UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended December 31, 2017June 30, 2022

For the transition period from _____ to _____

Commission File Number:000-53832

VITALITY BIOPHARMA,MALACHITE INNOVATIONS, INC.

(Exact name of registrant as specified in its charter)

(216)304-6556

Registrant’s telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes[X]Yes ☒ No [  ]☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] ☒ No [  ]☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “non-accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [  ] ☐ No [X] ☒

As of February 14, 2018,October 11, 2022, there were 24,200,14778,116,814 shares of the registrant’s common stock outstanding.

VITALITY BIOPHARMA,MALACHITE INNOVATIONS, INC.

Quarterly Report on Form 10-Q

For the Quarterly Period Ended

December 31, 2017June 30, 2022

INDEX

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)

VITALITY BIOPHARMA,MALACHITE INNOVATIONS, INC.

CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS

THREE AND NINESIX MONTHS ENDED DECEMBER 31, 2017JUNE 30, 2022 AND 20162021

(Unaudited)

VITALITY BIOPHARMA,MALACHITE INNOVATIONS, INC.

CONDENSEDCONSOLIDATED BALANCE SHEETS

TheSee accompanying notes are an integral part of these condensedto the consolidated financial statements.

VITALITY BIOPHARMA,MALACHITE INNOVATIONS, INC.

CONDENSEDCONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

TheSee accompanying notes are an integral part of these condensedto the consolidated financial statements.

VITALITY BIOPHARMA,MALACHITE INNOVATIONS, INC.

CONDENSED STATEMENTCONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

NINE MONTHS ENDED DECEMBER 31, 2017(Unaudited)

(Unaudited)

TheSee accompanying notes are an integral part of these condensedto the consolidated financial statements.

VITALITY BIOPHARMA,

MALACHITE INNOVATIONS, INC.

CONDENSEDCONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

TheSee accompanying notes are an integral part of these condensedto the consolidated financial statements.

VITALITY BIOPHARMA,MALACHITE INNOVATIONS, INC.

NOTES TO CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS

THREE AND NINESIX MONTHS ENDED DECEMBER 31, 2017JUNE 30, 2022 AND 20162021

(Unaudited)

1. BUSINESS OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Vitality Biopharma,Malachite Innovations, Inc. (the “Company”, “we”, “us” or “our”), was incorporated in the State of Nevada on June 29, 2007. The Company’s fiscal year end is March 31.

Originally founded in 2007 as Legend Mining Inc., the Company began operations as a mineral extraction exploration business. In 2011, the Company changed its name to Stevia First Corp. and pursued a new strategy focused on developing stevia-based additives for the food and beverage industry. In 2015, the Company developedchanged its name to Vitality Biopharma, Inc. and pursued a new classstrategy focused on developing cannabinoid-based prodrugs anticipated to treat inflammatory conditions of the gastrointestinal tract by unlocking the therapeutic properties of cannabinoids known as cannabosides,but without their unwanted psychoactive side effects.

In October 2021, the Company changed its name to Malachite Innovation, Inc. and reorganized its corporate structure and created the following two wholly-owned operating subsidiaries: (i) Graphium Biosciences, Inc., a Nevada corporation (“Graphium”), into which were discovered through applicationthe Company contributed all of its drug development assets; and (ii) Daedalus Ecosciences, Inc., a Nevada corporation (“Daedalus”). Graphium plans to focus its business activities on the health and wellness of people, with a particular focus on advancing our broad portfolio of over 100 glycosylated cannabinoid prodrugs. Daedalus plans to focus its business activities on the health and wellness of the Company’s proprietary enzymatic bioprocessing technologies originally developed for stevia sweeteners. planet through ESG investments, with a particular focus on deploying technological innovations and eco-friendly solutions to remedy difficult environmental situations in economically challenged communities.

In 2016, the Company received approvals from the U.S. Drug Enforcement Administration (the “DEA”May 2022, Daedalus acquired Range Environmental Resources, Inc., a West Virginia corporation (“Range Environmental”) and Range Natural Resources, Inc., a West Virginia corporation (“Range Natural” and together with Range Environmental, the State“Range Entities”). The Range Entities provide land reclamation, water restoration and environmental consulting services to mining and non-mining customers throughout the Appalachian region with the goal of Californiareturning land to initiate studiespre-mining conditions or repurpose the land for natural, commercial, agricultural or recreational use. The Range Entities’ water restoration services seek to improve rivers, streams and manufacturing scale-up at its researchdischarges through novel and development facilitiesinnovative treatment applications to help customers meet their various regulatory standards and requirements. The Range Entities also provide environmental consulting services to customers typically in orderconnection with land reclamation and water restoration projects and as an additional value-add service, sells water treatment chemicals manufactured by third parties to develop cannabosides as pharmaceutical products.their customers.

Going Concern

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying financial statements, forduring the ninesix months ended December 31, 2017,June 30, 2022, the Company incurred a net loss of $3,246,847$891,160 and used $845,068 of cash in our operating activities of $2,180,055.activities. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year of the date that the financial statements are issued. In addition, the Company’s independent registered public accounting firm, in its report on the Company’s March 31, 2017 financial statements, has raised substantial doubt about the Company’s ability to continue as a going concern within one year after the date that these financial statements are issued. The financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.

