RNGE 10-Q/A
Range Impact, Inc. (RNGE)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended
| TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _____ to _____
Commission
File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class: | Trading Symbol | Name of each exchange on which registered: | ||
| OTCQB |
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.
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).
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.
| Large accelerated filer ☐ | Accelerated filer ☐ |
| Smaller
reporting company | |
| Emerging
growth company |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
☐ No
As of August 13, 2024, there were shares of the registrant’s common stock, $ par value per share, outstanding.
Explanatory Note
Although this Form 10-Q/A amends and restates the original Form 10-Q in its entirety, except for the information described above, this Form 10-Q/A does not reflect events occurring after the filing of the original Form 10-Q and unless otherwise stated herein, the information contained in the Form 10-Q/A is current only as of the date of the original filing. Except as described above, no other changes have been made to the original Form 10-Q. Accordingly, this form should be read in conjunction with the Company’s filings made with the U.S. Securities and Exchange Commission subsequent to the filing of the original Form 10-Q.
Background of Amendment
In its Amendment No. 1 to Form 10-K filed on August 8, 2024, the Company disclosed that no disclosures under Item 104 (Mine Safety Disclosures) would be required in filings for periods after such date. On October 3, 2024, the Company received a letter from the staff of the SEC’s Division of Corporation Finance stating that disclosures in the Company’s Form 10-Q indicated that the Company was continuing to conduct mining activities. This Form 10-Q/A is being filed to add Mine Safety Disclosures as required by Item 104 of Regulation S-K and set forth below in Part II, Item 4 (Mine Safety Disclosures).
RANGE IMPACT, INC.
Quarterly Report on Form 10-Q
For the Quarterly Period Ended
June 30, 2024
INDEX
| 2 |
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
RANGE IMPACT, INC.
CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
| 3 |
RANGE IMPACT, INC.
CONSOLIDATED BALANCE SHEETS
| June 30, 2024 (unaudited) | December 31, 2023 | |||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable | ||||||||
| Contract assets | ||||||||
| Inventory | ||||||||
| Prepaid expenses | ||||||||
| Total current assets | ||||||||
| Long-term Assets | ||||||||
| Property and equipment, net of accumulated depreciation | ||||||||
| Goodwill | ||||||||
| Deposits | ||||||||
| Total long-term assets | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Line of credit | ||||||||
| Current portion of long-term debt | ||||||||
| Deposits | ||||||||
| Accrued expenses | ||||||||
| Total current liabilities | ||||||||
| Long-term Liabilities | ||||||||
| Long-term debt, net of current portion | ||||||||
| Total long-term debt | ||||||||
| Total liabilities | ||||||||
| Stockholders’ Equity | ||||||||
| Common stock, par value $ per share; shares authorized; and shares issued and outstanding, respectively | ||||||||
| Additional paid-in-capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total Liabilities and Stockholders’ Equity | $ | $ | ||||||
See accompanying notes to the consolidated financial statements.
| 4 |
RANGE IMPACT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Cost of services | ||||||||||||||||
| Gross profit (loss) | ( | ) | ( | ) | ||||||||||||
| Operating expenses: | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Research and development | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Profit (loss) from operations | ( | ) | ( | ) | ( | ) | ||||||||||
| Other income (expense): | ||||||||||||||||
| Other income | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total other income (expense) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income tax expense | ||||||||||||||||
| Net loss | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
| Net loss per share – basic and diluted | $ | ) | $ | $ | ) | $ | ) | |||||||||
| Weighted average number of common shares outstanding – basic and diluted | ||||||||||||||||
See accompanying notes to the consolidated financial statements.
| 5 |
RANGE IMPACT, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
(Unaudited)
| Three Months Ended June 30, 2024 | ||||||||||||||||||||
| Common Stock | Additional | |||||||||||||||||||
| Number of Shares | Amount | Paid-in Capital | Accumulated Deficit | Total | ||||||||||||||||
| Balance as of March 31, 2024 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Shares issued for cash | ||||||||||||||||||||
| Stock based compensation | - | |||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance as of June 30, 2024 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Three Months Ended June 30, 2023 | ||||||||||||||||||||
| Common Stock | Additional | |||||||||||||||||||
| Number of Shares | Amount | Paid-in Capital | Accumulated Deficit | Total | ||||||||||||||||
| Balance as of March 31, 2023 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Shares issued for cash | ||||||||||||||||||||
| Fair value of vested stock options | - | |||||||||||||||||||
| Net income | - | |||||||||||||||||||
| Balance as of June 30, 2023 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Six Months Ended June 30, 2024 | ||||||||||||||||||||
| Common Stock | Additional | |||||||||||||||||||
| Number of Shares | Amount | Paid-in Capital | Accumulated Deficit | Total | ||||||||||||||||
| Balance as of December 31, 2023 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Shares issued for cash | ||||||||||||||||||||
| Stock based compensation | - | |||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance as of June 30, 2024 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Six Months Ended June 30, 2023 | ||||||||||||||||||||
| Common Stock | Additional | |||||||||||||||||||
| Number of Shares | Amount | Paid-in Capital | Accumulated Deficit | Total | ||||||||||||||||
| Balance as of December 31, 2022 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Shares issued for cash | ||||||||||||||||||||
| Fair value of vested stock options | - | |||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance as of June 30, 2023 | $ | $ | $ | ( | ) | $ | ||||||||||||||
See accompanying notes to the consolidated financial statements.
| 6 |
RANGE IMPACT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Six Months Ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash (used in) operating activities: | ||||||||
| Fair value of vested stock options | ||||||||
| Depreciation | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Contract assets | ( | ) | ||||||
| Inventory | ( | ) | ||||||
| Prepaid expenses and other current assets | ( | ) | ||||||
| Accounts payable | ( | ) | ||||||
| Deposits | ||||||||
| Accrued expenses | ( | ) | ||||||
| Deposits | ( | ) | ||||||
| Net cash (used in) operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Equipment purchases | ( | ) | ||||||
| Net cash provided by (used in) investing activities | ( | ) | ||||||
| Cash flows from financing activities: | ||||||||
| Issuance of shares for cash | ||||||||
| Proceeds from long-term debt | ||||||||
| Repayment of long-term debt | ( | ) | ( | ) | ||||
| Proceeds from (repayment of) line of credit | ( | ) | ||||||
| Net cash provided by (used in) financing activities | ( | ) | ||||||
| Net decrease in cash and cash equivalents | ( | ) | ( | ) | ||||
| Cash and cash equivalents - beginning of period | ||||||||
| Cash and cash equivalents - end of period | $ | $ | ||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid during the period for: | ||||||||
| Interest | $ | $ | ||||||
See accompanying notes to the consolidated financial statements.
| 7 |
RANGE IMPACT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE AND SIX MONTHS ENDED JUNE 30, 2024 AND 2023
(Unaudited)
1. BUSINESS OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Range Impact, Inc. (the “Company”, “we”, “us”, or “our”), was incorporated in the State of Nevada on June 29, 2007.
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 changed its name to Vitality Biopharma, Inc. and pursued a new strategy focused on developing cannabinoid-based prodrugs anticipated to treat inflammatory conditions of the gastrointestinal tract.
In October 2021, the Company changed its name to Malachite Innovations, Inc. and formed two wholly-owned operating subsidiaries: (i) Graphium Biosciences, Inc., a Nevada corporation (“Graphium”), into which the Company contributed all of its drug development assets; and (ii) Daedalus Ecosciences, Inc., a Nevada corporation (“Daedalus”), which was formed to serve as a holding company for the Company’s future impact investing businesses.
In 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 “Range Reclamation Entities”). The Range Reclamation Entities provide land reclamation and water restoration services to mining and non-mining customers throughout the Appalachian region with the goal of returning land to pre-mining conditions or repurposing the land for natural, commercial, agricultural or recreational use. The Range Reclamation Entities’ water restoration services seek to improve the water quality in rivers, streams and discharges through novel and innovative treatment applications to help customers meet their various regulatory standards and requirements. Range Natural also engages subcontractors who control and are responsible for the mining and selling of coal to third-party customers incidental to the reclamation and repurposing of mine sites.
In August 2023, the Company acquired Collins Building & Contracting, Inc., a West Virginia corporation (“Collins Building”), an environmental services business primarily focusing on the reclamation of abandoned mine land sites in West Virginia, as described in more detail in Note 2.
In December 2023, the Company changed its name to Range Impact, Inc., and reorganized into five operating business segments: (i) Range Reclaim; (ii) Range Water; (iii) Range Security; (iv) Range Land; and (v) Drug Development.
In January 2024, the Company added Range Minerals as its sixth operating business segment. Range Minerals was previously reported within the Range Reclaim operating business segment. The Drug Development segment was also renamed Graphium Biosciences.
Basis of Presentation
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries: CLV Azurite Land LLC, Collins Building & Contracting, Inc., Graphium Biosciences, Inc., Range Environmental Resources, Inc., Range Land, LLC, Range Minerals, LLC, Range Natural Resources, Inc., Range Reclaim, LLC, Range Security, LLC, Range Security Resources, LLC, Range Water, LLC, Terra Preta, LLC, Aether Credit Ventures, Inc. (dissolved in November 2023), Pristine Stream Ventures, Inc. (dissolved in November 2023), NextGen AgriTech, Inc. (dissolved in November 2023), and Daedalus Ecosciences, Inc. (merged into Range Impact, Inc. in December 2022), and have been prepared in accordance with accounting principles generally accepted in the United States of America. Intercompany balances and transactions have been eliminated in consolidation.
