing environmental and social solutions in economically-disadvantaged regions of the United States.

Initially, the Company is targeting the Appalachian region, which is home to communities with some of the most disadvantaged income,

education and employment demographics in the United States.

Our ambitious strategy is to allocate investment capital and build operating

businesses that provide positive environmental and social impact in the disadvantaged coal communities of Appalachia to maximize the

good we can do for people and the planet.

Our impact investing strategy provides an opportunity for our dedicated

team to address pressing environmental, social, and economic challenges, such as climate change, air and water pollution, educational

inequality and economic disparity, through the development of novel and innovative solutions.

By actively directing investment capital

towards businesses that are working to create positive environmental, social, and economic outcomes, our impact investing strategy can

meaningfully contribute to an improved people-planet ecosystem and a healthier and happier way of life.

We have a particular interest in providing environmental and social solutions

in economically-disadvantaged regions of the United States.

Initially, the Company is targeting the Appalachian region, which is home

to communities with some of the most disadvantaged income, education and employment demographics in the United States.

Our ambitious strategy

is to allocate investment capital and management resources to acquire, reclaim, and repurpose former mine sites in Appalachia that have

the potential to provide positive environmental and social impact in these disadvantaged coal communities to maximize the good we can

do for people and the planet.

Investing Process

Company maintains a rigorous investment process comprised of sourcing, underwriting, acquiring or originating, growing, and exiting impact

Company maintains a rigorous investment process comprised of sourcing, underwriting, acquiring or originating, and growing impact

investing opportunities.

Our executive management team is responsible for the construction, execution, and continued refinement of our

impact investing process, which relies upon the decades of experience of our executive management team and a periodic review, evaluation

and adoption of best practices employed in the direct investment and private equity industry.

Our executive management team is responsible for the construction, execution, and continued refinement of

our impact investing process, which relies upon the decades of experience of our executive management team and a periodic review,

evaluation and adoption of best practices employed in the direct investment and private equity industry.

impact investing process starts with identifying and evaluating potential investment opportunities.

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Each potential impact investment is evaluated based on its fit with our corporate strategy,

the individual risks and opportunities of each potential investment, and any synergies with our other impact investments (“Portfolio

the individual risks and opportunities of each potential investment, and any synergies with our other impact investments.

This detailed due diligence review is aimed at identifying and addressing material investment risks and opportunities

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(“DEI”) factors in the investment decision-making process.

impact investments are commonly structured as stock or asset acquisitions with transaction consideration in the form of cash and the

Company’s common stock so the former owners of impact investment acquisitions are properly aligned with our public shareholders

in the creation of future value.

Additionally, the Company has developed innovative business projects that fit within our corporate strategy

and have been allocated capital and resources to grow and increase shareholder value.

Each such organic innovation has been developed

within a newly-created, wholly-owned Portfolio Company (e.g., Terra Preta, Pristine Stream and Range Security) so the executive management

team can properly monitor the performance of each organic innovation and optimize the allocation of capital and management resources

to maximize the positive overall impact to the Company and its shareholders.

a potential impact investment is acquired, or an organic innovation is launched, our executive management team is responsible for closely

monitoring on a regular basis the performance of each investment.

Each Portfolio Company has an experienced management team that is responsible

for executing a value creation plan with active support, collaboration and input from the Company’s executive management team.

Our complementary hybrid approach to investment management enables the management teams of each Portfolio Company to manage the daily

operations of the business in a decentralized manner, while the executive management team of the Company serves as an active collaborator

to the management team of each Portfolio Company to ensure the value creation plan is being successfully executed and cross-pollination

of ideas, capabilities and synergies are achieved across each Portfolio Company.

We believe a balanced approach to individual management

and corporate governance provides Portfolio Company management teams with the freedom and autonomy to preserve their ownership mindset

Our impact investments are commonly structured as stock or asset acquisitions

with transaction consideration in the form of cash and the Company’s common stock so the former owners of impact investment acquisitions

are properly aligned with our public shareholders in the creation of future value.