The ability to continue as a going concern is dependent on the Company attaining and maintaining profitable operations in the future and/or raising additional capital to meet its obligations and repay its liabilities arising from normal business operations when they come due. We estimate that as of December 31, 2017June 30, 2022, we havehad sufficient funds to operate the business for 18 months given our cash balance of $1,866,289, line of credit availability of $150,000, the next nine months. In December 2017,availability of $4,830,050 under our $5,000,000 equity financing line via an executed securities purchase agreement, and revenues being generated by the Company issued an aggregate of 933,332 shares ofRange Entities. Although our common stock and warrantsexisting cash balances are estimated to purchase 466,667 shares of our common stock to certain investors for net proceeds of approximately $1,395,000 and in July 2017, the Company issued an aggregate of 666,667 shares of our common stock and warrants to purchase 333,334 shares of our common stock to certain investors for net proceeds of approximately $995,000. We will require additional financingbe sufficient to fund our currently planned futurelevel of operations, includingwe are actively seeking additional financing and other sources of capital to accelerate the continuationfunding and execution of our ongoing researchgrowth strategy and development efforts, licensing or acquiring new assets, and researching and developing any potential patents and any further intellectual property that we may acquire. Further,value creation plan. However, these estimates could differ if we encounter unanticipated difficulties, in which case our current funds may not be sufficient to operate our business for that period. In addition,or if our estimates of the amount of cash necessary to operate our business may prove to be wrong, and we could spenduse our available financial resources much faster than we currently expect.

We do not have No assurance can be given that any firm commitments for future capital. We will need to raise additional funds in order to continue operating our business and pursue and execute our planned research and development and commercial operations. We do not presently have, nor do we expect in the near future to have, sufficientfinancing or consistent revenue to fund our business from our operations, and will need to obtain significant funding from external sources. Since inception, we have funded our operations primarily through equity and debt financings, and we expect to continue to rely on these sources of capital, in the future. However, if we raise additional funds by issuing equity or convertible debt securities, our existing stockholders’ ownershipneeded, will be diluted, and obtaining commercial loans would increase our liabilities and future cash commitments. If we pursue capital through alternative sources, such as collaborationsavailable or, other similar arrangements, we may be forced to relinquish rights to our proprietary technology or other intellectual propertyif available, that could result in our receipt of only a portion of any revenue that may be generated from a partnered product or business. Further, these or other sources of capital may not be available on commercially reasonable or acceptable terms when needed, or at all. If we cannot raise the money that we need in order to continue to operate and develop our business, weit will be forcedon terms that are satisfactory to delay, scale back or eliminate some or all of our operations. If any of these were to occur, there is a substantial risk that our business would fail and our stockholders could lose all of their investment.the Company.

Basis of Presentation of Unaudited Condensed Financial Information

The unaudited condensedconsolidated financial statements include the accounts of the Company for the three and nine months ended December 31, 2017its wholly owned direct subsidiaries, Graphium Biosciences, Inc., Daedalus Ecosciences, Inc., and 2016Vitality Healthtech, Inc. (dissolved in May 2021), and its wholly-owned indirect subsidiaries, Range Environmental Resources, Inc. and Range Natural Resources, Inc., and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, applied on a consistent basis,America. Intercompany balances and pursuant to the requirements for reporting on Form 10-Q and the requirements of Regulation S-K and Regulation S-X promulgated under the Securities Act of 1933, as amended (the “Securities Act”). Accordingly, they do not include all the information and footnotes required by U.S. GAAP for complete audited financial statements. However, the information includedtransactions have been eliminated in these financial statements reflects all adjustments (consisting solely of normal recurring adjustments), which are, in the opinion of management, necessary for the fair presentation of theconsolidation. The Company’s financial position and the results of operations. Results shown for interim periods are not necessarily indicative of the results to be obtained for a full fiscal year or any future annual or interim period. The balance sheet information as of March 31, 2017 was derived from the Company’s audited financial statements as of and for the year ended March 31, 2017 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on June 28, 2017. These financial statements should be read in conjunction with that report.end is December 31.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted accounting principles 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. SignificantThe more significant estimates and assumptions by management include, among others, assumptions used in valuing assets acquired in business acquisitions, reserves for accounts receivable, the fair value ofassumptions used in valuing equity instruments issued for services, and assumptions used in the valuation of derivative liabilities and the valuation allowance for deferred tax assets, and the accrual ofaccruals for potential liabilities. Actual results could differ from those estimates.