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.
| 8 |
Business Combinations
Business combinations are accounted for using the purchase method of accounting under ASC 805, “Business Combinations.” This method requires the Company to record assets and liabilities of the businesses acquired at their estimated fair values as of the acquisition date. Any excess of the cost of the acquisition over the fair value of the net assets acquired is recorded as goodwill. Any excess of the fair value of the net assets acquired over the cost of the acquisition is accounted for as a bargain purchase gain. Determining the fair value requires management to make estimates and assumptions including discount rates, rates of return on assets, and long-term sales growth rates.
Revenue Recognition
The Company recognizes revenue under ASC 606, “Revenue from Contracts with Customers”. The core principle of the ASC 606 revenue standard is that a company should recognize revenue by analyzing the following five steps: (1) identify the contract with the customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) each performance obligation is satisfied.
The Company primarily invoices customers and recognizes revenue on a periodic basis for equipment and labor hours provided to a customer on a particular job based on an agreed-upon hourly rate sheet or a fixed amount for a project. The Company also invoices customers and recognizes revenue for equipment mobilization fees and materials and supplies required to complete a project. The Company invoices for the sales of chemicals, stone and other products and recognizes revenue when the products are delivered to the customer’s designated site or when control of these products is transferred to its customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those products. Sales taxes and other taxes that the Company collects concurrent with revenue producing activities are excluded from revenue. Costs for equipment, labor and chemicals are generally expensed as incurred since the projects are generally short-term and not subject to a contract. The Company also invoices customers for the provision of environmental security services at an agreed-upon hourly rate for each project. All revenue is recognized at a point in time.
The Company recognizes revenue on reclamation contracts over time as performance obligations are satisfied due to the continuous transfer of control to the customer. The Company’s contracts are generally accounted for as a single performance obligation since the Company is providing a significant service of integrating components into a single project. The Company recognizes revenue using a cost-based input method by which actual costs incurred relative to total estimated contract costs determine, as a percentage, progress toward contract completion. This percentage is applied to the contract price to determine the amount of revenue to recognize. The Company believes the cost-based input method is the most faithful depiction of performance because it directly measures the value of the services transferred to the customer.
Contract Estimates
Due to the nature of the Company’s performance obligations, the estimation of total revenue and cost at completion is subject to many variables and requires significant judgment. Since a significant change in one or more of these variables could affect the profitability of contracts, the Company reviews and updates contract-related estimates regularly through a review process in which the Company reviews the progress and execution of performance obligations and the estimated cost at completion.
The Company recognizes adjustments in estimated profit on contracts under the cumulative catch-up method. Under this method, the impact of the adjustment on profit recorded to date is recognized in the period the adjustment is identified. Revenue and profit in future periods of contract performance is recognized using the adjusted estimate. If at any time the estimate of contract profitability indicates an anticipated loss on the contract, a provision for the entire loss is recognized in the period it is identified.
Contract Modifications
Contract modifications can occur during the performance of the Company’s contracts. Contracts may be modified to account for changes in contract specifications or requirements. In most instances, contract modifications are for goods or services that are not distinct, and, therefore, are accounted for as part of the existing contract.
Cost and Expense Recognition
Contract costs include all direct labor, materials, equipment mobilization, subcontractor, and equipment costs, and those indirect costs related to contract performance, such as indirect labor, tools and supplies. Costs are recognized as incurred.
The Company recognizes revenue from contracts for financial reporting purposes over time. Progress toward completion of the Company’s contracts is measured by the percentage of cost incurred to date compared to estimated total costs for each contract. This method is used because management considers total cost to be the best available measure of progress on contracts. Because of inherent uncertainties in estimating costs, it is at least reasonably possible that the estimates used will change significantly over the course of the contract’s performance.
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Revenue earned over time compared to a point in time is as follows for the three and six months ended June 30, 2024 and 2023.
| Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | |||||||
| Earned over time | $ | $ | ||||||
| Point in time | ||||||||
| Total revenue | ||||||||
| Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | |||||||
| Earned over time | $ | $ | ||||||
| Point in time | ||||||||
| Total revenue | ||||||||
Cost of Services
Contract costs include all direct labor, materials, subcontractor, and equipment costs and those indirect costs related to contract performance, such as indirect labor, tools and supplies. For construction contracts, costs are generally recognized as incurred. Under certain circumstances, costs incurred in the period related to future activity on contracts may be capitalized.
Costs incurred that do not contribute to satisfying performance obligations are excluded from the cost input calculation for revenue recognition. Excluded costs include both uninstalled materials and abnormal costs. Abnormal costs comprise wasted materials, wasted or rework labor and other resources to fulfill a contract that were not reflected in the price of the contract. A limited allowance for material overages and labor inefficiencies is typically included in our contract costs estimates (and by extension, in the contract price).
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 Corporation. The Company has never suffered a loss due to such excess balances.
Accounts Receivable
Included
as a component of accounts receivable are contract receivables that represent the Company’s unconditional right, subject only to
the passage of time, to receive consideration arising from performance obligations under reclamation contracts with customers. Billed
contract receivables have been invoiced to customers based on contracted amounts. Contract receivables were $
Contract Assets
Billing practices are governed by the contract terms of each project based upon costs incurred, achievement of milestones or predetermined schedules. Billings do not necessarily correlate with revenue recognized over time using the percentage-of-completion method. Contract assets include unbilled amounts typically resulting from revenue under long-term contracts when the percentage-of-completion method of revenue recognition is utilized, and revenue recognition exceeds the amount billed to the customer. The Company’s contract assets are reported on a contract-by-contract basis at the end of each reporting period. The Company classifies contract assets as current or noncurrent based on whether the revenue is expected to be recognized sooner or later than one year from the balance sheet date.
Details of contract assets arising from reclamation contracts in process as of June 30, 2024 and December 31, 2023 are as follows:
| June 30, 2024 | December 31, 2023 | |||||||
| Costs incurred on contracts in progress | $ | $ | ||||||
| Estimated earnings | ||||||||
| Revenue earned on contracts in progress | ||||||||
| Less: Billings to date | ( | ) | ( | ) | ||||
| Total contract assets | $ | $ | ||||||
| 10 |
Inventory
On
May 1, 2024, Range Minerals (“Range Minerals”) contracted with a mining contractor (“Contractor”) at the
Fola mining site in West Virginia. Contractor subcontracted the mining work to a subcontractor (“Subcontractor”). As of
June 30, 2024, Contractor failed to perform. On June 30, 2024, Range Minerals agreed to assume the liability of
$
| June 30, 2024 | December 31, 2023 | |||||||
| Saleable coal inventory | $ | $ | ||||||
| Total coal inventory | $ | $ | ||||||
Property & Equipment
Property and 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.
| June 30, 2024 | December 31, 2023 | |||||||
| Equipment | $ | $ | ||||||
| Land | ||||||||
| Buildings | ||||||||
| Accumulated depreciation | ( | ) | ( | ) | ||||
| Net book value | ||||||||
| Depreciation expense | $ | $ | ||||||
The Company provides for depreciation of its buildings, property and equipment using the straight-line method for both financial reporting and federal income tax purposes over the estimated -year useful lives of the assets.
The Company assesses the recoverability of its property 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.
Land
Land is carried at cost. The Company assesses the recoverability of its land by determining whether the cost of the land can be recovered through projected future cash flows generated by the land. No land was identified for impairment.
Delivery Costs
Delivery costs are classified as cost of sales.
Goodwill
U.S. GAAP requires that goodwill be tested for impairment annually and more frequently if events or changes in circumstances indicate that it is more likely than not (i.e., a likelihood greater than 50%) that the reporting unit is impaired. During interim periods, ASC 350 requires companies to focus on those events and circumstances that affect the significant inputs used to determine the fair value of the reporting unit to determine whether an interim quantitative impairment test is required.
The Company performed its quarterly impairment test for goodwill on June 30, 2024. The Company first assessed certain qualitative factors to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount, and whether it is therefore necessary to perform the quantitative impairment test. The qualitative analysis indicated that a quantitative impairment test was not necessary.
Income Taxes
The Company follows the asset and liability method of accounting for income taxes. Under this method, deferred income tax assets and liabilities are recognized for the estimated tax consequences attributable to differences between the financial statement carrying values and their respective income tax basis (temporary differences). The effect on deferred income tax assets and liabilities of a change in tax rates is recognized as income (loss) in the period that includes the enactment date.
Leases
The Company determines 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. As of June 30, 2024, the Company had no material lease commitments for longer than one year.
The Company periodically issues stock options and restricted stock awards to employees and non-employees in non-capital raising transactions for services. The Company accounts for such grants issued and vesting based on ASC 718, Compensation-Stock Compensation whereby the value of the award is measured on the date of grant and recognized for employees as compensation expense on the straight-line basis over the vesting period. Recognition of compensation expense for non-employees is in the same period and manner as if the Company had paid cash for the services. 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.
| 11 |
The fair value of the Company’s stock options is estimated using the Black-Scholes-Merton Option Pricing model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the stock options or restricted stock, and future dividends. Compensation expense is recorded based upon the value derived from the Black-Scholes-Merton Option Pricing model and based on actual experience. The assumptions used in the Black-Scholes-Merton Option Pricing model could materially affect compensation expense recorded in future periods.
Basic income (loss) per share is computed by dividing the net income (loss) applicable to common stockholders by the weighted average number of outstanding common shares during the period. Shares of restricted stock are included in the basic weighted average number of common shares outstanding from the time they vest. Diluted income (loss) per share is computed by dividing net income (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. Diluted income (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:
| June 30, 2024 | December 31, 2023 | |||||||
| Options | ||||||||
| Warrants | ||||||||
| Total | ||||||||
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.
