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As Of Filer Filing For·On·As Docs:Size Issuer Filing Agent 11/14/23 Correlate Energy Corp. 10-Q 9/30/23 48:5.1M Discount Edgar/FA |
Document/Exhibit Description Pages Size
1: 10-Q Quarterly Report HTML 1.21M
2: EX-31.1 Certification -- §302 - SOA'02 HTML 19K
3: EX-31.2 Certification -- §302 - SOA'02 HTML 19K
4: EX-32.1 Certification -- §906 - SOA'02 HTML 15K
5: EX-32.2 Certification -- §906 - SOA'02 HTML 15K
11: R1 Cover HTML 63K
12: R2 Condensed Consolidated Balance Sheets HTML 128K
13: R3 Condensed Consolidated Balance Sheets HTML 35K
(Parenthetical)
14: R4 Condensed Consolidated Statements of Operations HTML 83K
(Unaudited)
15: R5 Condensed Consolidated Statements of Changes in HTML 96K
Stockholders Deficit (Unaudited)
16: R6 Condensed Consolidated Statements of Cash Flows HTML 111K
(Unaudited)
17: R7 Nature of the Organization and Business HTML 21K
18: R8 Summary of Significant Accounting Policies HTML 49K
19: R9 Commitments and Contingencies HTML 18K
20: R10 Debt HTML 176K
21: R11 Equity HTML 41K
22: R12 Related Party Transactions HTML 25K
23: R13 Intangible Assets HTML 40K
24: R14 Subsequent Events HTML 20K
25: R15 Summary of Significant Accounting Policies HTML 74K
(Policies)
26: R16 Summary of Significant Accounting Policies HTML 28K
(Tables)
27: R17 Debt (Tables) HTML 166K
28: R18 Equity (Tables) HTML 34K
29: R19 Intangible Assets (Tables) HTML 42K
30: R20 Summary of Significant Accounting Policies HTML 21K
(Details)
31: R21 Summary of Significant Accounting Policies HTML 22K
(Details 1)
32: R22 Summary of Significant Accounting Policies HTML 42K
(Details Narrative)
33: R23 Debt (Details) HTML 116K
34: R24 Debt (Details 1) HTML 78K
35: R25 Debt (Details 2) HTML 37K
36: R26 Debt (Details Narrative) HTML 90K
37: R27 Equity (Details) HTML 34K
38: R28 Equity (Details 1) HTML 34K
39: R29 Equity (Details Narrative) HTML 108K
40: R30 Related Party Transactions (Details Narrative) HTML 48K
41: R31 Intangible Assets (Details) HTML 33K
42: R32 Intangible Assets (Details 1) HTML 25K
43: R33 Subsequent Events (Details Narrative) HTML 35K
46: XML IDEA XML File -- Filing Summary XML 77K
44: XML XBRL Instance -- cipi_10q_htm XML 1.48M
45: EXCEL IDEA Workbook of Financial Report Info XLSX 95K
8: EX-101.CAL XBRL Calculations -- cipi-20230930_cal XML 119K
10: EX-101.DEF XBRL Definitions -- cipi-20230930_def XML 339K
7: EX-101.LAB XBRL Labels -- cipi-20230930_lab XML 739K
9: EX-101.PRE XBRL Presentations -- cipi-20230930_pre XML 562K
6: EX-101.SCH XBRL Schema -- cipi-20230930 XSD 149K
47: JSON XBRL Instance as JSON Data -- MetaLinks 328± 460K
48: ZIP XBRL Zipped Folder -- 0001477932-23-008373-xbrl Zip 162K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM i 10-Q
i ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended i September 30, 2023
OR
i ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File No. i 000-55825
i CORRELATE ENERGY CORP. |
(Exact name of registrant as specified in its charter) |
i Nevada |
| i 84-4250492 |
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
|
|
|
i 176 S. Capitol Blvd., i 2nd Floor i Boise, i Idaho |
| i 83702 |
(Address of Principal Executive Offices) |
| (Zip Code) |
( i 855)- i 264-4060
(Registrant’s telephone number, including area code)
220 Travis Street, Suite 501, Shreveport, LA 71101
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities 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. i Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). i Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated Filer | ☐ | Smaller reporting company | i ☒ |
Accelerated Filer | ☐ | Emerging growth company | i ☐ |
i Non-accelerated Filer | ☒ |
|
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes i ☐ No ☒
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. The number of shares of Common Stock, par value $0.0001 per share, outstanding as of November 13, 2023 was i 36,181,457.
