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, 2023 and December 31, 2022 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. Items Affecting Comparability of Financial Results During the year ended December 31, 2023, we purchased Collins Building, as described in Note 2 to our Consolidated Financial Statements. During the year ended December 31, 2022, we purchased the Range Reclamation Entities, as described in Note 3 to our Consolidated Financial Statements. Plan of Operations We are a public company dedicated to improving the health and wellness of people and the planet through a novel and innovative approach to impact investing. We own and operate several complementary operating businesses focused on developing long-term solutions to environmental, social, and health challenges, with a particular focus on acquiring, reclaiming and repurposing mine sites and other undervalued land in economically disadvantaged communities throughout Appalachia. We take an opportunistic approach to impact investing by leveraging our competitive advantages and looking at solving old problems in new ways. We seek to thoughtfully allocate our 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. 37 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. Use of Estimates and Assumptions The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. 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. The 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. 38 Recent Accounting Pronouncements Please refer to Footnote 1 of the accompanying financial statements for management’s discussion of recent accounting pronouncements. Results of Operations Years Ended December 31, 2023 and December 31, 2022 The following table sets forth our results of operations for the years ended December 31, 2023 and 2022. Year Ended December 31, 2023 Year Ended December 31, 2022 Revenues $ 19,346,306 $ 4,832,278 Cost of services 13,111,497 3,439,026 Gross profit 6,234,809 1,393,252 Operating Expenses: General and administrative 4,021,556 2,022,882 Research and development 458,889 470,803 Income (loss) from operations 1,754,364 (1,100,433 ) Other Income: Gain on bargain purchase 1,875,150 - Gain on loan forgiveness - 109,435 Interest expense (505,917 ) (81,178 ) Interest income 7,458 - Total other income (expense) 1,376,691 28,257 Net income (loss) $ 3,131,055 $ (1,072,176 ) The Company’s revenue during the year ended December 31, 2023 was $19,346,306 compared to $4,832,278 for the year ended December 31, 2022 (an increase of $14,514,028). During the year ended December 31, 2023, we earned a gross profit of $6,234,809 compared to $1,393,252 during the year ended December 31, 2022 (an increase of $4,841,557). During the year ended December 31, 2023, we incurred general and administrative expenses in the aggregate amount of $4,021,556 compared to $2,022,882 incurred during the year ended December 31, 2022 (an increase of $1,998,674). 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 Range Reclaim segment of $2,068,677 during the year ended December 31, 2023, compared to $631,820 incurred during the year ended December 31, 2022 (an increase of $1,436,857), which was due to the acquisition of Collins Building in 2023 and significantly increased activity in the Range Reclaim segment during the year ended December 31, 2023. We recorded wages for the Corporate segment in the amount of $465,057 during the year ended December 31, 2023 compared to $392,344 during the year ended December 31, 2022 (an increase of $72,713), which was primarily due to additional wages resulting from two new accounting professionals hired during the year ended December 31, 2023. During the year ended December 31, 2023, we incurred research and development expenses of $458,889 compared to $470,803 incurred during the year ended December 31, 2022 (a decrease of $11,914). All of these expenses were incurred by the Company’s Drug Development segment. The Company’s research and development personnel expenses were $274,912 during the year ended December 31, 2023, compared to $331,202 for the year ended December 31, 2022 (a decrease of $56,290), and consulting expenses totaled $87,000 during the year ended December 31, 2023 compared to $0 during the year ended December 31, 2022. 