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.
Segments
As
of June 30, 2024, the Company has
| 12 |
In accordance with the “Segment Reporting” Topic of the ASC 280, 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 “Segment Reporting” due to their similar customer base and similarities in: economic characteristics; nature of products and services; and procurement, manufacturing, and distribution processes.
Recent Accounting Pronouncements
In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” This ASU enhances reportable segment disclosures on both an annual and interim basis primarily in regards to the disclosure of significant segment expenses that are regularly provided to the chief operating decision maker (CODM) and included within the reported measure(s) of segment profit or loss. In addition, the ASU requires disclosure, by segment, of other items included in the reported measure(s) of segment profit or loss, including qualitative information describing the composition, nature and type of each item. The ASU also expands disclosure requirements related to the CODM, including how the reported measure(s) of segment profit or loss are used to assess segment performance and allocate resources, and the method used to allocate overhead for significant segment expenses. All current required annual segment reporting disclosures under Topic 280 are now effective for interim periods. The ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is evaluating the impact of adopting this ASU.
In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” This ASU enhances income tax disclosures by providing information to better assess how an entity’s operations, related tax risks, tax planning and operational opportunities affect its tax rate and prospects for future cash flows. This ASU requires additional disclosures to the annual effective tax rate reconciliation including specific categories and further disaggregated reconciling items that meet the quantitative threshold. Additionally, the ASU requires disclosures relating to income tax expense and payments made to federal, state, local and foreign jurisdictions. This ASU is effective for fiscal years and interim periods beginning after December 15, 2024. The Company is evaluating the impact of adopting this ASU.
2. ACQUISITION OF COLLINS BUILDING & CONTRACTING
On
August 31, 2023, the Company entered into a stock purchase agreement with the owner of Collins Building & Contracting, Inc. (“Collins
Building”) pursuant to which the owner agreed to sell all of the outstanding common stock of Collins Building to the Company in
exchange for
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. Because the fair values exceeded the purchase price, a gain on the purchase of $
| Fair value of assets acquired: | ||||
| Equipment | $ | |||
| Land | ||||
| Buildings | ||||
| Total assets acquired | ||||
| Less: Gain on bargain purchase price | ( | ) | ||
| Purchase price | $ | |||
| Cash consideration | ||||
| Long-term notes issued to the seller | ||||
| Total purchase price | $ | |||
| Acquisition transaction costs incurred | $ |
Collins
Building’s operations contributed revenues of $
| 13 |
3. GOODWILL
Goodwill
is $
| June 30, 2024 | December 31, 2023 | |||||||
| Environmental Services: | ||||||||
| Beginning Balance | $ | $ | ||||||
| Acquisitions | ||||||||
| Adjustments | ||||||||
| Ending Balance | $ | $ | ||||||
Stock options issued during the three months ended June 30, 2024 and the three months ended June 30, 2023
During the three months ended June 30, 2024, the Company granted options to an officer to purchase shares of the Company’s common stock with an exercise price of $ per share that expire from the date of grant. Options to shares vested upon grant and options to purchase vest in one year. The fair value of the option award was estimated on the date of grant using the Black-Scholes-Merton Option Pricing model based on the following assumptions: (i) volatility rate of %, (ii) discount rate of %, (iii) expected dividend yield, and (iv) expected life of years, which is the term of the options. The total fair value of the option grants at their grant dates was approximately $, $ of which was allocated to general and administrative expenses during the three months ended June 30, 2024.
During the three months ended June 30, 2023, the Company granted options to two outside advisors to purchase an aggregate of shares of the Company’s common stock with exercise prices of $ per share that expire from the date of grant. Options to purchase shares vested upon grant and options to purchase vest over two years. The fair value of each option award was estimated on the date of grant using the Black-Scholes-Merton Option Pricing model based on the following assumptions: (i) volatility rate between % and %, (ii) discount rate between % and %, (iii) expected dividend yield, and (iv) expected life of years, which is the term of the options. The total fair value of the option grants at their grant dates was approximately $, $ of which was allocated to general and administrative expenses during the three months ended June 30, 2023.
During the three months ended June 30, 2024, the Company recorded $ in stock-based compensation expense. For the three months ended June 30, 2023, the Company recorded $ stock-based compensation expense related to vested stock options. At June 30, 2024, there was $ of unamortized cost of the outstanding stock-based awards.
| Shares | Weighted Average Exercise Price | |||||||
| Balance outstanding at December 31, 2023 | $ | |||||||
| Granted | ||||||||
| Exchanged | ||||||||
| Exercised | ||||||||
| Expired | ( | ) | ||||||
| Forfeited | ||||||||
| Balance outstanding at June 30, 2024 | $ | |||||||
| Balance exercisable at June 30, 2024 | $ | |||||||
At June 30, 2024, the outstanding stock options had $ of intrinsic value.
| 14 |
| Number of Options | Weighted Average Exercise Price | Weighted Average Grant- Date Stock Price | ||||||||||
| Options Outstanding, June 30, 2024 | $ | $ | ||||||||||
| $ | $ | |||||||||||
| $ | $ | |||||||||||
| $ | $ | |||||||||||
| $ | $ | |||||||||||
| $ | $ | |||||||||||
| $ | $ | |||||||||||
| $ | $ | |||||||||||
| $ | $ | |||||||||||
| $ | - | $ | - | |||||||||
| $ | - | $ | - | |||||||||
| $ | - | $ | - | |||||||||
| Number of Options | Weighted Average Exercise Price | Weighted Average Grant- Date Stock Price | ||||||||||
| Options Outstanding and Exercisable, June 30, 2024 | $ | $ | ||||||||||
| $ | $ | |||||||||||
| $ | $ | |||||||||||
| $ | $ | |||||||||||
| $ | $ | |||||||||||
| $ | $ | |||||||||||
| $ | $ | |||||||||||
| $ | $ | |||||||||||
| $ | $ | |||||||||||
| $ | - | $ | - | |||||||||
| $ | - | $ | - | |||||||||
| $ | - | $ | - | |||||||||
5. WARRANTS
A summary of warrants to purchase common stock issued during the six months ended June 30, 2024 is as follows:
| Shares | Weighted Average Exercise Price | |||||||
| Balance outstanding and exercisable at December 31, 2023 | $ | |||||||
| Granted | ||||||||
| Exercised | ||||||||
| Expired | ||||||||
| Balance outstanding and exercisable at June 30, 2024 | $ | |||||||
At
June 30, 2024, the
6. NOTES PAYABLE
The
Company had
7. LINE OF CREDIT
In
November 2022, the Company secured a bank line of credit with a limit of $
In
June 2023, Range Environmental secured a bank loan with a limit of $
| 15 |
8. LONG-TERM DEBT OBLIGATIONS
Long-term debt consists of debt on vehicles and equipment, which serves as the collateral, and debt issued as part of the acquisition of Collins Building.
Interest
rates on the equipment financings range from
The
Collins Building debt consists of a five-year secured promissory note with an original principal amount of $
A summary of payments due under the long-term debt by year is as follows:
| Equipment Financing | Collins Promissory Notes | |||||||
| 2024 – due between July 1, 2024 and June 30, 2025 | $ | $ | ||||||
| 2025 – due between July 1, 2025 and June 30, 2026 | ||||||||
| 2026 – due between July 1, 2026 and June 30, 2027 | ||||||||
| 2027 – due between July 1, 2027 and June 30, 2028 | ||||||||
| 2028 and later – due on July 1, 2028 and thereafter | ||||||||
| Total long-term debt | $ | $ | ||||||
9. MAJOR CUSTOMER AND CONCENTRATION OF CREDIT RISK
Sales
to the Company’s two largest customers constituted
Accounts
receivable from the same customers were
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Earnings Per Share - Basic | ||||||||||||||||
| Net (loss)/income | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
| Weighted average shares of common stock outstanding - Basic | ||||||||||||||||
| Earnings Per Share - Basic | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
| Earnings Per Share - Diluted | ||||||||||||||||
| Weighted average shares of common stock outstanding - Basic | ||||||||||||||||
| Unvested Restricted Stock Awards | ||||||||||||||||
| Weighted average shares of common stock - Diluted | ||||||||||||||||
| Earnings Per Share - Diluted | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
11. COMMITMENTS AND CONTINGENCIES
From time to time, the Company is involved in legal matters arising in the ordinary course of business. While the Company believes that such matters are currently not material, there can be no assurance that matters arising in the ordinary course of business for which the Company is, or could be, involved in litigation, will not have an adverse effect on its business, financial condition or results of operations.
12. SEGMENT INFORMATION
ASC 280, “Segment Reporting” establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organizational structure as well as information about services, categories, business segments and major customers in financial statements. The Company has six reportable segments that are based on the following business units: (i) Range Reclaim; (ii) Range Minerals; (iii) Range Water; (iv) Range Security; (v) Range Land; and (vi) Graphium Biosciences. In accordance with the “Segment Reporting” Topic of the ASC, the Company’s chief operating decision-maker has been identified as the Company’s 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 “Segment Reporting” due to their similar customer base and similarities in (i) economic characteristics, (ii) nature of products and services, and (iii) procurement, manufacturing and distribution processes.
