0001438943 true 0001438943 2022-05-10 2022-05-10 iso4217:USD xbrli:shares iso4217:USD xbrli:shares

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K/A

(Amendment No. 1)

 

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934

 

Date of report (Date of earliest event reported): May 10, 2022

 

MALACHITE INNOVATIONS, INC.

(Exact name of registrant as specified in its charter)

 

Nevada   000-53832   75-3268988
(State or other jurisdiction   (Commission   (I.R.S. Employer
of incorporation)   File Number)   Identification No.)

 

200 Park Avenue, Suite 400    
Cleveland, Ohio   44122
(Address of principal executive offices)   (Zip Code)

 

Registrant’s telephone number, including area code: (216) 304-6556

 

Not Applicable

(Former name or former address, if changed since last report.)

 

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

 

Title of each class:   Trading Symbol   Name of each exchange on which registered:
Common Stock   MLCT   OTC Markets

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
     
  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
     
  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
     
  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

 

 

 

 

Item 8.01 Other Events.

 

On May 11, 2022, Malachite Innovations, Inc. (the “Company”) filed a Current Report on Form 8-K (the “May 8-K”) reporting that it had entered into a Share Purchase Agreement by and among the Company, Daedalus Ecosciences, Inc., a wholly-owned subsidiary of the Company (“Daedalus Ecosciences”), Range Environmental Resources, Inc., a West Virginia corporation (“Range Environmental Resources”), Range Natural Resources, Inc., a West Virginia corporation (“Range Natural Resources”), Mr. Jeremy Starks and Mr. Joshua Justice (the “Share Purchase Agreement”). This amendment to the May 8-K amends Item 9.01 of the May 8-K and provides the historical financial information required pursuant to Item 9.01(a) of Form 8-K and the pro forma financial information required pursuant to Item 9.01(b) of Form 8-K.

 

Item 9.01 Financial Statements and Exhibits.

 

(a) Financial Statements of Businesses Acquired

 

The following financial statements of Range Environmental Resources, Inc. are included as Exhibit 99.1 hereto and incorporated herein by reference:

 

● The audited financial statements of Range Environmental Resources, Inc. as of December 31, 2021 and 2020 and for the years then ended.

 

(b) Pro Forma Financial Information

 

The following unaudited pro forma consolidated financial statements required pursuant to Item 9.01(b) of Form 8-K are included as Exhibit 99.2 hereto and are incorporated herein by reference:

 

● Unaudited Pro Forma Consolidated Balance Sheet of Malachite Innovations, Inc. and Range Environmental Resources, Inc., as of March 31, 2022, and Unaudited Pro Forma Consolidated Statements of Operations of Malachite Innovations, Inc. and Range Environmental Resources, Inc. for the year ended December 31, 2021 and for the three months ended March 31, 2022.

 

(d) Exhibits

 

Exhibit No.   Description
     
23.1   Consent of Independent Registered Public Accounting Firm*
     
99.1   Audited financial statements of Range Environmental Resources, Inc. as of December 31, 2021 and 2020, and for the years then ended and accompanying notes *
     
99.2  

Unaudited Pro Forma Consolidated Balance Sheet of Malachite Innovations, Inc. and Range Environmental Resources, Inc., as of March 31, 2022, and Unaudited Pro Forma Consolidated Statements of Operations of Malachite Innovations, Inc. and Range Environmental Resources, Inc. for the year ended December 31, 2021 and for the three months ended March 31, 2022. *

     
104   Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

* Filed herewith

 

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

  MALACHITE INNOVATIONS, INC.
     