39 During the year ended December 31, 2023, we recorded other income of $1,376,691, consisting of a gain on bargain purchase of $1,875,150 and interest income of $7,458, offset by interest expense of $505,917, compared to other income of $28,257 during the year ended December 31, 2022, consisting of a gain on loan forgiveness of $109,435 offset by interest expense of $81,178 during the year ended December 31, 2022 (an increase of $1,348,434). Our net income during the year ended December 31, 2023 was $3,131,055 compared to a net loss of $1,072,176 for the year ended December 31, 2022 (an improvement of $4,203,231). The improvement in year over year net income is primarily due to the year over year increase in gross profit of $4,841,557 which was primarily derived from the operations of the Range Reclaim segment. Liquidity and Capital Resources As of December 31, 2023, we had an accumulated deficit of $47,081,799. As of December 31, 2023, we had total current assets of $9,724,845, primarily comprised of cash in the amount of $2,176,800 and accounts receivable of $7,185,411. As of December 31, 2023, we had total current liabilities of $8,971,089, primarily consisting of the current portion of long-term debt in the amount of $2,755,792, accounts payable of $3,714,014 and lines of credit of $2,400,000. As a result, on December 31, 2023, the Company had working capital of $753,756. At December 31, 2022, the Company had negative working capital of $(128,371). As of December 31, 2023, the Company had long-term assets of $14,063,299, comprised of net equipment assets of $13,301,902, goodwill of $751,421, and deposits of $9,976. As of December 31, 2023, the Company had long-term liabilities of $5,250,027, comprised of long-term debt, net of current portion. Sources of Capital Based on the Company’s current corporate strategy, its net operating income for the 12 months following December 31, 2023 are expected to be approximately $1,200,000, which is comprised of revenue generated by the Range Reclaim and Range Security business segments partially offset by general operating and research and development expenses. Based on the Company’s cash balance of $2,176,800, and its estimated net operating income of approximately $1,200,000 for the 12-month period ending December 31, 2024, 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 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. As we have disclosed in our previously-filed quarterly reports, we are actively seeking capital to advance our leading drug candidate, VBX-100, through Phase II clinical trials. We have no assurance that we will be successful in these capital-raising efforts or whether, as a result of such fund-raising, Graphium would continue as a wholly-owned subsidiary of the Company. In the event that we fail to raise the desired amount of capital, the Company will likely explore a strategic alternative for our Drug Development business so the Company can focus on our income-producing environmental services business. Such a disposition of the Drug Development business, were it to occur, would likely have a material effect on the Company’s operations and financial condition. Our estimated total expenditures for the 12-month period ending December 31, 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 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 consistently 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. 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, and other related costs. 40 Net Cash Provided By (Used in) Operating Activities For the year ended December 31, 2023, net cash provided by operating activities was $438,637 compared to net cash used in operating activities of $603,778 for the year ended December 31, 2022 (an improvement of $1,042,415). This improvement was primarily attributable to (i) our net income of $3,131,055 for the year ended December 31, 2023 compared to a net loss of $1,072,176 for the year ended December 31, 2022, (ii) an increase in accounts payable of $3,480,206, and (iii) an increase in the cash adjustment for depreciation expense of $1,781,573 during the year ended December 31, 2023 compared to $395,543 during the year ended December 31, 2022, offset by an increase in accounts receivable of $6,204,026 in the year ending December 31, 2023. 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 Investing Activities For the year ended December 31, 2023, net cash used in investing activities was $7,162,811, which consisted primarily of $4,035,250 of long-term debt issued and $1,000,000 paid for the Collins Building acquisition, $1,118,664 for equipment purchased primarily by the Range Reclaim segment and $1,008,897 for land purchases by the Range Land segment. For the year ended December 31, 2022, net cash used in investing activities was $6,547,230, which consisted primarily of $5,813,057 for equipment purchased by the Range Reclaim segment and $750,000 paid in connection with the acquisition of the Range Reclamation Entities. Net Cash Provided By Financing Activities For the year ended December 31, 2023, net cash provided by financing activities was $8,458,605, compared to net cash provided from financing activities of $7,555,034 for the year ended December 31, 2022. Net cash provided by financing activities for the year ended December 31, 2023 consisted of $3,110,000 received from the issuance of common stock and warrants, proceeds of $4,035,250 from long-term debt issued for the Collins Building acquisition and proceeds of $2,400,000 from lines of credit, offset by the repayment of long-term debt of $1,650,659. 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. 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. 41