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
None | N/A | N/A |
Index
|
|
| Pg. No. |
| |
|
|
| |||
|
| 3 |
| ||
| Condensed Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022 (Unaudited) |
|
| 3 |
|
|
|
| 4 |
| |
|
|
| 5 |
| |
|
|
| 6 |
| |
|
|
| 7 |
| |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
|
| 18 |
| |
|
| 20 |
| ||
|
| 20 |
| ||
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| |||
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| 21 |
| ||
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| 21 |
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| 21 |
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| 21 |
| ||
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| 21 |
| ||
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| 21 |
| ||
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| 22 |
| ||
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| 23 |
| ||
| 2 |
| Table of Contents |
PART 1 — FINANCIAL INFORMATION
CORRELATE ENERGY CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2023 AND DECEMBER 31, 2022
(Unaudited)
|
| September 30, |
|
|
| |||
|
| 2023 |
|
| 2022 |
| ||
|
|
|
|
|
|
| ||
Assets |
| |||||||
Current assets |
|
|
|
|
|
| ||
Cash |
| $ | i 3,218,263 |
|
| $ | i 96,308 |
|
Contract assets |
|
| i 128,103 |
|
|
| i 684,185 |
|
Prepaid expenses and other current assets |
|
| i 697,542 |
|
|
| i 395,953 |
|
Total current assets |
|
| i 4,043,908 |
|
|
| i 1,176,446 |
|
|
|
|
|
|
|
|
|
|
Property and equipment |
|
|
|
|
|
|
|
|
Property and equipment, net |
|
| i 114,970 |
|
|
| i 4,004 |
|
Total property and equipment |
|
| i 114,970 |
|
|
| i 4,004 |
|
|
|
|
|
|
|
|
|
|
Other assets |
|
|
|
|
|
|
|
|
Intangible assets - customer relationships, net |
|
| i 151,970 |
|
|
| i 187,040 |
|
Intangible assets - developed technology, net |
|
| i 3,460 |
|
|
| i 13,870 |
|
Intangible assets - development rights, net |
|
| i 668,065 |
|
|
| i 112,744 |
|
Goodwill |
|
| i 762,851 |
|
|
| i 762,851 |
|
Total other assets |
|
| i 1,586,346 |
|
|
| i 1,076,505 |
|
|
|
|
|
|
|
|
|
|
Total assets |
| $ | i 5,745,224 |
|
| $ | i 2,256,955 |
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders' Deficit | ||||||||
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
Accounts payable |
| $ | i 204,741 |
|
| $ | i 396,743 |
|
Accounts payable, related parties |
|
| i 750,346 |
|
|
| i 673,000 |
|
Accrued expenses |
|
| i 772,683 |
|
|
| i 1,285,898 |
|
Customer deposits |
|
| i 3,076,771 |
|
|
| i - |
|
Shareholder advances |
|
| i 96,519 |
|
|
| i 96,519 |
|
Line of credit |
|
| i 30,000 |
|
|
| i 30,000 |
|
Notes payable, current portion, net of discount |
|
| i 522,456 |
|
|
| i 67,468 |
|
Notes payable, related parties, current portion, net of discount |
|
| i 1,227,089 |
|
|
| i 1,446,078 |
|
Convertible notes payable, current portion, net of discount |
|
| i 683,103 |
|
|
| i - |
|
Convertible notes payable, related party, current portion, net of discount |
|
| i 45,448 |
|
|
| i - |
|
Derivative liability |
|
| i - |
|
|
| i 722,328 |
|
Total current liabilities |
|
| i 7,409,156 |
|
|
| i 4,718,034 |
|
|
|
|
|
|
|
|
|
|
Notes payable, net of current portion and discount |
|
| i - |
|
|
| i 315,786 |
|