Dated: September 22, 2022 By: /s/ Michael Cavanaugh
  Name:  Michael Cavanaugh
  Title: Chief Executive Officer

 

 
 

 

EXHIBIT INDEX

 

Exhibit No.   Description
     
23.1   Consent of Meaden & Moore, Ltd.*
     
99.1   Audited financial statements of Range Environmental Resources, Inc. as of December 31, 2021 and 2020, and for the years then ended and accompanying notes *
     
99.2   Unaudited Pro Forma Consolidated Balance Sheet of Malachite Innovations, Inc. and Range Environmental Resources, Inc., as of March 31, 2022, and Unaudited Pro Forma Consolidated Statements of Operations of Malachite Innovations, Inc. and Range Environmental Resources, Inc. for the year ended December 31, 2021 and for the three months ended March 31, 2022. *
     
104   Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

* Filed herewith

 

 

 

 

Exhibit 23.1

 

 

Consent of Independent Registered Public Accounting Firm

 

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 333-181048) of Stevia First Corp. and the Registration Statement on Form S-8 (No. 333-192398) of Vitality Biopharma, Inc., of our report dated September 14, 2022, relating to the balance sheets as of December 31, 2021 and 2020, and the related statements of operations, stockholders’ equity and cash flows for the years then ended, and the related notes to the financial statements of Range Environmental Resources, Inc., which appears in the Current Report on Form 8-K of Malachite Innovations, Inc., dated September 22, 2022, as amended.

 

/s/ MEADEN & MOORE, LTD  
Cleveland, Ohio  
   
September 22, 2022  

 

 

 

 

Exhibit 99.1

 

Financial Statements

 

  Page
   
Independent Auditor’s Report F-2
Balance Sheets as of December 31, 2021 and December 31, 2020 F-3
Statements of Operations for the years ended December 31, 2021 and December 31, 2020 F-4
Statements of Stockholders’ Equity for the years ended December 31, 2021 and December 31, 2020 F-5
Statements of Cash Flows for the years ended December 31, 2021 and December 31, 2020 F-6
Notes to Financial Statements F-7

 

F-1
 

 

Independent Auditor’s Report

 

To the Shareholders of Range Environmental Resources, Inc.

 

Opinion

 

We have audited the financial statements of Range Environmental Resources, Inc., which comprise the balance sheets as of December 31, 2021 and 2020, and the related statements of operations, stockholders’ equity, and cash flows for the years then ended, and the related notes to the financial statements.

 

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of Range Environmental Resources, Inc. as of December 31, 2021 and 2020, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

 

Basis for Opinion

 

We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of Range Environmental Resources, Inc. and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

 

Responsibilities of Management for the Financial Statements

 

Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

 

In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about Range Environmental Resources, Inc.’s ability to continue as a going concern for one year after the date that the financial statements are issued.

 

Auditor’s Responsibilities for the Audit of the Financial Statements

 

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

 

In performing an audit in accordance with GAAS, we:

 

Exercise professional judgment and maintain professional skepticism throughout the audit.
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of Range Environmental Resources, Inc.’s internal control. Accordingly, no such opinion is expressed.
Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.
Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about Range Environmental Resources, Inc.’s ability to continue as a going concern for a reasonable period of time.

 

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control–related matters that we identified during the audit.

 

/s/ Meaden & Moore, Ltd.

Cleveland, Ohio

 

September 14, 2022

 

F-2
 

 

RANGE ENVIRONMENTAL RESOURCES, INC.

BALANCE SHEETS

 

   December 31, 2021   December 31, 2020 
Assets          
           
Current Assets          
Cash and cash equivalents  $85,373   $121,396 
Accounts receivable   835,966    154,328 
Total current assets   921,339    275,724 
Property and equipment, net of accumulated depreciation   374,153    333,255 
Total Assets  $1,295,492   $608,979 
           
Liabilities and Stockholders’ Equity          
           
Current Liabilities          
Accounts payable and accrued liabilities  $94,782   $22,652 
Current portion of long-term debt   49,204    31,236 
Total current liabilities   143,986    53,888 
Long term debt, net of current portion   161,020    125,870 
Notes payable   268,250    199,390 
Total long-term liabilities   429,270    325,260 
Total liabilities   573,256    379,148 
           
Stockholders’ Equity          
Common stock, par value $0.001 per share; 2 shares authorized; 2 shares issued and outstanding, respectively   1    1 
Retained earnings   722,235    229,830 
Total stockholders’ equity   722,236    229,831 
Total Liabilities and Stockholders’ Equity  $1,295,492   $608,979 

 

The accompanying notes are an integral part of these financial statements.