Financial Assets and Liabilities Measured at Fair ValueRevenue Recognition

The Company uses various inputs in determiningapplies the fair valuefollowing standards and recognizes revenue when (1) services have been provided pursuant to an agreed-upon equipment and labor hourly rate sheet or a fixed amount for a project, (2) products have been shipped to and accepted by the customer, and (3) amounts are reasonably assured of its investmentscollection, including the consideration of the customer’s ability and measures these assetsintention to pay when the amount is due. The Company primarily invoices customers and recognizes revenue on a recurring basis. Financial assets recordedperiodic 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’s performance obligations are satisfied at fair valuethe point in time when the balance sheetsservices are categorizedperformed or when products are received by the levelcustomer, which is when the customer has title and the significant risks and rewards of objectivity associatedownership.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less at the inputs useddate of acquisition to measure their fair value. Authoritative guidance providedbe cash equivalents. From time to time, the Company’s cash account balances exceed the balances covered by FASB defines the following levels directly relatedFederal Deposit Insurance System. The Company has never suffered a loss due to such excess balances.

Accounts Receivable

Trade accounts receivable are stated at the amount of subjectivity associated withmanagement expects to collect from the inputs to fair valuation of these financial assets:

The fair value of the derivative liabilities of $201,836 and $240,791 at December 31, 2017 and March 31, 2017, respectively, were valued using Level 2 inputs.

The carrying value of cash and accounts payable and accrued liabilities approximates their fair value because of the short maturity of these instruments. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments.

Derivative Financial Instruments

The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For stock-based derivative financial instruments, the Company uses a probability weighted average Black-Scholes-Merton models to value the derivative instruments at inception and on subsequent valuation dates through the December 31, 2017, reporting date. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluatedbalances outstanding at the end of each reporting period.fiscal period reflected in the consolidated balance sheets. Based on management’s assessment, it has concluded that losses on balances outstanding as of those dates will be immaterial and, therefore, no allowances were recorded for the three or six months ended June 30, 2022 or June 30, 2021.

Equipment

Equipment is carried at cost. Expenditures for maintenance and repairs are charged to cost of services. Additions and betterments are capitalized. The cost and related accumulated depreciation of equipment sold or otherwise disposed of are removed from the accounts and any gain or loss is reflected in the current year’s earnings.

SCHEDULE OF EQUIPMENT

Stock-Based Compensation

The Company periodically issues stock options and warrantsrestricted stock awards to employees and non-employees in non-capital raising transactions for services and for financing costs.services. The Company accounts for share-based payments undersuch grants issued and vesting based on FASB ASC 718 “Compensation-Stock Compensation” whereby the guidance as set forth in the Share-Based Payment Topicvalue of the FASB Accounting Standards Codification (“ASC”), which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees, officers, directors, and consultants, including employee stock options, based on estimated fair values. The Company estimates the fair value of share-based payment awards to employees and directorsaward is measured on the date of grant using a Black-Scholes-Merton option-pricing model, and recognized for employees as compensation expense on the straight-line basis over the vesting period. Recognition of compensation expense for non-employees is in the same period and manner as if the Company had paid cash for the services. The Company recognizes the fair value of stock-based compensation within its Consolidated Statements of Operations with classification depending on the nature of the services rendered.

The fair value of the portion ofCompany’s stock options is estimated using the award that is ultimatelyBlack-Scholes-Merton Option Pricing model, which uses certain assumptions related to risk-free interest rates, expected to vest is recognized as expense over the required service period in the Company’s statements of operations. The Company accounts for stock option and warrant grants issued and vesting to non-employees in accordance with the authoritative guidance whereas the valuevolatility, expected life of the stock compensationoptions or restricted stock, and future dividends. Compensation expense is recorded based upon the measurement date as determined at either a)value derived from the date at which a performance commitment is reached, or b) the date at which the necessary performance to earn the equity instruments is complete. Stock-based compensation isBlack-Scholes-Merton Option Pricing model and based on awards ultimately expected to vest and is reduced for estimated forfeitures. Forfeitures are estimated atactual experience. The assumptions used in the time of grant and revised, as necessary, in subsequent periods if actual forfeitures differ from those estimates.

The Company periodically issues unvested (“restricted”) shares of its common stock to employees as equity incentives. The Company’s restricted stock vests upon the satisfaction of a recipient’s service condition, which is satisfied over a period of years. The restricted shares vest over certain period and remain subject to forfeiture if vesting conditions are not met. The Company values the shares based on the price per share of the Company’s shares at the date of grant and recognizes the value asBlack-Scholes-Merton Option Pricing model could materially affect compensation expense ratably over the vesting period.recorded in future periods.

Basic and Diluted Loss Per Share

Basic loss per share is computed by dividing the net loss applicable to common stockholders by the weighted average number of outstanding common shares during the period. Shares of restricted stock subject to vesting are included in the basic weighted average number of common shares outstanding from the time they vest. Diluted loss per share is computed by dividing net loss applicable to common stockholders by the weighted average number of common shares outstanding plus the number of additional common shares that would have been outstanding if all dilutive potential common shares had been issued. Shares of restricted stock are included in the diluted weighted average number of common shares outstanding from the date they are granted unless they are antidilutive. Diluted loss per share excludes all potential common shares if their effect is anti-dilutive. The following potentially dilutive shares were excluded from the shares used to calculate diluted earnings per share as their inclusion would be anti-dilutive:

SCHEDULE OF ANTI-DILUTIVE SECURITIES EXCLUDED FROM COMPUTATION OF EARNINGS PER SHARE

Patents and Patent Application Costs

Although the Company believes that its patents and underlying technology have continuing value, the amount of future benefits to be derived from the patents is uncertain. Accordingly, patent costs are expensed as incurred.