The
| ● | Range Reclaim – land reclamation, water restoration and land repurposing |
| ● | Range Minerals – subcontracted mining and reclamation activities |
| ● | Range Water – biochar product development and water solutions business |
| ● | Range Security – security services on mine land being reclaimed and repurposed for non-fossil fuel uses |
| ● | Range Land – mine land being acquired, reclaimed and repurposed for non-fossil fuel uses |
| ● | Graphium Biosciences – glycosylated cannabinoid drug development program |
The Company had no inter-segment sales for the periods presented.
| 16 |
Summarized financial information concerning the Company’s reportable segments is shown as below:
By Categories
| For the Three Months Ended June 30, 2024 | ||||||||||||||||||||||||||||||||
| Range Reclaim | Range Minerals | Range Water | Range Security | Range Land | Graphium Biosciences | Corporate | Total | |||||||||||||||||||||||||
| Sales | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||
| Gross profit | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Net income (loss) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Total assets | ||||||||||||||||||||||||||||||||
| Depreciation | ||||||||||||||||||||||||||||||||
| Interest expense | ||||||||||||||||||||||||||||||||
| Tax expense | ||||||||||||||||||||||||||||||||
| Capital expenditures for long-lived assets | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||
| For the Three Months Ended June 30, 2023 | ||||||||||||||||||||||||||||
| Range Reclaim | Range Water | Range Security | Range Land | Graphium Biosciences | Corporate | Total | ||||||||||||||||||||||
| Sales | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| Gross profit | ||||||||||||||||||||||||||||
| Net income (loss) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Total assets | ||||||||||||||||||||||||||||
| Depreciation | ||||||||||||||||||||||||||||
| Interest expense | ||||||||||||||||||||||||||||
| Tax expense | ||||||||||||||||||||||||||||
| Capital expenditures for long-lived assets | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| For the Six Months Ended June 30, 2024 | ||||||||||||||||||||||||||||||||
| Range Reclaim | Range Minerals | Range Water | Range Security | Range Land | Graphium Biosciences | Corporate | Total | |||||||||||||||||||||||||
| Sales | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Gross profit | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Net income (loss) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Total assets | ||||||||||||||||||||||||||||||||
| Depreciation | ||||||||||||||||||||||||||||||||
| Interest expense | ||||||||||||||||||||||||||||||||
| Tax expense | ||||||||||||||||||||||||||||||||
| Capital expenditures for long-lived assets | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| For the Six Months Ended June 30, 2023 | ||||||||||||||||||||||||||||
| Range Reclaim | Range Water | Range Security | Range Land | Graphium Biosciences | Corporate | Total | ||||||||||||||||||||||
| Sales | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| Gross profit | ||||||||||||||||||||||||||||
| Net income (loss) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Total assets | ||||||||||||||||||||||||||||
| Depreciation | ||||||||||||||||||||||||||||
| Interest expense | ||||||||||||||||||||||||||||
| Tax expense | ||||||||||||||||||||||||||||
| Capital expenditures for long-lived assets | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
13. SUBSEQUENT EVENTS
None.
| 17 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Cautionary Statement
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Unaudited Consolidated Financial Statements and the related notes thereto contained in Part I, Item 1 of this Quarterly Report. The information contained in this Quarterly Report on Form 10-Q is not a complete description of our business or the risks associated with an investment in our common stock. We urge you to carefully review and consider the various disclosures made by us in this Quarterly Report and in our other reports filed with the Securities and Exchange Commission (the “SEC”), including our Annual Report on Form 10-K/A for the year ended December 31, 2023 filed on August 8, 2024, and the related audited financial statements and notes included therein.
Certain statements made in this Quarterly Report on Form 10-Q constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). Forward-looking statements are projections in respect of future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “intend,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, which may cause our or our industry’s actual results, levels of activity or performance to be materially different from any future results, levels of activity or performance expressed or implied by these forward-looking statements. These risks and uncertainties include: general economic and financial market conditions; our ability to obtain additional financing as necessary; our ability to continue operating as a going concern; any adverse occurrence with respect to our business or; results of our research and development activities that are less positive than we expect; our ability to bring our intended products to market; market demand for our intended products; shifts in industry capacity; product development or other initiatives by our competitors; fluctuations in the availability and costs of raw materials required in our drug development process; other factors beyond our control; and the other risks described under the heading “Risk Factors” in our Annual Report on Form 10-K/A filed with the SEC on August 8, 2024.
Although we believe that the expectations and assumptions reflected in the forward-looking statements we make are reasonable, we cannot guarantee future results, levels of activity or performance. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those expressed by any forward-looking statements. As a result, readers should not place undue reliance on any of the forward-looking statements we make in this report. Forward-looking statements speak only as of the date on which they are made. Except as required by law, we undertake no obligation to revise or update publicly any forward-looking statements for any reason.
Company Overview
Range is a public company dedicated to improving the health and wellness of people and the planet through a novel and innovative approach to impact investing. We own and operate several complementary operating businesses focused on developing long-term solutions to environmental, social, and health challenges, with a particular focus on acquiring, reclaiming and repurposing mine sites and other undervalued land in economically disadvantaged communities throughout Appalachia. Range takes an opportunistic approach to impact investing by leveraging its competitive advantages and looking at solving old problems in new ways. Range seeks to thoughtfully allocate its capital into strategic opportunities that are expected to make a positive impact on the people-planet ecosystem and generate strong investment returns for its shareholders.
| 18 |
Our corporate headquarters is located in Cleveland, Ohio, with additional office locations in Flatwoods, West Virginia, Fola, West Virginia and Rocklin, California. As of August 13, 2024, we employed 44 full-time employees. In addition, we have, from time to time, engaged various consultants and professional service firms to provide us with flexible and experienced resources to advance our corporate objectives in order to maintain a cost-effective overhead structure. We strive to instill a corporate culture of honesty, integrity and respect while advancing our mission of doing well by doing good.
Impact Investing Strategy
Our impact investing strategy aims to improve the health and wellness of people and the planet, while also generating long-term sustainable financial returns for our shareholders. We believe that doing well and doing good are not mutually exclusive, and that an impact investing strategy can balance the environmental, social and economic needs of people and the planet while also generating attractive risk-adjusted financial returns for shareholders.
Our impact investing strategy provides an opportunity for our dedicated team to address pressing environmental, social and economic challenges, such as air and water pollution, educational inequality and economic disparity, and climate change, through the development of technology-based solutions. By actively directing investment capital towards businesses that are working to create positive environmental, social and economic outcomes, we believe that our impact investing strategy can contribute to an improved people-planet ecosystem and a healthier and happier way of life.
We have a particular interest in providing environmental and social solutions in economically-disadvantaged regions of the United States. Initially, the Company is targeting the Appalachian region, which is home to communities with some of the most disadvantaged income, education and employment demographics in the United States. Our ambitious strategy is to allocate investment capital and build operating businesses that provide positive environmental and social impact in the disadvantaged coal communities of Appalachia to maximize the good we can do for people and the planet.
Operating Business Segments
Our six operating business segments are: (i) Range Reclaim; (ii) Range Minerals; (iii) Range Water; (iv) Range Security; (v) Range Land; and (vi) Graphium Biosciences.
Range Reclaim
In May 2022, the Company acquired Range Environmental Resources, Inc., a West Virginia corporation (“Range Environmental”). Range Environmental provides land reclamation and water restoration services to customers throughout the Appalachian region with the goal of returning land to pre-mining conditions or repurposing the land for natural, commercial, agricultural or recreational use. Range Environmental’s water restoration services seek to improve the water quality of rivers, streams and discharges through novel and innovative treatment applications to help customers meet their various regulatory standards and requirements.
According to the U.S. Energy Information Administration (“EIA”), the United States had 551 coal mines in 2020, comprised of 370 active mines, 141 idled or closed mines, and 40 new or activated mines. Approximately 82% of those coal mines were located in Appalachia (which comprises the Appalachian Mountains and is commonly known as the cultural region in the Eastern United States stretching from the southern part of New York to the northern parts of Alabama and Georgia). According to the EIA, there were approximately three times as many coal mines in the United States in 2008 compared to 2020 with approximately 89% located in Appalachia. The precipitous decline in the number of operating coal mines since 2008 is due to various supply, demand and regulatory factors, including a reduction in demand for coal as a source of electricity due to the increased use of natural gas and renewable energy, an increase in coal production costs due to inflation, the dearth of cost-effective locations remaining for mining, and a more stringent and costly regulatory environment, all of which have resulted in an increasingly difficult market for coal producers.
In 2000, coal was responsible for 1,966 billion kWh of electricity generation, which represented 52% of the total electricity generation in the United States. By contrast, in 2022, coal was responsible for only 828 billion kWh of electricity generation, which represented 20% of the total electricity generation in the United States. According to the EIA, 23% of the 200,568 megawatts of coal-fired capacity currently operating in the United States is scheduled to be retired by the end of 2029 due to the high cost of operations, continued competition from natural gas and renewable energy resources, and sustainable initiatives of energy producers.