 

F-3
 

 

RANGE ENVIRONMENTAL RESOURCES, INC.

STATEMENTS OF OPERATIONS

 

   Year Ended
December 31, 2021
   Year Ended
December 31, 2020
 
         
Revenues  $2,484,207   $1,862,979 
Cost of services   (1,159,650)   (1,464,632)
Gross Profit   1,324,557    398,347 
           
Operating Expenses:          
General and administrative   560,458    318,986 
Total operating expenses   560,458    318,986 
           
Income from operations   764,099    79,361 
           
Other income (expense):          
Gain on PPP loan forgiveness   46,200    - 
Other income (expense)   (15,334)   (9,751)
Total other income (expense)   30,866    (9,751)
           
Net income  $794,965   $69,610 

 

The accompanying notes are an integral part of these financial statements.

 

F-4
 

 

RANGE ENVIRONMENTAL RESOURCES, INC.

STATEMENTS OF STOCKHOLDERS’ EQUITY

YEARS ENDED DECEMBER 31, 2021 AND DECEMBER 31, 2020

 

   Common Stock   Retained     
   Shares   Amount   Earnings   Total 
Balance, December 31, 2019   2   $1   $382,730   $382,731 
                     
Shareholder distributions   -    -    (222,510)   (222,510)
Net Income   -    -    69,610    69,610 
                     
Balance, December 31, 2020   2    1    229,830    229,831 
                     
Shareholder distributions               -                -    (302,560)   (302,560)
Net Income   -    -    794,965    794,965 
                     
Balance, December 31, 2021   2   $1   $722,235   $722,236 

 

The accompanying notes are an integral part of these financial statements.

 

F-5
 

 

RANGE ENVIRONMENTAL RESOURCES, INC.

STATEMENTS OF CASH FLOWS

 

   Year Ended
December 31, 2021
   Year Ended
December 31, 2020
 
Cash flows from operating activities:          
Net income  $794,965   $69,610 
           
Adjustments to reconcile income from operations to net cash used in operating activities:          
           
Gain on extinguishment of liabilities   (46,200)   - 
Depreciation   76,166    60,623 
Changes in operating assets and liabilities:          
Accounts receivable   (681,638)   137,976 
Interest accrued but not paid   5,625    3,190 
Accounts payable and accrued liabilities   72,130    (139,395)
Net cash provided by operating activities   221,048    132,004 
           
Cash used in investing activities:          
           
Equipment purchases   (117,064)   (101,077)
Net cash used in investing activities   (117,064)   (101,077)
           
Cash provided by financing activities:          
Proceeds from long-term debt   90,840    43,132 
Payments on long-term debt   (37,722)   (34,080)
Shareholder distributions   (302,560)   (222,510)
EIDL loan   -    150,000 
PPP loans   109,435    46,200 
Net cash used in financing activities   (140,007)   (17,258)
           
Net increase (decrease) in cash and cash equivalents   (36,023)   13,669 
Cash and cash equivalents - beginning of period   121,396    107,727 
           
Cash and cash equivalents - end of period  $85,373   $121,396 
           
Supplemental non-cash transactions:          
Forgiveness of PPP loan  $46,200   $- 
Fixed assets purchased with debt  $90,840   $43,132 

 

The accompanying notes are an integral part of these financial statements.

 

F-6
 

 

RANGE ENVIRONMENTAL RESOURCES, INC.

NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2021 AND DECEMBER 31, 2020

 

1. BUSINESS OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Range Environmental Resources, Inc. (the “Company”, “we”, “us” and “our”) was incorporated in the State of West Virginia on January 18, 2019. The Company provides land reclamation, water restoration and environmental consulting services to mining and non-mining customers throughout the Appalachian region. The Company’s land reclamation services seek to return land to pre-mining conditions or repurpose the land for natural, commercial, agricultural or recreational use. The Company’s water restoration services seek to improve rivers, streams and discharges through novel and innovative treatment applications to help customers meet their various regulatory standards and requirements. The Company also provides environmental consulting services to customers typically in connection with land reclamation and water restoration projects. As an additional value-add service, the Company sells water treatment chemicals manufactured by third parties to its customers.