Notes payable, related parties, net of current portion and discount |
|
| i - |
|
|
| i 28,809 |
|
Convertible notes payable, net of current portion and discount |
|
| i 683,297 |
|
|
| i - |
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
| i 8,092,453 |
|
|
| i 5,062,629 |
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' deficit |
|
|
|
|
|
|
|
|
Preferred stock $.0001 par value; authorized i 50,000,000 shares with - i 0- issued and outstanding at September 30, 2023 and December 31, 2022, respectively |
|
| i - |
|
|
| i - |
|
Common stock $ i 0.0001 par value; authorized i 400,000,000 shares with i 36,181,457 and i 35,323,626 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively |
|
| i 3,618 |
|
|
| i 3,532 |
|
Additional paid-in capital |
|
| i 14,280,986 |
|
|
| i 5,459,220 |
|
Accumulated deficit |
|
| ( i 16,631,833 | ) |
|
| ( i 8,268,426 | ) |
Total stockholders' deficit |
|
| ( i 2,347,229 | ) |
|
| ( i 2,805,674 | ) |
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders' deficit |
| $ | i 5,745,224 |
|
| $ | i 2,256,955 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 3 |
| Table of Contents |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022
(Unaudited)
|
| For the three months ended |
|
| For the nine months ended |
| ||||||||||
|
| September 30, |
|
|
| |||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Revenues |
| $ | i 930,277 |
|
| $ | i 2,312,577 |
|
| $ | i 5,139,133 |
|
| $ | i 2,617,675 |
|
Cost of revenues |
|
| i 698,256 |
|
|
| i 2,169,138 |
|
|
| i 3,827,429 |
|
|
| i 2,432,198 |
|
Gross profit |
|
| i 232,021 |
|
|
| i 143,439 |
|
|
| i 1,311,704 |
|
|
| i 185,477 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative |
|
| i 1,611,987 |
|
|
| i 2,301,539 |
|
|
| i 3,994,739 |
|
|
| i 3,496,747 |
|
Insurance |
|
| i 2,826 |
|
|
| i 1,487 |
|
|
| i 8,171 |
|
|
| i 4,879 |
|
Legal and professional |
|
| i 76,592 |
|
|
| i 75,552 |
|
|
| i 206,578 |
|
|
| i 1,014,474 |
|
Travel |
|
| i 39,314 |
|
|
| i 35,340 |
|
|
| i 127,097 |
|
|
| i 85,820 |
|
Depreciation and amortization |
|
| i 89,841 |
|
|
| i 15,560 |
|
|
| i 152,485 |
|
|
| i 45,880 |
|
Total operating expenses |
|
| i 1,820,560 |
|
|
| i 2,429,478 |
|
|
| i 4,489,070 |
|
|
| i 4,647,800 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations |
|
| ( i 1,588,539 | ) |
|
| ( i 2,286,039 | ) |
|
| ( i 3,177,366 | ) |
|
| ( i 4,462,323 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
| ( i 183,273 | ) |
|
| ( i 43,381 | ) |
|
| ( i 437,524 | ) |
|
| ( i 113,745 | ) |
Amortization of debt discount |
|
| ( i 1,611,905 | ) |
|
| ( i 257,497 | ) |
|
| ( i 3,700,034 | ) |
|
| ( i 685,639 | ) |
Financing costs |
|
| i - |
|
|
| i - |
|
|
| ( i 4,156,291 | ) |
|
| i - |
|
Change in fair value of derivative liability |
|
| i - |
|
|
| i - |
|
|
| i 3,107,808 |
|
|
| i - |
|
Total other income (expense) |
|
| ( i 1,795,178 | ) |
|
| ( i 300,878 | ) |
|
| ( i 5,186,041 | ) |
|
| ( i 799,384 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
| $ | ( i 3,383,717 | ) |
| $ | ( i 2,586,917 | ) |
| $ | ( i 8,363,407 | ) |
| $ | ( i 5,261,707 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share |
| $ | ( i 0.09 | ) |
| $ | ( i 0.07 | ) |
| $ | ( i 0.23 | ) |