However, the reclamation of closed and inactive mine sites has not kept pace with the increase in closed and idled mine sites, thus creating a substantial backlog of reclamation work that needs to be completed on former mine sites. According to the U.S. Office of Surfacing Mining Reclamation and Enforcement (“OSMRE”), there are approximately 50,000 high-priority abandoned mine land locations in the United States resulting from legacy coal mining operations that failed to adequately reclaim the land and waterways back to their natural state. Additionally, there are tens of thousands of active mine sites in the United States that require contemporaneous reclamation of land and waterways during the active mining process, and an estimated equally large number of idled mine locations that also require significant land reclamation and water restoration services.
| 19 |
Under the Surface Mining Control and Reclamation Act of 1977 (“SMRCA”), OSMRE was established for two basic purposes: (i) to ensure coal mines in the United States operate in a manner that protects citizens and the environment during mining operations and to restore the land to beneficial use following mining; and (ii) to implement an Abandoned Mine Land (“AML”) reclamation program to address the hazards and environmental degradation resulting from two centuries of coal mining activities that occurred before SMRCA was passed in 1977. The AML reclamation program is funded through fees levied against coal producers based on tons of coal produced. As of September 2020, the AML reclamation fund had collected a total of $11.7 billion in coal mining fees over the life of the program, with $9.5 billion (81%) appropriated and distributed in accordance with SMCRA, and $2.2 billion (19%) unappropriated and available for future disbursement. In November 2021, the Infrastructure Investment and Jobs Act was enacted, which, among other things, authorized $11.3 billion in new funding to be appropriated for deposit into the AML reclamation fund. Importantly, the AML reclamation fund is only available to help fund the reclamation of mines abandoned before SMCRA was enacted in 1977; therefore, all mines abandoned after the year 1977 cannot access funding from the AML reclamation fund and must obtain funding from other sources.
While much of the funding for this reclamation work comes from the federal government, each state in Appalachia has a Department of Environmental Protection or an equivalent agency (“DEP”) that oversees coal mining permitting, operations, and reclamation. Under DEP rules and regulations, coal mining companies are required to develop a mining and reclamation plan that is approved by the applicable state agency, obtain a mining permit from the state, and secure a reclamation surety bond from a qualified third-party insurance company or provide a comparable financial guarantee. The reclamation surety bond provides the state with financial assurances that land reclamation and waterway restoration will be performed in accordance with the original reclamation plan once mining is complete if the coal mining company, as primary obligor, fails to perform. Therefore, there are at least three groups who may need land reclamation, water restoration and environmental auditing services: (i) mining companies when permits are active and reclamation bonds are not in default; (ii) surety bond insurers when reclamation bonds are in default; and (iii) states through their AML reclamation funds for mine lands abandoned before 1977 and for mine lands with defaulted coal mining companies and surety bond insurers after 1977.
Range Environmental is planning for continued growth in its land reclamation, water restoration and consulting businesses by expanding its market share with existing coal mining customers and reclamation bond insurers, adding new coal mining and non-coal mining customers, and collaborating with the Company’s other operating businesses to generate incremental sales opportunities. We will seek to add additional people, equipment and technologies to support our ambitious growth goals to ensure we successfully execute our value creation plans for the Company and our shareholders.
In August 2023, the Company acquired Collins Building & Contracting, Inc. (“Collins Building”), a West Virginia-based environmental services business focused on performing reclamation services on abandoned mine lands throughout West Virginia. Collins Building, along with Range Environmental, are classified within the Range Reclaim operating business segment.
Range Minerals
In May 2022, the Company acquired Range Natural Resources, Inc., a West Virginia corporation (“Range Natural”). During the six months ended June 30, 2024, Range Natural had no mining employees or equipment and engaged an independent, third-party contractor responsible for all aspects of providing coal mining and reclamation services on a surface coal mine at the Fola Mine Complex in Fola, West Virginia (“Fola Mine”). In January 2024, the Company separated Range Natural’s results from the “Range Reclaim” reporting segment and has included Range Natural’s results in a new “Range Minerals” reporting segment. The Company believes reporting the results of Range Minerals separately from Range Reclaim will provide better insight and transparency into the overall operational performance of both operating business segments. On June 30, 2024, Range Natural terminated its agreement with the independent, third-party contractor that performed coal mining and reclamation services at the Fola Mine due to a failure to perform.
Range Water
Terra Preta, LLC, an Ohio limited liability company (“Terra Preta”), is a biochar product development and environmental solutions business started by the Company in December 2022. Terra Preta is developing a novel and innovative combination of biochar, proprietary materials and structural designs intended to create several first-of-its-kind agricultural and water filtration products and solutions.
| 20 |
Biochar is a solid, lightweight carbon-rich material produced by the thermal decomposition of organic material (such as cellulosic feedstock, including wood and plants) using a chemical-conversion process known as pyrolysis. Carbonization pyrolysis is a chemical degradation process that heats organic materials to produce carbon-rich biochar, liquid bio-oils, and syngas products. Since organic material is thermally decomposed without oxygen during the pyrolysis process, combustion does not occur, so the process allows for the permanent capture of carbon in the biochar end-product and eliminates the release of climate-damaging carbon dioxide into the atmosphere. The specific yield of biochar during the carbonization pyrolysis process depends on several variables such as temperature, heating time and heating rate. Lower temperatures, longer heating times and lower heating rates typically yield more biochar and less bio-oil and syngas.
Terra Preta has been launched to build a full-cycle, carbon-negative business that reduces greenhouse gases from the atmosphere, passively filters contaminated water without the use of harsh chemicals, and provides a fortified, nutrient-rich soil amendment to improve the growth of agricultural products.
Greenhouse gases, comprised of carbon dioxide, methane, nitrous oxide and fluorinated gases, are gases that trap heat in the atmosphere, and are generally believed to result in warmer temperatures and climate change, including changing weather patterns, rising sea levels, and more extreme weather events. Carbon dioxide enters the atmosphere through, among other things, the burning of fossil fuels, solid waste and other biomass materials, and is removed from the atmosphere when absorbed by plants during the photosynthesis process. Terra Preta is in discussions with a large affiliated landowner to enter into a long-term lease or purchase of at least 100 acres of former mine land in West Virginia for the planting, growth and harvesting of crops to serve as the primary feedstock for our biochar production operations. The newly planted crops would then act as a “carbon sink”, drawing substantial amounts of carbon dioxide from the atmosphere into the plants through the photosynthesis process. When the plants are harvested, biochar is produced through the carbonization pyrolysis process and the captured carbon dioxide is permanently preserved as carbon in the biochar product for use in water treatment and agricultural end uses.
Pursuant to rules adopted under the Clean Water Act of 1972 (“Clean Water Act”), the U.S. Environmental Protection Agency (“EPA”) has implemented various pollution control programs such as wastewater standards for industry and recommendations for pollutants in surface waters. The Clean Water Act prohibits any party from discharging pollutants into a water of the United States unless they have a permit issued under the National Pollutant Discharge Elimination System (“NPDES”), which contains limits on what a party can discharge and establishes monitoring and reporting requirements. On mining sites, coal operators are required to sample and test their water discharges on a regular basis to ensure compliance with the Clean Water Act and applicable NPDES permits. Currently, most mining operators treat non-compliant water with temporary holding ponds and expensive chemicals such as pH adjusters, coagulants and flocculants that require constant reapplication to ensure compliance. Terra Preta will focus on developing a proprietary, biochar-based passive treatment system that treats non-compliant mine site discharges to ensure compliance with the Clean Water Act and NPDES permits without the need for holding ponds or expensive chemicals.
Sustainable agriculture plays a critical role in the stability, growth, and diversification of our future food supply chain and the growth of plants intended to serve as a carbon sink to reduce greenhouse gases. High-quality soil, a key condition for sustainable agriculture, requires organic matter, microorganisms, nutrients, and optimal compaction. Subsoils with a sufficient number of air-filled pores have little restriction to drainage and aeration, and typically are able to decompose and cycle organic matter and nutrients more efficiently. Alternatively, soil with poor aeration leads to the build-up of carbon dioxide, reduces the ability of plants to absorb water and nutrients, and leads to increased plant stress and root disease. To help address the ill effects of soil compaction, Terra Preta is developing a proprietary, fortified biochar soil amendment that provides unique soil structuring characteristics that will allow plants to grow strong roots that optimize the absorption of water and nutrients, thereby reducing root stress and disease.
| 21 |
In December 2022, Terra Preta filed trademarks for biochar goods and services related to agricultural and water treatment applications. In March 2023, Terra Preta filed provisional patents related to novel and innovative agricultural and water treatment solutions and designs. Additionally, in March 2023, Terra Preta purchased two pyrolysis ovens with the capacity to produce one ton of biochar per day to advance our research and development activities. We are currently evaluating the purchase of a large continuous-process pyrolysis oven to increase the scale of our biochar production to commercial levels.
Range Security
Range Security Resources, LLC, an Ohio limited liability company (“Range Security”), is an environmental security services business started by the Company in November 2022. Range Security is focused on providing eco-friendly, technology-driven security services to active and former mine sites, with a particular focus on locations transitioning from coal mining to next generation industries and uses. Range Security is intended to serve as a complementary business to the Range Reclaim and Range Minerals entities.
Mine sites in the Appalachian region frequently comprise thousands of acres of natural habitat with valuable infrastructure and operating assets disbursed across large tracts of land. However, many of these mine sites lack adequate broadband access or cellular service, and therefore traditional technology-based security solutions are not available. Also, due to the large land areas and often challenging access roads and mountainous terrain, consistent visual confirmation of the safety and security of high value assets is problematic, and unnecessary amounts of carbon dioxide are emitted from heavy-duty trucks used to perform frequent visual security checks. Furthermore, due to the remoteness and lack of technological options, most security services in the market fail to provide an independent verification of the security status of a mine site and confirmation of visual security checks, resulting in a customer’s uncertainty regarding the actual security services being provided.