 

Basis of Presentation

 

The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America.

 

Use of Estimates

 

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.

 

Revenue Recognition

 

The Company applies the following 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 collection, including the consideration of the customer’s ability and intention to pay when the amount is due. 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’s performance obligations are satisfied at the point in time when the services are performed or when products are received by the customer, which is when the customer has title and the significant risks and rewards of ownership.

 

Cash and Cash Equivalents

 

The Company considers all highly liquid investments with an original maturity of three months or less at the date of acquisition to be cash equivalents. From time to time, the Company’s cash account balances exceed the balances covered by the Federal Deposit Insurance System. The Company has never suffered a loss due to such excess balances.

 

F-7
 

 

Accounts Receivable

 

Trade accounts receivable are stated at the amount management expects to collect from the balances outstanding at year end. Based on management’s assessment, it has concluded that losses on balances outstanding at year end will be immaterial and, therefore, no allowances were recorded in 2021 or 2020.

 

Property and 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.

 

   December 31, 2021   December 31, 2020 
         
Equipment  $374,153   $333,255 
Depreciation expense  $76,166   $60,623 

 

The Company provides for depreciation of equipment using the straight-line method for both financial reporting and federal income tax purposes over the estimated six year useful lives of the equipment.

 

The Company assesses the recoverability of its property, plant, and equipment by determining whether the depreciation of the assets over their remaining lives can be recovered through projected future cash flows generated by the assets. There were no assets identified for impairment.

 

Fair Value of Financial Instruments

 

FASB ASC 825, “Financial Instruments” requires that the Company disclose estimated fair values of financial instruments. Financial instruments held by the Company include, among others, accounts receivable, accounts payable and long-term debt. The carrying amounts reported in the balance sheets for assets and liabilities qualifying as financial instruments are a reasonable estimate of fair value.

 

Leases

 

FASB 842 will require the Company to determine whether a contract is, or contains, a lease at inception. Right-of-use assets represent the Company’s right to use an underlying asset during the lease term, and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized at lease commencement based upon the estimated present value of unpaid lease payments over the lease term. The Company uses its incremental borrowing rate based on the information available at lease commencement in determining the present value of unpaid lease payments. The standard is effective for fiscal years beginning after December 15, 2021.

 

Subsequent Events

 

Management evaluates events occurring subsequent to the date of the financial statements in determining the accounting for and disclosure of transactions and events that affect the financial statements. Subsequent events have been evaluated through September 14, 2022, which is the date the financial statements were available to be issued.

 

F-8
 

 

Recent Accounting Pronouncements

 

In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments. ASU 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 2016-13 is effective for the Company beginning April 1, 2023, and early adoption is permitted. The Company does not believe the potential impact of the new guidance and related codification improvements will be material to its financial position, results of operations and cash flows.

 

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. NOTES PAYABLE

 

The Company was granted two loans (the “PPP loans”) from United Bank for $46,200 on April 12, 2020, and for $109,435 on March 9, 2021, pursuant to the Paycheck Protection Program (the “PPP”) under the CARES Act.

 

The PPP loans mature on April 12, 2022, and March 9, 2023, respectively, and each bears interest at a rate of 1% per annum, with the first six months of interest deferred.

 

On July 13, 2021, and August 19, 2022, respectively, the Company received notice that the SBA had reviewed the forgiveness application of the Company’s PPP loans and provided forgiveness of the entire principal of the PPP loans plus accrued interest, and the Company recognized a gain on extinguishment of the PPP loan of $46,200 during the year ended December 31, 2021.

 

On June 17, 2020. The Company was granted an SBA Disaster Loan. The SBA Disaster Loan in the amount of $150,000, matures on June 17, 2050, and bears interest at a rate of 3.75% per annum.

 

3. 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 2021 and range from 3.69% to 7.13% for 2020. The debt matures from 2022 through 2027.

 

4. MAJOR CUSTOMER AND CONCENTRATION OF CREDIT RISK

 

Sales to the Company’s two largest customers were 99% of total sales for both 2021 and 2020.