Research and Development

Research and development costs consist primarily of fees paid to consultants and outside service providers, patent fees and costs, and other expenses relating to the acquisition, design, development and testing of the Company’s treatments and product candidates. Research and development costs are expensed as incurred.

Recent Accounting PronouncementsSegments

In May 2014,As of October 1, 2021, we began operating under two segments: (i) Graphium Biosciences, Inc., a wholly-owned subsidiary of the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers. ASU 2014-09 is a comprehensive revenue recognition standard thatCompany, will supersede nearly all existing revenue recognition guidance under current U.S. GAAPreport the operating results of our health and replace itwellness innovations serving people, with a principleparticular focus on advancing our broad portfolio of over 100 glycosylated cannabinoid prodrugs, and (ii) Daedalus Ecosciences, Inc., a wholly-owned subsidiary of the Company, will report the operating results of our health and wellness innovations serving the planet, with a particular focus on deploying technological innovations and eco-friendly solutions to remedy difficult environmental situations in economically challenged communities.

In accordance with FASB ASC 280 “Segment Reporting”, the Company’s chief operating decision maker has been identified as the Chief Executive Officer of the Company, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. Existing guidance, which is based on a management approach for determining revenue recognition. Under ASU 2014-09, revenue is recognized when a customer obtains control of promised goods orto segment reporting, establishes requirements to report selected segment information quarterly and to report annually entity-wide disclosures about products and services, major customers, and is recognizedthe countries in an amount that reflects the consideration which the entity expectsholds material assets and reports revenue. All material operating units qualify for aggregation under “Segment Reporting” due to receive in exchange for those goods or services. their similar customer base and similarities in: economic characteristics; nature of products and services; and procurement, manufacturing, and distribution processes.

Recent Accounting Pronouncements

In addition,June 2016, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The FASB has recently issued ASU 2016-08,2016-13, Measurement of Credit Losses on Financial Instruments. ASU 2016-10,2016-13 requires entities to use a forward-looking approach based on current expected credit losses to estimate credit losses on certain types of financial instruments, including trade receivables. This may result in the earlier recognition of allowances for losses. ASU 2016-11, ASU 2016-12, ASU 2016-20, and ASU 2017-05, all of which clarify certain implementation guidance within ASU 2014-09. ASU 2014-092016-13 is effective for interimthe Company beginning April 1, 2023, and annual periods beginning after December 15, 2017. Earlyearly adoption is permitted only in annual reporting periods beginning after December 15, 2016, including interim periods therein. The standard can be adopted either retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the cumulative catch-up transition method).permitted. The Company is currently indoes not believe the process of analyzing the information necessary to determine thepotential impact of adopting thisthe new guidance onand related codification improvements will be material to its financial position, results of operations and cash flows. The Company will adopt the provisions of this statement in the quarter beginning April 1, 2018.

In February 2016, the FASB issued ASU No. 2016-02, Leases. This update will require the recognition of a right-of-use asset and a corresponding lease liability, initially measured at the present value of the lease payments, for all leases with terms longer than 12 months. For operating leases, the asset and liability will be expensed over the lease term on a straight-line basis, with all cash flows included in the operating section of the statement of cash flows. For finance leases, interest on the lease liability will be recognized separately from the amortization of the right-of-use asset in the statement of comprehensive income and the repayment of the principal portion of the lease liability will be classified as a financing activity while the interest component will be included in the operating section of the statement of cash flows. ASU 2016-02 is effective for annual and interim reporting periods beginning after December 15, 2018. Early adoption is permitted. Upon adoption, leases will be recognized and measured at the beginning of the earliest period presented using a modified retrospective approach. The Company is currently evaluating the impact of the adoption of ASU 2016-02 on its financial statements and related disclosures.

In July 2017, the FASB issued ASU 2017-11,Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. ASU 2017-11 allows companies to exclude a down round feature when determining whether a financial instrument (or embedded conversion feature) is considered indexed to the entity’s own stock. As a result, financial instruments (or embedded conversion features) with down round features may no longer be required to be accounted for as derivative liabilities. A company will recognize the value of a down round feature only when it is triggered and the strike price has been adjusted downward. For equity-classified freestanding financial instruments, an entity will treat the value of the effect of the down round as a dividend and a reduction of income available to common shareholders in computing basic earnings per share. For convertible instruments with embedded conversion features containing down round provisions, entities will recognize the value of the down round as a beneficial conversion discount to be amortized to earnings. The guidance in ASU 2017-11 is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted, and the guidance is to be applied using a full or modified retrospective approach. The adoption of ASU 2017-11 is not expected to have an impact on the Company’s financial statements and related disclosures because the conversion feature of the Company’s warrants have features other than down round provisions that require current accounting treatment and classification.

Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future financial statements.