Valuable assets commonly found on mine sites requiring high-levels of security services include office buildings, coal operation facilities such as preparation plants and loadout facilities, power stations and electrical lines, vehicles and heavy equipment, supplies and chemicals, and spare parts and components. These high-value assets are frequently the target of theft since all or parts of these assets can be easily removed from the mine site and sold for cash. Unfortunately, the actual damage to the operation resulting from this type of destructive theft is frequently many times the market value of the stolen item, primarily due to the losses resulting from the down-time of operations, the cost of repairs and replacement components, and the long-term damage to critical infrastructure that can be repurposed and used to attract next generation industries once the mining is complete.
In March 2023, Range Security was engaged by its first customer for environmental security services covering a 13,000-acre coal mine site in West Virginia. As of August 13, 2024, Range Security employed 7 security professionals, and is focusing its recruitment efforts on military veterans, police officers, and other professionals with security experience. Range Security has purchased two fuel-efficient utility task vehicles for ground surveillance and a thermal-imaging drone for aerial surveillance, all of which use significantly less fuel and electricity to operate than traditional security vehicles and provide a much broader coverage range with a substantially lower carbon footprint. Range Security is also in the process of establishing satellite-based wireless service to support video surveillance and enable a mobile technology solution used by our security professionals to provide real-time evidence of visual security checks. Range Security plans to expand its security service business to additional mine sites, with a particular focus on locations with valuable infrastructure being repurposed into non-coal multi-use complexes with attractive job growth prospects and next generation industry opportunities.
Range Land
Range Land, LLC, an Ohio limited liability company (“Range Land”), is a land acquisition company started by the Company in August 2023. Range Land is focused on acquiring former mine lands with the goal of reclaiming and repurposing the sites for non-fossil fuel uses, including commercial, industrial, residential and recreational developments. Range Land is specifically focused on acquiring land to be used for renewable energy facilities, innovative agricultural installations, and projects focused on improving the quality and condition of our air, land and waterways.
According to industry estimates, Appalachia contains nearly one million acres of abandoned, idled and non-performing mine sites that are burdened with significant land reclamation and water restoration obligations. Many of these troubled mine sites are subject to mining permits and associated reclamation bonds, which as a result, prevents the land from being repurposed for non-mining uses until the land has been reclaimed and the permits and bonds have been released by the applicable state’s environmental protection department. Water quality is a particularly challenging issue since a permit can only be released if the site has at least 12-months of compliant water samples without active chemical treatment, which heightens the need for water restoration solutions to help transition former mine land to economically viable non-mining uses.
The Company has assembled the internal resources and capabilities to reclaim land, restore waterways, install innovative water treatment solutions, and secure the mine site to protect the significant historical investment in infrastructure. In addition, the Company has extensive knowledge and expertise regarding the permit and bond release process, which is a critical step necessary to unlock the underlying value of the former mine land for non-fossil fuel uses. Range Land is actively reviewing several mine sites throughout Appalachia to acquire, reclaim and repurpose in order to improve the land and create non-fossil fuel economic development opportunities for disadvantaged local coal communities.
In September 2023, Range Land, through its wholly-owned subsidiary CLV Azurite Land, LLC, an Ohio limited liability company (“CLV Azurite”), acquired over 1,900 acres of surface interest at an idled mine complex in West Virginia. CLV Azurite is in active discussions with the holder of the permits and bonds associated with the acquired land to ensure that the acquired surface acreage can be repurposed for alternative non-fossil fuel uses. Concurrently, CLV Azurite is in active discussions with two experienced and well-capitalized solar developers to convert the former mine land into a large solar energy facility on a majority of the acquired surface acreage, as well as additional acreage for commercial, industrial, recreational and residential development. Under the solar arrangements, CLV Azurite would be the landlord and the solar developer-operator would be the tenant required to pay CLV Azurite a negotiated lease payment on a per acre basis.
Graphium Biosciences
Graphium Biosciences, Inc., a Nevada corporation (“Graphium”), is a cannabinoid-based drug development company tracing its history of technological innovation and drug advancement back to October 2011 through two predecessor entities, Stevia First Corp. and Vitality Biopharma, Inc. In October 2021, the Company formed Graphium as a wholly-owned subsidiary and transferred all of its drug development assets to this newly-formed entity.
Graphium is advancing a broad portfolio of glycosylated cannabinoid prodrugs that have been developed to unlock the rebalancing effects of the endocannabinoid system to address numerous chronic conditions with inadequate pharmaceutical options. Graphium’s leading drug candidate, VBX-100, is a glycosylated tetrahydrocannabinol (“THC”) cannabinoid that targets inflammatory conditions of the gastrointestinal tract but without unwanted psychoactive or intoxicating side effects.
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Cannabinoids, including THC and cannabidiol (“CBD”), have well-known therapeutic benefits through their interaction with the human endocannabinoid system, which serves a regulating and rebalancing function in the body. For decades, patients have used cannabinoids to activate the endocannabinoid system to provide relief for numerous chronic and debilitating ailments, including inflammation, pain, anxiety, depression, and cancer. However, THC, a commonly-used cannabinoid with significant therapeutic benefit, is psychoactive and intoxicating, and therefore its use has many practical, and in some cases legal, limitations. Nevertheless, many patients with chronic health conditions, including gastrointestinal inflammation, continue to use cannabinoids because current pharmaceutical offerings do not provide adequate therapeutic relief or result in unwanted side effects.
Our novel scientific discovery was the development of a proprietary enzymatic bioprocessing technology that adds one or more glucose molecules to a cannabinoid, resulting in our proprietary glycosylated cannabinoid compounds. Our glycosylated cannabinoids act as prodrugs that achieve targeted delivery of the bioactive cannabinoids within the body once they are activated. Prodrugs are compounds that, after administration, are metabolized into a pharmacologically active drug and are often designed to improve drug properties and reduce known or expected toxicities and adverse side effects. The advantages of our glycosylated cannabinoid prodrugs may include: (i) administration in a convenient oral formulation; (ii) targeted delivery with release in the colon or large intestine; (iii) improved stability with limited degradation or drug metabolism; and (iv) delayed release enabling longer-lasting effects and fewer administrations by patients.
We have learned through our animal studies that glucose bound to cannabinoid molecules are inactive and poorly absorbed from the intestines, allowing the combined molecule to reach the large intestine where glycoside hydrolase enzymes cleave the glucose and the cannabinoid is released in a targeted and restricted manner. Further, we have learned through our animal studies that a targeted release of THC, which could be provided in very low doses to achieve physiologically beneficial results, serves as an anti-inflammatory agent in the lower gastrointestinal tract and minimizes the amount of THC absorbed into the blood stream. Therefore, we anticipate our glycosylated cannabinoid prodrug will provide the anti-inflammatory benefits of low-dose THC while avoiding the psychoactive and intoxicating properties that hinder the broader pharmaceutical use of THC. Initially, we are targeting the $20 billion inflammatory bowel disease (“IBD”) market in the United States, which is composed of patients suffering from ulcerative colitis and Crohn’s disease, both chronic and debilitating conditions with no cure. We also believe our glycosylated cannabinoids could also be used to treat other indications, including, among others, irritable bowel syndrome (“IBS”), anxiety, depression, autism and cancer.
By using our proprietary enzymatic bioprocessing technologies, our research team has developed a novel family of over 100 glycosylated cannabinoid prodrugs. These glycosylated cannabinoids have unique commercial applications and patentable compositions of matter, which are separate and distinct from ordinary cannabinoids. Currently, our intellectual property is comprised of the following patents: (i) the Cannabinoid Glycoside Prodrugs and Methods of Synthesis patent filed in 2016 and granted in 2021 for the invention of novel glycosylated cannabinoids and methods of targeted delivery for the treatment of gastrointestinal disorders, including IBD and IBS; (ii) the Antimicrobial Compositions Comprising Cannabinoids and Methods of Using the Same patent filed in 2018 and granted in 2021 for the use of cannabinoids as antibiotics for the treatment of Clostridioides difficile; (iii) the Novel Cannabinoid Glycosides and Uses Thereof patent filed in 2020 and in prosecution for additional novel cannabinoid glycosides and includes research data supporting the improved characteristics and commercial production strategies for these new molecules; and (iv) the Continuous Enzymatic Perfusion Reactor System patent filed in 2021 and in prosecution for our improved reactor system for the efficient enzymatic glycosylation of hydrophobic small molecules, including cannabinoids. We believe our intellectual property portfolio of glycosylated cannabinoids possess significant value and, as a result, we have allocated substantial resources to ensure that our U.S. and international patents are properly filed and successfully prosecuted. As our research efforts involving glycosylated cannabinoids continue to progress, we plan to file additional patents to further expand our growing family of intellectual property assets and create long-term value for our shareholders.
Our research team has performed 23 animal studies to test the safety, efficacy and dosing levels of our glycosylated cannabinoids, which have provided us with favorable scientific data and the opportunity to further refine our drug development plan. We have performed two industry standard colitis disease mouse models: (i) TNBS model in 2017 and 2018 that generated favorable colitis prevention data; and (ii) DSS model in 2021 that generated favorable colitis treatment data. In 2021, we received a letter from the Food and Drug Administration’s (“FDA”) Office of Orphan Products Development stating that we have been granted Orphan Drug Designation for our glycosylated cannabinoid VBX-100 for the treatment of pediatric ulcerative colitis. An Orphan Drug Designation provides several benefits, including fee waivers, tax credits, fast tracking of regulatory processes, and seven years of market exclusivity.