Additionally, the Company has developed innovative

business projects that fit within our corporate strategy and have been allocated capital and resources to grow and increase shareholder

After a potential impact investment is acquired, or an organic innovation

is launched, our executive management team is responsible for closely monitoring on a regular basis the performance of each investment.

Each operating business has an experienced management team that is responsible for executing a value creation plan with active support,

collaboration and input from the Company’s executive management team.

We believe a balanced approach to individual management and

corporate governance provides the managers of the operating businesses with the freedom and autonomy to preserve their ownership mindset

while also providing the Company’s executive team with the optimal level of involvement in order to maximize the overall benefits

to the Company’s shareholders.

the value creation plan is executed for each Portfolio Company, the Company’s executive team, in consultation with the management

team of each Portfolio Company, will regularly evaluate the strategic options for the business, which could include additional investment

to fund strategic growth and expansion, maximizing current cash flow without further investments, or a potential exit to a strategic

or financial buyer.

This process of evaluating strategic options is dynamic and involves many considerations, including an evaluation

of the current and future market conditions, the Portfolio Company’s current and future financial performance, changes in the Portfolio

Company’s competitive advantages, macro and micro market conditions, and exit valuations.

Since the Company is structured as a

perpetual investment vehicle without predetermined hold periods, our executive management team possesses the flexibility to regularly

evaluate the risk-return profile of each Portfolio Company and make strategic decisions that maximize the investment returns and value

creation for the Company’s shareholders.

and Operation

Company is organized as a public holding company.

Currently, all Portfolio Companies are wholly-owned subsidiaries of the Company and

are consolidated in our financial reporting.

Company’s executive management team works closely with the management team of each Portfolio Company on strategy, operations and

financial matters.

The Company allocates the time and resources of several executives to support the operations of Portfolio Companies,

including accounting, insurance and human resources, to recognize operational efficiencies and cost savings resulting from the Company’s

larger scale.

As the value creation plan is executed for each operating business, the

Company’s executive team, in consultation with the management team of each business unit, will regularly evaluate the strategic

options for the business, which could include additional investment to fund strategic growth and expansion, maximizing current cash flow

without further investments, or a potential exit to a strategic or financial buyer.

This process of evaluating strategic options is dynamic

and involves many considerations, including an evaluation of the current and future market conditions, the current and future financial

performance of the operating business, changes in its competitive advantages, new competitors, macro and micro market conditions, and

exit valuations.

Environmental,

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Additionally, we believe these benefits will ultimately result in greater profits and an increase in long-term shareholder

Company is focused on a large and growing marketplace for impact investing and ESG business initiatives, and therefore, is anticipated

Company is focused on a large and growing marketplace for impact investing, and therefore, is anticipated

to face competition from a variety of operating businesses and investment funds who are developing business plans and operating strategies

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and better capitalized operating businesses and investment funds.

Company competes on the basis of a number of factors, including access to capital, access to impact investing opportunities, recruitment

and retention of key personnel, market share with key customers, and supply relationships with critical vendors.

Our ability to continue

to compete effectively in our businesses will depend upon our ability to attract new employees and retain and motivate our existing employees.

inception, the Company and its subsidiaries have used QuickBooks as its general ledger accounting software.

However, given the significant

current and anticipated growth of its Portfolio Companies and the need for more robust information for management analysis and decision-making,

the Company has decided to transition all of its accounting software services from QuickBooks to Foundation Software.

Software, founded in Cleveland, Ohio in 1985, is specifically designed for service companies, particularly those in the

construction, contracting and reclamation industries.

Foundation Software offers the Company several enhanced features critical to

the successful execution of its value creation plan, including (i) general ledger accounting, including accounts payable, accounts

receivable, inventory and customer billing, (ii) equipment tracking on job sites, maintenance, utilization and depreciation, (iii)

employee tracking on job sites, time and materials, utilization, and billing, (iv) job costing and profitability reporting segmented

by customers, job types and location, and (v) numerous real-time management dashboard and key performance indicator reports that

will allow management to closely monitor the performance of each Portfolio Company and react on a timely basis to business

Our Company competes on the basis of a number of factors, including access

to capital, access to impact investing opportunities, recruitment and retention of key personnel, market share with key customers, strong

relationships with reclamation bond insurance companies and state regulators, and supply relationships with critical vendors.

to continue to compete effectively in our lines of business will depend upon our ability to attract new employees, retain and motivate

our existing employees, and invest in new equipment.