2. DERIVATIVE LIABILITYACQUISITION OF RANGE ENVIRONMENTAL RESOURCES AND RANGE NATURAL RESOURCES

In May 2015,2022, the Company and its wholly-owned subsidiary, Daedalus Ecosciences, Inc., entered into a Share Purchase Agreement with Range Environmental Resources, Inc. (“Range Environmental”), and Range Natural Resources, Inc. (“Range Natural”, and collectively with Range Environmental, the “Range Entities”), and the two (2) shareholders of the Range Entities (the “Range Shareholders”) (the “Share Purchase Agreement”), under which the Company issued certain warrants which included an anti-dilution provision that allows for the automatic reseta total of the exercise price of the warrants upon future sale10,000,000 shares of the Company’s common stock warrants, options, convertible debt or any other equity-linked securities at an issuance, exercise or conversion price belowto the current exercise priceRange Shareholders and Daedalus Ecosciences paid cash consideration of $1,000,000 to the Range Shareholders for 80% of the warrants. In addition,outstanding common stock of each of the Range Entities.

Subsequent to entering into the Share Purchase Agreement, the Company determineddiscovered that the warrants can be settled for cash at the holders’ option in a future fundamental transaction, as defined. As a resultJoshua Justice, one of the anti-dilution and fundamental transaction provisions, the Company determined that the conversion feature of the warrants should be separated from the host contract, be recognized as a derivative liability, and re-measured at each reporting period with the change in value reportedRange Shareholders (“Justice”), made certain misrepresentations in the statement of operations.

At March 31, 2017, the balance of the derivative liabilities was $240,791. During the nine months ended December 31, 2017, the Company recorded a decrease in derivative liability of $38,955. At December 31, 2017, the balance of the derivative liabilities was $201,836.

At December 31, 2017 and March 31, 2017, the derivative liabilities were valued using a probability weighted Black-Scholes-Merton pricing model with the following assumptions:

The risk-free interest rate was based on rates established by the Federal Reserve Bank. The Company uses the historical volatility of its common stock to estimate the future volatility for its common stock. The expected life of the warrants was determined by the expiration date of the warrants. The expected dividend yield was based on the fact that the Company has not paid dividends to its common stockholders in the past and does not expect to pay dividends to its common stockholders in the future.

3. STOCKHOLDERS’ EQUITY

Equity Financing

Share Purchase Agreement. On DecemberJuly 12, 2017,2022, the Company entered into a Separation Agreement, by and among the Company, Daedalus Ecosciences, the Range Entities, and Justice and his spouse (the “Separation Agreement”) pursuant to which Justice: a) acknowledged that his employment with the Range Entities was terminated for cause effective June 30, 2022; b) returned the 5,000,000 shares of the Company’s common stock that had been issued to him under the terms of the Share Purchase Agreement; c) transferred his 10% interest in each of the Range Entities to Daedalus Ecosciences; and d) paid Daedalus Ecosciences cash in an amount of $250,000. As a result, only 5,000,000 of the Company’s common stock issued to the Range Shareholders is considered to have been issued in exchange for 90% of the outstanding common stock of each of the Range Entities.

Subsequently, on October 11, 2022, Daedalus Ecosciences and Jeremy Starks, the other Range Shareholder (“Starks”), entered into a share purchase agreement, effective as of May 11, 2022 (the “Starks Agreement”) pursuant to which Starks agreed to exchange his 10% common stock ownership of the Range Entities for 10% of the Cash Dividends and Sale Proceeds (as both terms are defined in the Starks Agreement) of the Range Entities, as a result of which, the Range Entities are now wholly-owned subsidiaries of Daedalus Ecosciences and the Range Entities are reported as wholly-owned indirect subsidiaries of the Company in the financial statements made part of this Form 10-Q. No other changes were made to the consideration received by Mr. Starks as part of the Share Purchase Agreement and he remains as President of each of the Range Entities.

The Company accounted for the transaction as a business combination in accordance ASC 805 “Business Combinations”. The Company has performed an allocation of the purchase price paid for the assets acquired and the liabilities assumed. The fair values of the assets acquired are set forth below. The allocation of the purchase price is based on management’s estimates.

SCHEDULE OF BUSINESS ACQUISITION ALLOCATION OF PURCHASE PRICE

3. GOODWILL

Goodwill increased to $751,421 at June 30, 2022. There had been no goodwill at December 31, 2021. The increase in goodwill was driven by the addition of the Range Entities in the quarter and represents the value of the Range Entities’ brand reputation, customer base and employee relations. Goodwill by reportable segment is as follows:

SCHEDULE OF GOODWILL

4. EQUITY

Issuance of Common Stock and Warrants

In May 2022, the Company entered into two securities purchase agreementagreements providing for the issuance and sale by the Company of 933,332(i) 20,000,000 shares of the Company’s common stock (the “Shares”) at a price of $0.15 per share and (ii) warrants to purchase up to 466,667an additional 20,000,000 shares of the Company’s common stock (the “Warrants”, and the shares issuable upon exercise of the Warrants, the “Warrant Shares”) at a price of $1.50$0.60 per share. After deducting for fees and expenses, the netThe Warrants expire on May 10, 2027. The aggregate proceeds to the Company from the sale of the Shares and Warrants was $3,000,000.