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Due to our development of pharmaceutical products, we are subject to extensive regulation by the FDA and other federal, state, and local agencies. Also, since we are researching and developing cannabinoid-based products, we are subject to regulation by the U.S. Drug Enforcement Administration (“DEA”). Our research and development activities focus on cannabinoids, particularly THC and CBD derived from the cannabis plant, which the DEA has classified as Schedule I substances. Schedule I substances are defined as drugs with no currently accepted medical use and a high potential for abuse. In May 2019, the DEA informed us that it had determined that they consider our VBX-100 prodrug a Schedule I substance. As a result, any developing, testing, manufacturing, or clinical studies involving our VBX-100 prodrug, and by inference potentially all of our THC-glycoside molecules, are required to be properly licensed by the DEA and adhere to strict diversion control standards.
We are working closely with a third-party contract research organization to develop a detailed drug development plan to advance our leading drug candidate, VBX-100, through Phase II clinical trials by the end of 2027, subject to receipt of sufficient funding, which is currently estimated to be approximately $20 million. Graphium has engaged a registered broker-dealer to assist with the capital raise, which remains in process.
Competition
Our Company is focused on a large and growing marketplace for impact investing initiatives, and therefore, is anticipated to face competition from a variety of operating businesses and investment funds who are developing similar business plans and operating strategies to satisfy the increasing demands of these types of investments in the marketplace. In many cases, these competitors are larger and better capitalized operating businesses and investment funds.
Our Company competes on the basis of a number of factors, including our geographic focus on Appalachia, access to mission-driven energy-transition capital, access to impact investing opportunities, strategic relationships with reclamation bond insurance companies, recruitment and retention of key personnel, market share with key customers, and supply relationships with critical vendors. Our ability to continue to compete effectively in our businesses will depend upon our ability to attract new employees and retain and motivate our existing employees.
Information Systems
In 2023, the Company engaged Foundation Software, LLC (“Foundation Software”) as its new accounting software provider and converted all of the Company’s accounting system operations from QuickBooks to Foundation Software during the second quarter of 2023.
Founded in Cleveland, Ohio in 1985, Foundation Software is specifically designed for service companies, particularly those in the construction, contracting and reclamation industries. Foundation Software offers the Company several enhanced features critical to the successful execution of its shareholder value creation plan, including: (i) general ledger accounting, including accounts payable, accounts receivable, inventory and customer billing; (ii) equipment tracking on job sites, maintenance, utilization and depreciation; (iii) employee tracking on job sites, time and materials, utilization, and billing; (iv) job costing and profitability reporting segmented by customers, job types and location’ and (v) numerous real-time management dashboard and key performance indicator reports that will allow management to closely monitor financial and operational performance and quickly react to business opportunities and issues. Furthermore, Foundation Software will allow the Company to quickly scale operations and efficiently and cost-effectively support the anticipated growth of each business, thereby preventing our accounting and management systems from becoming a limiting factor to our growth initiatives.
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Results of Operations
Three Months Ended June 30, 2024 and June 30, 2023
The Company’s revenue for the three months ended June 30, 2024 was $2,349,738, its gross loss was $148,929 and net loss was $1,225,681. The Company’s revenue for the three months ended June 30, 2023 was $3,998,267, its gross profit was $845,101 and net income was $36,762. The $1,648,529 reduction in quarterly revenue was due to a $1,693,416 reduction in revenue from the Range Reclaim and Range Minerals business segments primarily due to a failure of performance by a mining subcontractor, which was partially offset by a $44,887 increase in revenue from the Range Security business segment primarily due to the performance of a new security services contract at a second mine site.
For the three months ended June 30, 2024, general and administrative expenses were $697,699 compared to $583,964 incurred for the three months ended June 30, 2023. This $113,735 increase in general and administrative expenses are primarily due to the costs of additional employees and consultants hired in anticipation of the projected long-term growth of the Range Reclaim and Range Minerals business segments, offset by the partial re-allocation to the Graphium Biosciences business segment of the salaries and benefits of a corporate executive.
For the three months ended June 30, 2024, the Company incurred research and development costs of $157,278 compared to $107,444 for the three months ended June 30, 2023. This $49,834 increase in research and development costs was due to the full allocation of employment costs of a corporate executive who was transitioned from the Company to the Graphium Biosciences business segment effective March 31, 2024.
For the three months ended June 30, 2024, the Company incurred net other expenses in the amount of $221,775 compared to net other expenses of $116,931 for the three months ended June 30, 2023. This $104,844 increase was primarily attributable to increased interest expense of $48,729 and state income taxes of $56,600 for the three months ended June 30, 2024. There was no state tax expense incurred during the three months ended June 30, 2023.
The net loss during the three months ended June 30, 2024 was $1,225,681 compared to net income of $36,762 for the three months ended June 30, 2023. This $1,262,443 decrease in net income was due to lower revenue of $1,648,529, lower gross profit of $994,030, higher operating expenses of $163,569 and higher other expense of $104,844.
Six Months Ended June 30, 2024 and June 30, 2023
The Company’s revenue for the six months ended June 30, 2024 was $6,259,631, its gross loss was $130,075 and net loss was $2,439,521. The Company’s revenue for the three months ended June 30, 2023 was $7,013,154, its gross profit was $1,494,103 and net loss was $190,098. The $753,523 reduction in revenue for the six months ended June 30, 2024 was related to a $1,193,805 reduction in revenue from the Range Reclaim and Range Minerals business segments primarily due to a failure of performance by a mining subcontractor, which decline was partially offset by a $440,282 increase in revenue from the Range Security business segment primarily due to its growth with its first customer and the performance of a new security services contract at a second mine site for the six months ended June 30, 2024.
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For the six months ended June 30, 2024, general and administrative expenses were $1,641,600 compared to $1,310,012 incurred for the six months ended June 30, 2023. This $331,588 increase in general and administrative expenses are primarily due to the costs of additional employees and consultants hired in anticipation of the projected long-term growth of the Range Reclaim and Range Minerals business segments, offset by the partial re-allocation to the Graphium Biosciences business segment of the salaries and benefit of a corporate executive during the second quarter of 2024.
For the six months ended June 30, 2024, the Company incurred research and development costs of $288,918 compared to $213,621 for the six months ended June 30, 2023. This $75,297 increase in research and development costs was due to the full allocation of employment costs of a corporate executive who was transitioned from the Corporate business segment to the Graphium Biosciences business segment effective March 31, 2024, and costs associated with the capital raise process to advance its drug development program.
For the six months ended June 30, 2024, the Company incurred net other expenses in the amount of $378,928 compared to net other expenses of $160,568 for the six months ended June 30, 2023. This $218,360 increase was primarily attributable to increased interest expense of $180,350 and state income taxes of $56,600 for the six months ended June 30, 2024. There was no state tax expense incurred during the six months ended June 30, 2023.
The net loss during the six months ended June 30, 2024 was $2,439,521 compared to a net loss of $190,098 for the six months ended June 30, 2023. This $2,249,423 decrease in net income was due to lower revenue of $753,523, lower gross profit of $1,624,178, higher operating expenses of $406,885 and higher other expense of $218,360.
Liquidity and Capital Resources
As of June 30, 2024, the Company had total current assets of $6,655,093, comprised of: (i) cash of $123,713; (ii) accounts receivable of $4,388,785; (iii) contract assets of $1,374,962; (iv) inventory of $725,429 and (v) prepaid expenses of $42,204. As of June 30, 2024, the Company had total current liabilities of $7,058,714, comprised of: (v) outstanding amounts on the lines of credit of $2,200,000; (w) accounts payable of $2,036,868; (x) accrued expenses of $54,402, (y) deposit of $150,000 and (z) the current portion of long-term debt of $2,617,444. As a result, as of June 30, 2024, the Company had negative working capital of $403,621. As of December 31, 2023, the Company had positive working capital of $753,756. This $1,157, 377 decrease in working capital is the result of lower sales in the amount of $1,648,529 during the six months ended June 30, 2024, which has translated into lower non-cash current assets of $1,016,655 and lower non-debt current liabilities of $1,574,027, for a net decrease of non-cash and non-debt working capital of $557,362 during the six months ended June 30, 2024. Also, during the six months ended June 30, 2024, $2,053,087 of cash was used to fund the aforementioned $557,362 decrease of non-cash and non-debt working capital, repayment of $338,348 of the current portion of long-term debt, and the repayment of $1,051,208 of long-term debt.
As of June 30, 2024, the Company had long-term assets of $12,786,427, comprised of: (i) net equipment assets of $10,289,443; (ii) land of $1,563,797; (iii) buildings of $171,790; (iv) goodwill of $751,421; and (v) deposits of $9,976. As of June 30, 2024, the Company had long-term liabilities of $4,198,819, entirely comprised of long-term debt, net of current portion. As of December 31, 2023, the Company had long-term assets of $14,063,299, comprised of: (v) net equipment assets of $11,549,689; (w) land of $1,563,797; (x) building of $188,416; (y) goodwill of $751,421; and (z) deposits of $9,976. As of December 31, 2023, the Company had long-term liabilities of $5,250,027, entirely comprised of long-term debt, net of current portion.
Based on the Company’s current corporate strategy, we expect our general operating expenses to be substantially offset by revenue generated by the Range Reclaim and Range Security business segments, and the collection of significant outstanding accounts receivables from the Company’s largest customer. While we expect the Company’s operating businesses to generate operating losses over the 12 months following June 30, 2024, based on the Company’s current cash balance and the anticipated collection of significant outstanding accounts receivable, the Company expects to have sufficient funds to operate its business over the next 12 months. If additional capital is needed in excess of our current capital resources, we will explore financing options to accelerate the funding and execution of our growth strategy and shareholder value creation plan.