Since inception, the Company and its subsidiaries have used QuickBooks as

its general ledger accounting software.

However, given the significant current and anticipated growth of its operating businesses and

the need for more robust information for management analysis and decision-making, the Company transitioned all of its accounting software

services from QuickBooks to Foundation Software in the second quarter of 2023.

Foundation Software, founded in Cleveland, Ohio in 1985, is specifically

designed for service companies, particularly those in the construction, contracting and reclamation industries.

Foundation Software offers

the Company several enhanced features critical to the successful execution of its value creation plan, including (i) general ledger accounting,

including accounts payable, accounts receivable, inventory and customer billing, (ii) equipment tracking on job sites, maintenance, utilization

and depreciation, (iii) employee tracking on job sites, time and materials, utilization, and billing, (iv) job costing and profitability

reporting segmented by customers, job types and location, and (v) numerous real-time management dashboard and key performance indicator

reports that will allow management to closely monitor the performance of each operating business and react on a timely basis to business

opportunities and issues.

Furthermore, Foundation Software will allow the Company and its Portfolio Companies to more readily scale

Furthermore, Foundation Software will allow the Company and its operating businesses to more easily scale their

operations and efficiently and cost-effectively support the anticipated growth of each business.

Company completed converting all

of the Company accounting system operations from QuickBooks to Foundation Software during the second quarter of 2023.

of Operations

Months Ended June 30, 2023 and June 30, 2022

revenue during the three months ended June 30, 2023 was $3,998,267 and our gross profit was $845,101 (representing a 21% gross

profit margin) compared to revenue during the three months ended June 30, 2022 of $639,359 and gross profit of $64,952 (representing

a 10% gross profit margin).

the three months ended June 30, 2023, we incurred general and administrative expenses in the aggregate amount of $635,898 compared

to $380,326 incurred during the three months ended June 30, 2022 (an increase of $255,572).

General and administrative expenses

generally include corporate overhead, salaries for administrative and management personnel and other related compensation costs,

financial and administrative contracted services, marketing, consulting costs and travel expenses.

These costs include the

operations of the Range Reclamation Entities, which were acquired in May 2022.

The majority of the increase in general and

administrative expenses relates to salaries which increased to $257,081 during the three months ended June 30, 2023, as compared to

$116,553 during the three months ended June 30, 2022 (an increase of $140,528) as a result of the hiring of additional administrative and management personnel in connection with the expansion

of the Company’s business operations.

addition, during the three months ended June 30, 2023, we incurred research and development costs of $107,444, compared to $107,823

during the three months ended June 30, 2022 (a decrease of $379).

These costs consist primarily of the salary of our Chief Science

Officer, rent for our Rocklin lab space, patent-related legal fees, and consulting fees.

the three months ended June 30, 2023, we recorded total net other expense of $64,997 (all of which was interest expense),

compared to total net other expense recorded during the three months ended June 30, 2022 of $19,989 (all of which was

interest expense).

This increase of $45,008 in interest expense during the three months ended June 30, 2023 was attributable to the increased amount of debt used to finance equipment purchased by the Range Reclamation

net income during the three months ended June 30, 2023 was $36,762 compared to a net loss of $443,186 during the three months ended June

30, 2022 (an improvement of $479,948).

Months Ended June 30, 2023 and June 30, 2022

revenue during the six months ended June 30, 2023 was $7,013,154 and our gross profit was $1,494,103 (representing a 21% gross

profit margin), compared to revenue during the six months ended June 30, 2022 of $639,359 and gross profit of $64,952 (representing

Months Ended September 30, 2023 and September 30, 2022

revenue for the three months ended September 30, 2023 was $5,455,633 and our gross profit was $2,857,766 (representing a 52% gross

profit margin) compared to revenue for the three months ended September 30, 2022 of $1,547,258 and gross profit of $357,783 (representing

a 23% gross profit margin).

the six months ended June 30, 2023, we incurred general and administrative expenses in the aggregate amount of $1,361,946 compared

to $698,267 incurred during the six months ended June 30, 2022 (an increase of $663,679).