 

Accounts receivable from the same two customers were 97% (2021) and 100% (2020), respectively, of total accounts receivable.

 

5. INCOME TAXES

 

As an “S” Corporation, the Company passes through its taxable income to its shareholders each year as earned, and thus pays no corporate income tax itself.

 

6. SUBSEQUENT EVENTS

 

On May 11, 2022, the Company entered into a Share Purchase Agreement by and among the Company, Malachite Innovations, Inc. (“Malachite”), Daedalus Ecosciences, Inc., a wholly-owned subsidiary of Malachite (“Daedalus Ecosciences”), Range Natural Resources, Inc., a West Virginia corporation formed in May 2022 (“Range Natural Resources”), and the shareholders of the Company (the “Share Purchase Agreement”), under which Malachite issued a total of 10,000,000 shares of Malachite’s common stock to Mr. Starks and Mr. Justice and Daedalus Ecosciences paid cash consideration in an amount equal to $1,000,000 to the shareholders for 80% of the outstanding common stock of each of the Company and Range Natural Resources.

 

Subsequent to May 11, 2022, a dispute arose between Malachite and one of the shareholders related to certain representations made by the shareholder in the Share Purchase Agreement. On July 12, 2022, Malachite entered into a Separation Agreement, by and among Malachite, Daedalus Ecosciences, Range Environmental Resources, Range Natural Resources, the shareholder and his wife (the “Separation Agreement”). Under the terms of the Separation Agreement, the shareholder: a) acknowledged that his employment with the Company and Range Natural Resources was terminated for cause effective June 30, 2022; b) returned the 5,000,000 shares of Malachite’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 Company and Range Natural Resources to Daedalus Ecosciences; and d) paid Daedalus Ecosciences the sum of $250,000.

 

F-9

 

Exhibit 99.2

 

Malachite Innovations, Inc. and Subsidiaries

Summary of Unaudited Pro Forma Consolidated Financial Information

 

On May 11, 2022, Malachite Innovations, Inc. (the “Company”), completed its acquisition of Range Environmental Resources, Inc. (“Range Environmental”) (such acquisition referred to as the “Acquisition”). Pursuant to the terms of a share purchase agreement (the “Purchase Agreement”), the stockholders of Range Environmental exchanged 80% of the outstanding capital stock of Range Environmental and Range Natural Resources, Inc. (Range Natural”) for 10,000,000 shares of the Company’s common stock and cash consideration of $1,000,000. The shares of the Company’s common stock were valued at the closing market price of the Company’s common stock on May 11, 2022 of $0.15 per share resulting in an aggregate initial purchase price of $2,500,000 for the Acquisition (the “Initial Purchase Price”).

 

Subsequent to May 11, 2022, a dispute arose between the Company and Mr. Justice, one of the owners of Range Environmental, relating to certain representations made by Mr. Justice in the Purchase Agreement. On July 12, 2022, the Company entered into a Separation Agreement, by and among the Company, Daedalus Ecosciences, Range Environmental, Range Natural, Mr. Justice and Mrs. Christine Justice, who is Mr. Justice’s wife (the “Separation Agreement”). Under the terms of the Separation Agreement, Mr. Justice: a) acknowledged that his employment with Range Environmental and Range Natural 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 Purchase Agreement; c) transferred his 10% interest in each of Range Environmental and Range Natural to Daedalus Ecosciences; and d) paid Daedalus Ecosciences the sum of $250,000. By virtue of these transactions, the Initial Purchase Price of $2,500,000 was reduced by $1,000,000, representing the combined value of the return to the Company of 5,000,000 shares of Company common stock and $250,000, to $1,500,000 (the “Adjusted Purchase Price”).

 

As required by Accounting Standards Codification Topic 805-20, the Company will allocate the Adjusted Purchase Price to the acquired assets and assumed liabilities based on their estimated fair value at the acquisition date. The fair values of the assets acquired, as set forth below, are considered provisional and subject to adjustment as additional information is obtained through the purchase price measurement period (a period of up to one year from the closing date of the Acquisition). The provisional allocation of the Adjusted Purchase Price is based on management’s preliminary estimates. Once management completes its analysis to finalize the purchase price allocation, it is reasonably possible that there could be changes to the preliminary values. The primary areas of the purchase price allocation that are not yet finalized relate to identifiable tangible assets and goodwill.