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Our estimated total expenditures for the 12-month period ending June 30, 2025 could increase if we encounter unanticipated lower revenues and higher expenses in connection with operating our business as presently planned. In addition, our estimates of the amount of cash necessary to fund our business may prove to be too low, and we could spend our available financial resources much faster than we currently expect. If we cannot raise the capital necessary to continue to develop our business, we will be forced to delay, scale back or eliminate some or all of our proposed operations. If any of these were to occur, there is a substantial risk that our business would fail.
Until such time as the Company and its operating businesses are cash flow positive, we expect to continue funding our operations, at least in part, through equity and debt financings. However, sources of additional funds may not be available when needed, on acceptable terms, or at all. If we issue equity or convertible debt securities to raise additional funds or to fund, in whole or in part, acquisitions in furtherance of our business strategy, our existing stockholders may experience substantial dilution, and the new equity or debt securities may have rights, preferences and privileges senior to those of our existing stockholders. If we incur additional debt, we would incur additional interest expenses, and assuming those loans would be available, it would increase our liabilities and future cash commitments. Moreover, regardless of the manner in which we seek to raise capital, we may incur substantial costs in those pursuits, including investment banking fees, legal fees and other related costs.
Net Cash Used in Operating Activities
For the six months ended June 30, 2024, net cash used in operating activities was $1,663,531, compared to net cash used in operating activities of $398,399 for the six months ended June 30, 2023. This $1,265,132 increase was primarily due to a $2,249,423 increase in loss from continued operations that was primarily driven by reduced sales and profitability in our Range Reclaim and Range Minerals business segments, and higher costs of additional employees and consultants hired in anticipation of the projected long-term growth of those business segments, offset by higher non-cash depreciation expense of $580,962 due to the Company’s larger investment in equipment and a $382,769 reduction in cash used to fund the Company’s working capital.
Net Cash Used in Investing Activities
For the six months ended June 30, 2024, net cash used in investing activities was $0, compared to net cash provided by investing activities of $784,515 for the six months ended June 30, 2023. Net cash used in investing activities for the six months ended June 30, 2023 consisted of equipment purchases and capital expenditures. Based on the Company’s current corporate strategy, no additional equipment purchases are required to execute its near-term strategic plan; however, if additional equipment is required in the future, the Company anticipates securing such equipment through third-party equipment leases or equipment financings. Future capital expenditures required to maintain the Company’s existing equipment are anticipated to be funded with cash on hand.
Net Cash Provided By Financing Activities
For the six months ended June 30, 2024, the most significant items affecting the comparison of our cash flows (used in) provided by financing activities for the six months ended June 30, 2024 and 2023 are summarized below:
| ● | During the six months ended June 30, 2024, we received aggregate proceeds of $1,410,000 from the sale of our common stock in privately-negotiated transactions. | |
| ● | During the six months ended June 30, 2024, we repaid $1,389,556 of our indebtedness. | |
| ● | During the six months ended June 30, 2023, we received proceeds of $383,202 from the issuance of long-term debt and $1,200,000 from a line of credit, offset by the repayment of long-term debt of $893,093. |
Off-Balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that would be material to stockholders.
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Critical Accounting Policies
Our financial statements and accompanying notes included in this report have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) applied on a consistent basis. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.
We regularly evaluate the accounting policies and estimates that we use to prepare our financial statements. In general, management’s estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from the estimates made by management.
We believe the following critical accounting policies require us to make significant judgments and estimates in the preparation of our consolidated financial statements included in this report:
Use of Estimates and Assumptions
The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. The more significant estimates and assumption by management include, among others, assumptions used in valuing assets acquired in business acquisitions, reserves for accounts receivable, assumptions used in valuing equity instruments issued for services, the valuation allowance for deferred tax assets, accruals for potential liabilities, and assumptions used in the determination of the Company’s liquidity. Actual results could differ from those estimates.
Business Combinations
Business combinations are accounted for using the purchase method of accounting under ASC 805, “Business Combinations.” This method requires the Company to record assets and liabilities of the businesses acquired at their estimated fair values as of the acquisition date. Any excess of the cost of the acquisition over the fair value of the net assets acquired is recorded as goodwill. Determining the fair value requires management to make estimates and assumptions including discount rates, rates of return on assets, and long-term sales growth rates.
Goodwill
As referenced by ASC 350 “Intangibles- Goodwill and other” (“ASC 350”), management performs its annual test for goodwill at least annually or more frequently, if impairment indicators arise.
Revenue Recognition
The Company recognizes revenue under ASC 606, “Revenue from Contracts with Customers”. The core principle of the revenue standard is that a company should recognize revenue by analyzing the following five steps: (1) identify the contract with the customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations; and (5) recognize revenue when (or as) each performance obligation is satisfied. The Company primarily invoices customers and recognizes revenue on a periodic basis for equipment and labor hours provided to a customer on a particular job based on an agreed-upon hourly rate sheet or a fixed amount for a project. The Company also invoices customers and recognizes revenue for equipment mobilization fees and materials and supplies required to complete a project. The Company invoices for the sales of chemicals and recognizes revenue when the products are delivered to the customer’s designated site. Costs for equipment, labor and chemicals are generally expensed as incurred since the projects are generally short-term and not subject to a contract. The Company also invoices customers for the provision of environmental security services on an agreed-upon hourly rate for each project. All revenue is recognized at a point in time.
The Company recognizes revenue from contracts for financial reporting purposes over time. Progress toward completion of the Company’s contracts is measured by the percentage of cost incurred to date compared to estimated total costs for each contract. This method is used because management considers total cost to be the best available measure of progress on contracts. Because of inherent uncertainties in estimating costs, it is at least reasonably possible that the estimates used will change significantly within the near term.
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Stock-Based Compensation
The Company periodically issues stock options and restricted stock awards to employees and non-employees in non-capital raising transactions for services and for financing costs. The Company accounts for such grants issued and vesting based on ASC 718, Compensation-Stock Compensation whereby the value of the award is measured on the date of grant and recognized for employees as compensation expense on the straight-line basis over the vesting period. Recognition of compensation expense for non-employees is in the same period and manner as if the Company had paid cash for the services.
Recent Accounting Pronouncements
Please refer to Footnote 1 of the accompanying financial statements for management’s discussion of recent accounting pronouncements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not Applicable.
Item 4. Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our Disclosure Controls and Procedures (“DCPs”) as of the end of the fiscal quarter ended March 31, 2024, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act.
Based on such evaluation at the time our Form 10-Q for the three months ended March 31, 2024 was filed, our Chief Executive Officer and Chief Financial Officer concluded that as of March 31, 2024, our DCPs were effective at a reasonable assurance level. Subsequent to that evaluation and as a result of the material weakness in our ICFR discussed below, our Chief Executive Officer and Chief Financial Officer have concluded that during the three-month period ended March 31, 2024, our disclosure controls and procedures were not effective. Our internal control over financial reporting did not result in the proper accounting classification of financial information and presentation which, due to its material impact on our financial statements, we determined to be a material weakness. Therefore, on August 8, 2024, the Company filed a Form 10-Q/A for the three months ended March 31, 2024, which corrected the accounting error of a vendor invoice that was inadvertently recorded in April 2024 rather than the proper period of March 2024.
Material Weaknesses in Internal Control over Financial Reporting
A material weakness is a deficiency, or a combination of deficiencies, in Internal Control over Financial Reporting (“ICFR”), such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected in a timely manner.
We did not maintain effective controls over expense recording and accruals. Specifically, we did not maintain effective controls to timely identify and account for period cutoff and accruals to the proper period. This material weakness resulted in the restatement of our financial statements for the three months ended March 31, 2024.
Remediation Plan
Upon identification of the material weakness, our management developed a remediation plan to address the material weakness, which includes updating our procedures regarding the review of expenses and accruals of expenses to the proper period.
Our management believes the measures described above and others that may be implemented will remediate the material weakness that we have identified. However, the material weakness will not be considered remediated until there has been appropriate time for us to conclude through testing that the controls are operating effectively.
As our management continues to evaluate and improve our ICFR, we may decide to take additional measures to address control deficiencies or determine to modify certain remediation measures identified.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the six months ended June 30, 2024, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. The impact and outcome of litigation, if any, is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are not currently a party to and our properties are not currently the subject of any material pending legal proceedings the adverse outcome of which, individually or in the aggregate, would be expected to have a material adverse effect on our financial position or results of operations.
Item 1A. Risk Factors
Please refer to the risks described under the heading “Risk Factors” in our Annual Report on Form 10-K/A filed with the SEC on August 8, 2024.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On June 17, 2024, the Company entered into a securities purchase agreement with Continental Heritage Holding Company LLC, a Florida limited liability company, providing for the issuance and sale of 3,703,704 shares of the Company’s common stock. The aggregate gross proceeds from the sale of these shares was approximately $1,000,000. The sale proceeds were used for general operating purposes.
Item
3. Defaults Upon Senior Securities:
Item 4. Mine Safety Disclosures:
The information concerning mine safety violations and other regulatory matters is filed as Exhibit 95 to this Form 10-Q/A pursuant to the requirements of Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K (17 CFR 229.104).
Item 5. Other Information: None
Item 6. Exhibits
† Furnished herewith.
* Filed herewith
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| RANGE IMPACT, INC. | ||
| By: | /s/ Michael Cavanaugh | |
| Michael Cavanaugh | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| Date: | October 15, 2024 | |
| 31 |
EXHIBIT INDEX
† Furnished herewith.
* Filed herewith
| 32 |