The majority of the increase in general

and administrative costs relates to increased salary expense which increased to $431,334 during the six months ended June 30, 2023

as compared to $116,553 during the six months ended June 30, 2022 (an increase of $314,781), legal fees which increased to $207,639

during the six months ended June 30, 2023, as compared to $71,253 during the six months ended June 30, 2022 (an increase of

$136,386), and insurance costs, which increased to $312,122 during the six months ended June 30, 2023 as compared to $99,187 during

the six months ended June 30, 2022 (an increase of $212,935) as a result of the insurance related to the increases in the equipment assets and the number of employees of the

Range Reclamation Entities.

addition, during the six months ended June 30, 2023, we incurred research and development costs of $213,621, compared to $233,553

during the six months ended June 30, 2022 (a decrease of $19,932).

This decrease primarily resulted from a decrease in

legal fees related to research and development, offset by an increase in professional fees related to

research and development.

the six months ended June 30, 2023, we recorded total net other expense of $108,634 (all of which was interest expense),

compared to total net other expense recorded during the six months ended June 30, 2022 of $24,292 (all of which was interest

This increase of $84,342 in interest expense during the six months ended June 30, 2023 was attributable to the increased amount of debt used to finance equipment purchased by the Range Reclamation Entities.

net loss during the six months ended June 30, 2023 was $190,098 compared to a net loss of $891,160 during the six months ended June 30,

2022 (an improvement of $701,062).

For the three months ended September

30, 2023, we incurred general and administrative expenses in the aggregate amount of $1,057,055 compared to $449,041 incurred for the

three months ended September 30, 2022 (an increase of $608,014).

General and administrative expenses generally include corporate overhead,

salaries for administrative and management personnel and other related compensation costs, financial and administrative contracted services,

marketing, consulting costs and travel expenses.

These costs include the operations of Collins Building which was acquired in August 2023

and the Range Reclamation Entities which were acquired in May 2022.

The majority of the increase in general and administrative expenses

relates to salaries which increased to $531,172 for the three months ended September 30, 2023, as compared to $132,879 for the three months

ended September 30, 2022 (an increase of $398,293) as a result of the hiring of additional administrative and management personnel in

connection with the expansion of the Company’s business operations.

In addition, for the three months ended September 30, 2023, we incurred

research and development costs of $140,840, compared to $106,744 for the three months ended September 30, 2022 (an increase of $34,096).

These costs consist primarily of the salary of our Chief Science Officer, rent for our Rocklin lab space, patent-related legal fees, and

consulting fees.

This increase primarily resulted from an increase in consulting fees in the amount of $54,000, offset by a decrease in

wages allocated to research and development of $19,330.

For the three months ended September

30, 2023, we recorded total net other income of $1,744,304, compared to total net other income recorded for the three months ended September

30, 2022 of $78,386.

This increase of $1,665,918 was primarily attributable to the gain recognized on the purchase of Collins Building

of $1,875,150, partially offset by the increased amount of interest expense related to equipment financing and the financing of the purchase

of Collins Building of $135,467.

net income for the three months ended September 30, 2023 was $3,404,175 compared to a net loss of $119,616 for the three months ended

September 30, 2022 (an improvement of $3,523,791).

Months Ended September 30, 2023 and September 30, 2022

Our revenue for the nine months ended September 30, 2023 was $12,468,787

and our gross profit was $4,351,869 (representing a 35% gross profit margin), compared to revenue for the nine months ended September

30, 2022 of $2,186,617 and gross profit of $422,735 (representing a 19% gross profit margin).

For the nine months ended September

30, 2023, we incurred general and administrative expenses in the aggregate amount of $2,419,001 compared to $1,147,308 incurred for the

nine months ended September 30, 2022 (an increase of $1,271,693).

The majority of the increase in general and administrative costs relates

to increased salary expense which increased by $456,666 and legal fees which increased by $338,922.

For the nine months ended September

30, 2023, we incurred research and development costs of $354,461, compared to $340,297 for the nine months ended September 30, 2022 (an

increase of $14,164).