 

The unaudited pro forma consolidated balance sheet as of March 31, 2022, gives effect to the Acquisition as if it had occurred on March 31, 2022. The unaudited pro forma consolidated statement of operations for the year ended December 31, 2021, is presented as if the Acquisition was consummated on January 1, 2021, the beginning of the Company’s 2021 fiscal year. The unaudited pro forma consolidated statement of operations for the three months ended March 31, 2022, is presented as if the Acquisition was consummated on January 1, 2022, the beginning of the Company’s 2022 fiscal year. The historical financial data has been adjusted to give pro forma effect to events that are (1) directly attributable to the Acquisition, and (2) factually supportable.

 

The unaudited pro forma consolidated financial information presented herein is provided for illustrative purposes only. The unaudited pro forma consolidated financial information is based on management’s estimate of the effects of the Acquisition, had such transaction occurred on the dates indicated, based on currently available information and certain assumptions and estimates that the Company believes are reasonable under the circumstances. The unaudited pro forma consolidated financial information is not necessarily indicative of the results of operations or financial position that actually would have been achieved had the Acquisition been consummated on the dates indicated, or that may be achieved in the future.

 

The unaudited pro forma consolidated financial information presented herein should be read in conjunction with the financial statements of Range Environmental Resources, Inc. contained elsewhere in this Current Report on Form 8-K/A, as filed with the Securities and Exchange Commission, the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the Securities and Exchange Commission on March 31, 2022, and the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2022, as filed with the Securities and Exchange Commission on May 10, 2022.

 

 

 

 

Malachite Innovations, Inc.

Pro Forma Consolidated Balance Sheet

March 31, 2022

(unaudited)

 

   Malachite
Innovations Inc.
   Range
Environmental
Resources, Inc.
  

Pro Forma

Adjustments

   

Pro Forma

Total

 
               (unaudited) 
Current assets                    
Cash  $44,162   $87,058   $-   $131,220 
Accounts receivable, net   -    853,311    -    853,311 
Prepaid expenses   884    -    -    884 
Total current assets   45,046    940,369    -    985,415 
                     
Property and equipment, net of accumulated depreciation   -    400,886    182,114(1)   583,000 
Deposits   8,892    -    -    8,892 
Operating lease asset   -    130,630    -    130,630 
Goodwill   -    -    779,165(2)   779,165 
                     
Total Assets   53,938    1,471,885    961,279    2,487,102 
                     
Current liabilities                    
Accounts payable and accrued liabilities   133,553    286,998    -    420,551 
Current portion of long-term debt   -    49,625    -    49,625 
Line of Credit   750,000    -    -    750,000 
Total current liabilities   883,553    336,623    -    1,220,176 
                     
Long-term debt, net of current portion   -    197,661    -    197,661 
Notes payable   

-

    268.250    -    268.250 
Operating lease liability   -    130,630    -    130,630 
Total long-term liabilities   -    596,541    -    596,541 
Total liabilities   883,553    933,164    -    1.816,717 
                     
Stockholders’ deficit                    
Common stock   51,250    1    5,000(3)   56,250 
              (1)(4)     
Additional paid-in capital   48,707,787    -    1,495,000(3)   50,202,787 
                     
Retained earnings (accumulated deficit)   (49,588,652)   538,720    (538,720)(4)   (49,588,652)
Total stockholders’ equity (deficit)   (829,615)   538,721    961,279    670,385 
Total liabilities and stockholders’ equity (deficit)  $53,938   $1,471,885   $961,279   $2,487,102 

 

Notes

 

(1) Reflects the adjustment to increase the basis in the acquired equipment to the estimated fair value.