In May 2022, the Company purchased 90% of the outstanding common stock of each of the Range Entities for a combination of Company shares and warrants were approximately $1,395,000.

On July 26, 2017, the Company entered into a securities purchase agreement providing for the issuance and sale by the Company of 666,667 sharescash, as described in Note 2. Only 5,000,000 of the Company’s common stock and warrantsissued to purchase upthe Range Shareholders is considered outstanding as of June 30, 2022, in order to 333,334 sharesreflect the effects of the Company’s common stock, at a price of $1.50 per share. After deducting for fees and expenses, the net proceeds to the Company from the sale of the shares and warrants were approximately $995,000.Separation Agreement.

Common stock issued to employees with vesting terms

The Company has issued shares of common stock to employees and directors that vest over time. The fair value of these stock awards are based on the market price of the Company’s common stock on the dates granted, and are amortized over vesting terms ranging up to three years.

At March 31, 2017, the accumulated vested balance of stock awards was $310,710. In December 2017, the Company issued an aggregate of 200,000 shares of its common stock to an officer and a director of the Company, with aggregate fair value of $362,000 at the grant date, which vest over a period of 14 months from the date of the grant. During the nine months ended December 31, 2017, we recorded expense related to the fair value of stock awards that vested of $309,183. At December 31, 2017, the amount of unvested compensation related to these awards is approximately $463,000, and will be recorded as expense over 1 year.

Shares of restricted stock granted above are subject to forfeiture to the Company or other restrictions that will lapse in accordance with a vesting schedule determined by our Board. In the event a recipient’s employment or service with the Company terminates, any or all of the shares of common stock held by such recipient that have not vested as of the date of termination under the terms of the restricted stock agreement are forfeited to the Company in accordance with such restricted grant agreement.

The following table summarizes restricted common stock activity:

Common stock issued for services

During the nine months ended December 31, 2017, the Company issued a total of 184,968 shares of common stock to three consultants as payment for services and recorded expense of $313,676 based on the fair value of the Company’s common stock at the issuance dates.

4. 5. STOCK OPTIONS

A summary of the Company’s stock option activity during the ninesix months ended December 31, 2017June 30, 2022 is as follows:

SCHEDULE OF STOCK OPTION ACTIVITY

A summary of the Company’s stock options outstanding and exercisable as of December 31, 2017June 30, 2022 is as follows:

SCHEDULE OF STOCK OPTIONS OUTSTANDING AND EXERCISABLE

In the nine months ended December 31, 2017, the Company granted an aggregate of 470,000 options to purchase shares of the Company’s common stock with exercise prices ranging from $1.59 to $1.81 per share to five employees and two directors, that expire ten years from the date of grant. The options issued to the two directors have a vesting period of one year and the options issued to employees all have vesting periods of 24 months. The fair value of each option award was estimated on the date of grant using the Black-Scholes option pricing model based on the following assumptions: (i) volatility rate between 123.13% and 124.88%, (ii) discount rate between 2.33% and 2.265%, (iii) zero expected dividend yield, and (iv) expected life of 6 years, whichThere is the average of the term of the options and their vesting periods. The total fair value of these option grants at their grant dates was approximately $740,000.

During the nine months ended December 31, 2017, we expensed total stock-based compensation related to stock options of $842,121, and theno remaining unamortized cost of the outstanding stock-based awards at December 31, 2017 was approximately $1,497,000. This cost will be amortized on a straight line basis over a weighted average remaining vesting period of 2 years.June 30, 2022. At December 31, 2017,June 30, 2022, the 3,216,7106,752,544 outstanding stock options had anno intrinsic valuevalue.

6. WARRANTS

A summary of approximately $2,659,000.

5. WARRANTS

At December 31, 2017, warrants to purchase common shares werestock during the six months ended June 30, 2022 is as follows:

SCHEDULE OF WARRANTS ACTIVITY

At June 30, 2022, the 20,646,668 outstanding as follows:stock warrants had no intrinsic value.

7. NOTES PAYABLE

Range Environmental was granted a loan (the “PPP loan”) from United Bank for $109,435 on March 9, 2021, pursuant to the Paycheck Protection Program (the “PPP”) under the CARES Act.

The PPP loan matures on March 9, 2023 and bears interest at a rate of 1% per annum, with the first six months of interest deferred.

On August 19, 2022, Range Environmental received notice that the U.S. Small Business Administration (“SBA”) had reviewed the forgiveness application of Range Environmental’s PPP loan and provided forgiveness of the entire principal of the PPP loan plus accrued interest.

On June 17, 2020, Range Environmental was granted an SBA Disaster Loan in the amount of $150,000 with an interest rate of 3.75% per annum. On September 14, 2022, the Company paid the entire balance due on this loan of $162,575, including $12,575 in accrued interest.

The following notes payable are outstanding as of June 30, 2022:

SCHEDULE OF NOTES PAYABLE

8. LINE OF CREDIT

In conjunction with the December 2017 Offering (see Note 3),November 2021, the Company grantedobtained an unsecured revolving line of credit with a bank with a limit of $1,000,000. The line of credit has a maturity date of November 30, 2022, and bears interest at one percent (1%) above the prime rate. As of June 30, 2022, the balance due under the line of credit was $850,000.