This increase primarily resulted from an increase in consulting fees of $72,000, partially offset by a decrease

in wages allocated to research and development of $38,708.

For the nine months ended September

30, 2023, we recorded total net other income of $1,635,670, compared to total net other income recorded during the nine months ended September

30, 2022 of $54,094.

This increase of $1,689,764 during the nine months ended September 30, 2023 was primarily attributable to the gain

recognized on the purchase of Collins Building of $1,875,150, partially offset by an increase in interest expense of $188,760, and a gain

of $109,435 related to the forgiveness of a PPP loan recorded during the nine months ended September 30, 2022.

net income for the nine months ended September 30, 2023 was $3,214,077 compared to a net loss of $1,010,776 for the nine months ended

September 30, 2022 (an improvement of $4,224,853).

and Capital Resources

have incurred losses since inception resulting in an accumulated deficit of $50,402,952.

of June 30, 2023, we had total current assets of $2,809,964, primarily comprised of cash in the amount of $359,564, accounts receivable

of $1,273,635 and unbilled receivables of $1,129,046.

As of June 30, 2023, we had total current liabilities of $3,062,401, consisting

of outstanding amounts on our lines of credit of $1,200,000, accounts payable of $772,892 and the current portion of long-term debt of $1,089,509.

As a result, on June 30, 2023, the Company had negative working capital of $252,437.

At December 31, 2022,

As of September 30, 2023, we had total current assets of $4,075,750, comprised

of cash in the amount of $1,026,286, accounts receivable of $2,897,234, unbilled receivables of $49,148 and prepaid expenses of $103,082.

As of September 30, 2023, we had total current liabilities of $5,335,662, consisting of outstanding amounts on our lines of credit of

$1,900,000, accounts payable of $924,282 and the current portion of long-term debt of $2,511,380.

As a result, on September 30, 2023,

the Company had negative working capital of $1,259,912.

of June 30, 2023, the Company had long-term assets of $6,905,516, comprised of net equipment assets of $6,134,119, goodwill of $751,421,

and deposits of $19,976.

As of June 30, 2023, the Company had long-term liabilities of $3,457,814, comprised of long-term debt, net of

current portion.

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.

on the Company’s current corporate strategy, we expect our general operating and cannabinoid-based drug development research

and development expenses to be substantially offset by revenue generated by the Range Reclamation Entities and Range Security.

We do not expect to generate significant operating income or losses over the 12 months following June 30, 2023.

Company’s current cash balance and $800,000 currently available under its revolving credit line ,

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.

If additional capital is needed in excess of our current capital resources, we will explore

financing options to accelerate the funding and execution of our growth strategy and shareholder value creation plan.

estimated total expenditures for the 12-month period ending June 30, 2024 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

If any of these were to occur, there is a substantial risk that our business would fail.

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.

At December 31, 2022, the Company had negative working capital of $128,371.

of September 30, 2023, the Company had long-term assets of $14,768,739, comprised of net equipment assets of $12,268,855, land of $1,531,758,

buildings of $196,729, goodwill of $751,421, and deposits of $19,976.

As of September 30, 2023, the Company had long-term liabilities

of $5,891,557, comprised of long-term debt, net of current portion.

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.

Based on the Company’s current corporate strategy, we expect our general

operating expenses to be substantially offset by revenue generated by the Range Reclamation Entities, Collis Building and Range Security.

We expect the Company’s operating businesses to generate operating income and positive cash flow over the 12 months following September

Based on the Company’s current cash balance and $100,000 currently available under its revolving credit line, the Company

expects to have sufficient funds to operate its business over the next 12 months.

If additional capital is needed in excess of our current

capital resources, we will explore financing options to accelerate the funding and execution of our growth strategy and shareholder value

creation plan.

Our estimated total cash needs for the 12-month period ending September

30, 2024 could increase if we encounter unanticipated lower revenues and higher 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.

Until such time as the Company and its 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

4 unchanged sentences

would increase our liabilities and future cash commitments.

If we pursue capital through alternative sources, such as strategic business

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 and other related costs.

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 and other related costs.

