| BUSINESS OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 1.
BUSINESS OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Malachite
Innovations, 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 by unlocking the therapeutic properties of cannabinoids
but without their unwanted psychoactive side effects. In
October 2021, the Company changed its name to Malachite Innovations, Inc. and reorganized its corporate structure and created the
following two wholly-owned operating subsidiaries: (i) Graphium Biosciences, Inc., a Nevada corporation (“Graphium”),
into which 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 ESG operating
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, water restoration and environmental consulting 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 rivers,
streams and discharges through novel and innovative treatment applications to help customers meet their various regulatory standards and
requirements. The Range Reclamation Entities also provide environmental consulting services to customers typically in connection with
land reclamation and water restoration projects and as an additional value-add service, sells water treatment chemicals manufactured by
third parties to their customers. Range Natural also provides resource mining services for customers incidental to the reclamation and
repurposing of mine sites. On
December 31, 2022, Daedalus was merged into Malachite Innovations, Inc., leaving Malachite Innovations, Inc., as the parent company with
full ownership of all of its wholly-owned operating subsidiaries, including the Range Reclamation Entities, Terra Preta, Pristine Stream,
Range Security and Graphium. Going
Concern The
accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement
of liabilities and commitments in the normal course of business. As reflected in the accompanying financial statements, during the year
ended December 31, 2022, the Company incurred a net loss of $ 1,072,176 603,778 The
ability to continue as a going concern is dependent on the Company attaining and maintaining profitable operations in the future and/or
raising additional capital to meet its obligations and repay its liabilities arising from normal business operations when they come due.
The Company estimates, as of December 31, 2022, that it has sufficient funds to operate the business for 12 months given its cash balance
of $ 442,369 1,000,000 Basis
of Presentation The
consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Graphium Biosciences, Inc.,
Range Environmental Resources, Inc., Range Natural Resources, Inc., Terra Preta, Inc., Pristine Stream Ventures, Inc., Range
Security Resources, Inc., Daedalus Ecosciences, Inc. (merged into Malachite Innovations, Inc. on December 31, 2022), and Vitality
Healthtech, Inc. (dissolved in May 2021), 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. The Company’s fiscal
year end is December 31. Use
of Estimates The
preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual
results could differ from those estimates. Revenue
Recognition The
Company 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. All revenue is recognized at a point in time. Cash
and Cash Equivalents The
Company considers all highly liquid investments with an original maturity of three months or less at the date of acquisition to be cash
equivalents. From time to time, the Company’s cash account balances exceed the balances covered by the Federal Deposit Insurance
System. The Company has never suffered a loss due to such excess balances. Accounts
Receivable Trade
accounts receivable are stated at the amount management expects to collect from the balances outstanding at the end of each fiscal period
reflected in the consolidated balance sheets. Based on management’s assessment, it has concluded that losses on balances outstanding
as of those dates will be immaterial and, therefore, no 981,385 no No no Equipment Equipment
is carried at cost. Expenditures for maintenance and repairs are charged to cost of services. Additions and betterments are capitalized.
The cost and related accumulated depreciation of equipment sold or otherwise disposed of are removed from the accounts and any gain or
loss is reflected in the current year’s earnings. SCHEDULE
OF EQUIPMENT
December
31, 2022 December
31, 2021
Equipment $ 6,637,814 $ -
Accumulated
depreciation 592,300 -
Net
book value 6,045,514 -
Depreciation
expense $ 395,543 $ - The
Company provides for depreciation of equipment using the straight-line method for both financial reporting and federal income tax purposes
over the estimated six-year The
Company assesses the recoverability of its 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. Delivery
Costs Delivery
costs are classified as cost of sales. Goodwill Goodwill
is 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 intangible asset is impaired. 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. The Company had no lease commitments for longer than
one year as of December 31, 2022. The laboratory space lease in Rocklin, California was renewed in March 2022 and ends on March 31, 2023. 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. 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. 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
and Diluted Loss Per Share Basic
loss per share is computed by dividing the net loss applicable to common stockholders by the weighted average number of outstanding common
shares during the period. Shares of restricted stock are included in the basic weighted average number of common shares outstanding from
the time they vest. Diluted loss per share is computed by dividing net loss applicable to common stockholders by the weighted average
number of common shares outstanding plus the number of additional common shares that would have been outstanding if all dilutive potential
common shares had been issued. Shares of restricted stock are included in the diluted weighted average number of common shares outstanding
from the date they are granted unless they are antidilutive. Diluted loss per share excludes all potential common shares if their effect
is anti-dilutive. The following potentially dilutive shares were excluded from the shares used to calculate diluted earnings per share
as their inclusion would be anti-dilutive: SCHEDULE OF ANTI-DILUTIVE SECURITIES EXCLUDED FROM COMPUTATION OF EARNINGS PER SHARE
December
31, 2022 December
31, 2021
Options 9,392,544 6,882,544
Warrants 22,313,335 646,668
Total 31,705,879 7,529,212 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 October 1, 2021, we began operating under two which are wholly-owned subsidiaries of the Company, report the operating results of the Environmental
Services segment, which provides land reclamation, water restoration and environmental consulting services to mining and non-mining customers In
accordance with the “Segment Reporting” Topic of the ASC, 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
June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments Other
recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public
Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s
present or future financial statements. |