9. EQUITY LINE

In August 2021, the Company entered into a $5,000,000 equity line transaction with Triton Funds, LP (“Triton”) providing for the issuance and sale by the Company to investorsTriton of a number of shares of the Company’s common stock having an aggregate value of up to $5,000,000 and warrants to purchase up to 466,667an equal number of shares of the Company’s common stock. In its sole discretion and subject to certain agreed upon funding conditions, the Company may submit, from time to time, notices obligating Triton to purchase shares with a value of up to $250,000 until the financing arrangement expires on December 31, 2022 or Triton has purchased the $5,000,000 of shares pursuant to the equity line transaction. As of June 30, 2022, $4,830,050 is available under this equity line.

10. GAIN ON EXTINGUISHMENT OF ADVANCE

In July 2018, the Company received a payment from a third party in the amount of $296,653. Since the Company has not been able to confirm the nature of this payment, it had previously recorded this payment as an advance that was included in current liabilities. At March 31, 2021, the Company, after consultation with outside legal counsel, determined that any claim to recover that payment was time barred by the statute of limitations and the Company recorded relief of this liability and a gain from debt extinguishment of $296,653 during the six months ended June 30, 2021.

11. LONG-TERM DEBT OBLIGATIONS

Long-term debt consists of debt on vehicles and equipment, which serves as the collateral. Interest rates range from 3.69% to 8.99% for 2022. The warrants were exercisable immediately, havedebt matures from 2022 through 2028. The aggregate amount of the debt was $1,258,382 at June 30, 2022, $392,708 of which is due within one year of June 30, 2022, and $865,674 is due after June 30, 2023.

A summary of payments due under the long-term debt by year is as follows:

SCHEDULE OF MATURITIES OF LONG TERM DEBT

12. OPERATING LEASE

The Company has an exercise priceoperating lease agreement for one piece of $2.00 per share, and expireequipment leased by Range Environmental Resources with a remaining lease term of 31 months. Leases with an initial term of 12 months or less are not recorded on the three year anniversarybalance sheet. The Company accounts for the lease and non-lease components of its lease as a single lease component. Lease expense is recognized on a straight-line basis over the lease term.

Under FASB ASC 842, an operating lease right-of-use (“ROU”) asset and liability is recognized at commencement date based on the present value of lease payments over the lease term. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Generally, the implicit rate of interest in arrangements is not readily determinable and the Company utilizes its incremental borrowing rate in determining the present value of lease payments. The Company’s incremental borrowing rate is a hypothetical rate based on its understanding of what its credit rating would be. The operating lease ROU asset includes any lease payments made and excludes lease incentives.

The components of lease expense and supplemental cash flow information related to leases for the period are as follows:

SCHEDULE OF COMPONENTS OF LEASE EXPENSE

The supplemental balance sheet information related to leases for the period is as follows:

SCHEDULE OF LEASES SUPPLEMENTAL BALANCE SHEET INFORMATION

Maturities of the dateCompany’s lease liabilities are as follows:

SCHEDULE OF MATURITIES OF LEASE LIABILITIES

Lease expenses related to leases with a duration of issuance. The exercise priceone year or less were $8,620 and $8,213 during the three months ended June 30, 2022 and June 30, 2021, respectively. Lease expenses related to leases with a duration of one year or less were $16,870 and $15,720 during the warrants is subject to adjustment for standard anti-dilution provisions, such as stock dividendssix months ended June 30, 2022 and splits, subsequent rights offerings and pro rata distributionsJune 30, 2021, respectively.

13. MAJOR CUSTOMER AND CONCENTRATION OF CREDIT RISK

Sales to the Company’s common stockholders. two largest customers were 91% of total sales for the three and six months ended June 30, 2022.

Accounts receivable from the same two customers were 93% of total accounts receivable and unbilled receivables as of June 30, 2022.

14. COMMITMENTS AND CONTINGENCIES

The exercisabilityCompany received a letter in February 2021 from counsel for the Company’s director’s and officer’s insurance carrier (the “insurer”) demanding that the Company reimburse the insurer for sums advanced by the insurer to a former director of the warrants may be limited if, upon exercise,Company as defense costs in connection with a claim purportedly arising under a previous director’s and officer’s insurance policy. The Company believes it has no liability for this claim on the holder or anybasis of, its affiliates would beneficially own more than 4.99% or 9.99%among other things, Nevada law, the Company’s governing documents and the language of the policy. Accordingly, as of June 30, 2022, no contingent liability has been recorded in the Company’s common stock.consolidated statements of financial condition for this matter.

In conjunction15. SEGMENT INFORMATION

FASB ASC 280 “Segment Reporting” establishes standards for reporting information about operating segments on a basis consistent with the July 2017 Offering (see Note 3),Company’s internal organizational structure as well as information about services, categories, business segments and major customers in financial statements. The Company has two reportable segments that are based on the following business units:

In accordance with FASB ASC 820, the Company’s chief operating decision-maker has been identified as the Chief Executive Officer, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. Existing guidance, which is based on a management approach to segment reporting, establishes requirements to report selected segment information quarterly and to report annually entity-wide disclosures about products and services, major customers and the countries in which the entity holds material assets and reports revenue. All material operating units qualify for aggregation under FASB ASC 820 due to their similar customer base and similarities in: economic characteristics; nature of products and services; and procurement, manufacturing and distribution processes.