Cash Used in Operating Activities

the six months ended June 30, 2023, net cash used in operating activities was $398,399 compared to net cash used in operating

activities of $845,068 for the six months ended June 30, 2022.

This decrease of $446,669 was primarily attributable to a decrease in

the Company’s net loss of $190,098 during the six months ended June 30, 2023, compared to a net loss of $891,160 during the

six months ended June 30, 2022 and an increase of accounts payable of $539,084, offset by an increase in unbilled receivables of

$1,129,046 during the six months ended June 30, 2023.

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.

For the nine months ended September 30, 2023, net cash provided by operating

activities was $1,074,719 compared to net cash used in operating activities of $568,536 for the nine months ended September 30, 2022.

This difference of $1,643,255 was primarily attributable to the Company’s net income of $3,214,077 for the nine months ended September

30, 2023, compared to a net loss of $1,010,776 for the nine months ended September 30, 2022 and depreciation of $1,026,052, offset by

the gain of $1,875,150 recognized on the purchase of Collins Building and an increase in accounts payable of $1,915,848, for the nine

months ended September 30, 2023.

Net cash used in operating activities for the nine months ended September 30, 2022 consisted primarily

of a net loss of $1,010,776, offset by depreciation of $187,923 and a decrease in accounts receivable of $554,181.

Cash Used in Investing Activities

the six months ended June 30, 2023, net cash used in investing activities was $784,515 compared to net cash used in investing

activities of $1,842,006 for the six months ended June 30, 2022.

Net cash used in investing activities during the six months ended

June 30, 2023 consisted of equipment purchases totaling $784,515.

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 in connection with the acquisition of

Range Environmental of $750,000.

For the nine months ended September

30, 2023, net cash used in investing activities was $7,146,525 compared to net cash used in investing activities of $1,977,502 for the

nine months ended September 30, 2022.

Net cash used in investing activities during the nine months ended September 30, 2023 consisted

of equipment purchases totaling $1,134,417, cash paid or financed in connection with the acquisition of Collins Building totaling $5,035,250

and cash paid for land of $976,858.

Net cash used in investing activities for the nine months ended September 30, 2022 consisted primarily

of equipment purchases totaling $1,243,329 and cash paid in connection with the acquisition of Range Environmental of $750,000.

Cash Provided By Financing Activities

the six months ended June 30, 2023, net cash provided by financing activities was $1,100,109 compared to net cash provided by financing

activities of $4,515,020 for the six months ended June 30, 2022.

Net cash provided by financing activities during the six months ended

June 30, 2023 consisted of $410,000 received from the issuance of common stock and warrants, proceeds of $383,093 from long-term debt

and $1,200,000 from revolving lines of credit, offset by repayments on long-term debt of $893,093.

Net cash provided by financing activities

during the six months ended June 30, 2022 consisted 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.

For the nine months ended September

30, 2023, net cash provided by financing activities was $6,655,723 compared to net cash provided by financing activities of $3,664,494

for the nine months ended September 30, 2022.

Net cash provided by financing activities during the nine months ended September 30, 2023

consisted of $1,410,000 received from the issuance of common stock and warrants, proceeds of $4,035,250 from long-term debt issued in

connection with the acquisition of Collins Building, proceeds of $383,202 from other long-term debt and $1,900,000 from revolving lines

of credit, offset by repayments on long-term debt of $1,072,729.

Net cash provided by financing activities during the nine months ended

September 30, 2022 consisted of $3,250,000 received from the issuance of common stock and warrants, proceeds of $923,309 from long-term

debt, offset by $350,000 paid off on a revolving line of credit.

Sheet Arrangements

55 unchanged sentences

All revenue is recognized at a point in time.

Company recognizes revenue from contracts for financial reporting purposes over time.

Progress toward completion of the Company’s

contracts is measured by the percentage of cost incurred to date compared to estimated total costs for each contract.

This method is

used because management considers total cost to be the best available measure of progress on contracts.

Because of inherent uncertainties

in estimating costs, it is at least reasonably possible that the estimates used will change significantly within the near term.

Company periodically issues stock options and restricted stock awards to employees and non-employees in non-capital raising transactions

9 unchanged sentences

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