 

Book Value of Equipment- Gross  $587,502 
Accumulated Depreciation   186,616 
Net Book Value   400,886 
Fair Market Value of Equipment   583,000 
Adjustment to Increase Equipment   182,114 

 

(2) Reflects adjustment to record goodwill associated with the acquisition of Range Environmental Resources, Inc., as shown below:

 

Assets Acquired:    
Cash  $87,058 
Accounts Receivable   853,311 
Fair value of equipment   583,000 
Goodwill   779,165 
Total Assets Acquired   2,302,534 
Liabilities Assumed   802,534 
Net Assets Acquired   1,500,000 

 

(3) Represents the issuance of 5,000,000 shares of Malachite Innovations, Inc.’s common stock valued at $750,000 and the payment of $750,000 in cash for the acquisition of Range Environmental Resources, Inc.

 

(4) Elimination of common stock, additional paid-in capital, shareholder distributions and retained earnings of Range Environmental Resources, Inc. related to the acquisition of Range Environmental Resources, Inc. by Malachite Innovations, Inc.

 

 

 

 

Malachite Innovations, Inc.

Pro Forma Consolidated Statement of Operations

Three Months Ended March 31, 2022

(unaudited)

 

   Malachite
Innovations, Inc.
   Range
Environmental
Resources, Inc.
  

Pro Forma

Adjustments

  

Pro Forma

Total

 
               (unaudited) 
Revenues  $-   $589,540   $-   $589,540 
Cost of services   -    (478,786)   -    (478,786)
Gross profit   -    110,755    -    110,755 
                     
Operating expenses                    
General and administrative   317,941    290,561    -    608,502 
Research and development   125,730    -    -    125,730 
Total operating expenses   443,671    290,561    -    734,232 
                     
Loss from operations   (443,671)   (179,809)   -    (623,490)
                     
Other expense   (4,303)   (3,706)   -    (8,009)
                     
Net loss  $(447,974)  $(183,515)  $55,028(2)  $(579,461)
Controlling interest  $(447,974)   (165,164)   -    (613,138)
Minority interest   -    (18,351)   55,028    36,677 
Net loss  $(447,974)   (183,515)   55,028    (579,461)
                     
Net loss per share -                    
Basic and diluted
  $(0.01)            $(0.01)
                     
Weighted average common shares outstanding-                    
Basic and diluted   51,450,147         5,000,000(1)   56,450,147 

 

 

(1) Represents the issuance of 5,000,000 shares of Malachite Innovations, Inc.’s common stock valued at $750,000 in connection with the acquisition of Range Environmental Resources, Inc.

(2) Adjustment for personal expenses paid through the Range Environmental Resources, Inc. accounts.

 

 

 

 

Malachite Innovations, Inc.

Pro Forma Consolidated Statement of Operations

Year ended December 31, 2021

 

   Malachite
Innovations, Inc.
   Range
Environmental
Resources, Inc.
   Pro Forma Adjustments   Pro Forma Total 
               (unaudited) 
Revenues  $-   $2,484,207   $-   $2,484,207 
Cost of services   -    (1,159,650)   -    (1,159,650)
Gross profit   -    1,324,557    -    1,324,557 
                     
Operating expenses                    
General and administrative   1,413,774    560,458    -    1,974,232 
Research and development   298,925    -    -    298,925 
Total operating expenses   1,712,699    560,458    -    2,273,157 
Income (loss) from operations   (1,712,699)   764,099    -    (948,600)
                     
Other income (expense)   (270)   30,866    -    30,596 
                     
Net income (loss)  $(1,712,969)  $794,965   $129,887

(2)

  $(788,117)
Controlling interest  $(1,712,969)   715,469    -    (997,500)
Minority interest   -    79,496    129,887    209,383 
Net income (loss)  $(1,712,969)   794,965    129,887    (788,117)
                     
Net loss per share -                    
Basic and diluted  $(0.03)        -   $(0.01)
                     
Weighted average common shares outstanding-                    
Basic and diluted   50,968,292         5,000,000(1)   55,968,292 

 

 

(1) Represents the issuance of 5,000,000 shares of Malachite Innovations, Inc.’s common stock valued at $750,000 in connection with the acquisition of Range Environmental Resources, Inc.

(2) Adjustment for personal expenses paid through the Range Environmental Resources, Inc. accounts.