The Company had no inter-segment sales for the periods presented.

Summarized financial information concerning the Company’s reportable segments is shown as below:

SCHEDULE OF FINANCIAL INFORMATION OF REPORTABLE SEGMENT

By Categories

16. SUBSEQUENT EVENTS

On August 19, 2022, Range Environmental received notice that the SBA had reviewed the forgiveness application of Range Environmental’s PPP loan and provided forgiveness of the entire principal of the PPP loan plus accrued interest, which totaled an amount of debt forgiveness equal to $109,435.

On August 31, 2022, the Company grantedpaid the entire balance due on the unsecured bank credit line of $863,305, including $13,305 in accrued interest.

On September 14, 2022, the Company paid the entire balance due on the SBA Disaster Loan of $162,575, including $12,575 in accrued interest.

On July 12, 2022, the Company and Daedalus Ecosciences entered into the Separation Agreement pursuant to investors warrants to purchase up to 333,334which, among other things, Justice: a) acknowledged that his employment with the Range Entities was terminated for cause effective June 30, 2022; b) returned the 5,000,000 shares of the Company’s common stock. The warrants were exercisable immediately, have an exercise price of $2.00 per share, and expire onstock that had been issued to him under the three year anniversaryterms of the date of issuance. The exercise priceShare Purchase Agreement; c) transferred his 10% interest in each of the warrants is subjectRange Entities to adjustment for standard anti-dilution provisions, such as stock dividendsDaedalus Ecosciences; and splits, subsequent rights offerings and pro rata distributions tod) paid Daedalus Ecosciences cash in the Company’s common stockholders. The exercisabilityamount of the warrants may be limited if, upon exercise, the holder or any of its affiliates would beneficially own more than 4.99% or 9.99% of the Company’s common stock.$250,000.

At December 31, 2017, the 1,164,422 outstanding warrants had no intrinsic value.

6. RELATED PARTY OBLIGATIONS

On April 23, 2012,August 26, 2022, the Company entered into a leasesecurities purchase agreement with One World Ranches, which is jointly-ownedHTGT Enterprises LLC (“HTGT”) providing for the issuance and sale by Dr. Avtar Dhillon, the Chairman of the Company’s Board of Directors, and his wife, to rent the space being used as the Company’s principal office and laboratory facility. The original term of the lease was from May 1, 2012 to May 1, 2017. In May 2017, the Company extended the lease through May 1, 2020. Our rent payments thereunder were $2,300 per month until May 1, 2017 and increased to $2,600 per month on May 1, 2017. Aggregate payments under the lease for the nine months ended December 31, 2017 and 2016 were $25,700 and $20,700, respectively.

7. LEGAL AND OTHER PROCEEDINGS

On August 19, 2016, we filed a resale registration statement on Form S-1 (“Form S-1”) with the SEC to register 2,650,000HTGT of (i) 1,666,667 shares of our common stock and 7,950,000 shares of our common stock issuable upon exercise of certain warrants. We received a letter from the Washington D.C. office of the SEC dated December 10, 2016, stating that the staff of the SEC was conducting a Section 8(e) examination with respect to this Form S-1 and that the Division of Corporate Finance would not take any further action on the Form S-1 while the examination was pending. We received subpoenas to produce documents dated December 14, 2016, and January 23, 2017, and a further subpoena for testimony and any supplemental production of documents dated June 5, 2017. The document requests were primarily in connection with this matter. We have complied with all document requests and the Company’s CEO will provide testimony when the SEC schedules such testimony, which we believe will be sometime before the end of September 2018.

As of December 31, 2017, we had accrued approximately $11,000 in legal fees related to the SEC examination.

8. SUBSEQUENT EVENTS

In February 2018, the Company issued a total of 75,000 shares of common stock to one consultant as payment for services and recorded expenses of $144,000 based on the fair value of the Company’s common stock (the “HTGT Shares”) at a price of $0.15 per share and (ii) a warrant to purchase up to an additional 1,666,667 shares of the issuance date.Company’s common stock (the “HTGT Warrant”, and the shares issuable upon exercise of the Warrant, the “HTGT Warrant Shares”) at a price of $0.60 per share. After deducting for fees and expenses, the aggregate net proceeds from the sale of the HTGT Shares and the HTGT Warrant are approximately $248,000.

On October 11, 2022, Daedalus Ecosciences and Starks entered into the Starks Agreement pursuant to which Daedalus Ecosciences acquired Starks’ 10% common stock ownership interest in the Range Entities. As a result of this transaction, Daedalus Ecosciences is the sole shareholder of the Range Entities. No other changes were made to the consideration received by Starks as part of the Share Purchase Agreement entered into on May 11, 2022, and he remains as President of each of the Range Entities.