| $ | ( i 0.15 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding - basic |
|
| i 36,175,490 |
|
|
| i 35,139,920 |
|
|
| i 35,937,305 |
|
|
| i 34,876,184 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 4 |
| Table of Contents |
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022
(Unaudited)
|
| Class A Common Stock |
|
| Class B Common Stock |
|
| Common Stock |
|
| Additional Paid in |
|
| Accumulated |
|
|
|
| ||||||||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Capital |
|
| Deficit |
|
| Total |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Balances, December 31, 2021 |
|
| i 34,639,920 |
|
| $ | i 3,464 |
|
|
| - |
|
| $ | i - |
|
|
| - |
|
| $ | i - |
|
| $ | i 1,534,474 |
|
| $ | ( i 1,105,518 | ) |
| $ | i 432,420 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of warrants in connection with debt |
|
| - |
|
|
| i - |
|
|
| - |
|
|
| i - |
|
|
| - |
|
|
| i - |
|
|
| i 799,128 |
|
|
| i - |
|
|
| i 799,128 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation |
|
| - |
|
|
| i - |
|
|
| - |
|
|
| i - |
|
|
| - |
|
|
| i - |
|
|
| i 150,504 |
|
|
| i - |
|
|
| i 150,504 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares for cash |
|
| - |
|
|
| i - |
|
|
| - |
|
|
| i - |
|
|
| - |
|
|
| i - |
|
|
| i 150,000 |
|
|
| i - |
|
|
| i 150,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
| - |
|
|
| i - |
|
|
| - |
|
|
| i - |
|
|
| - |
|
|
| i - |
|
|
| i - |
|
|
| ( i 973,460 | ) |
|
| ( i 973,460 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, March 31, 2022 |
|
| i 34,639,920 |
|
| $ | i 3,464 |
|
|
| - |
|
| $ | i - |
|
|
| - |
|
| $ | i - |
|
| $ | i 2,634,106 |
|
| $ | ( i 2,078,978 | ) |
| $ | i 558,592 |
|
|
|
|
|
|
|
|
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|
|
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|
|
Elimination of Class A and Class B common stock for single class of common stock |
|
| ( i 34,639,920 | ) |
|
| ( i 3,464 | ) |
|
| - |
|
|
| i - |
|
|
| i 34,639,920 |
|
|
| i 3,464 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
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|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation |
|
| - |
|
|
| i - |
|
|
| - |
|
|
| i - |
|
|
| - |
|
|
| i - |
|
|
| i 179,234 |
|
|
| i - |
|
|
| i 179,234 |
|
|
|
|
|
|
|
|
|
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|
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|
|
|
|
|
Issuance of shares for services |
|
| - |
|
|
| i - |
|
|
| - |
|
|
| i - |
|
|
| i 500,000 |
|
|
| i 50 |
|
|
| i 499,950 |
|
|
| i - |
|
|
| i 500,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
| - |
|
|
| i - |
|
|
| - |
|
|
| i - |
|
|
| - |
|
|
| i - |
|
|
| i - |
|
|
| ( i 1,701,330 | ) |
|
| ( i 1,701,330 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, June 30, 2022 |
|
| - |
|
| $ | i - |
|
|
| - |
|
| $ | i - |
|
|
| i 35,139,920 |
|
| $ | i 3,514 |
|
| $ | i 3,313,290 |
|
| $ | ( i 3,780,308 | ) |
| $ | ( i 463,504 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of warrants in connection with debt |
|
| - |
|
|
| i - |
|
|
| - |
|
|
| i - |
|
|
| - |
|
|
| i - |
|
|
| i 417,314 |
|
|
| i - |
|
|
| i 417,314 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation |
|
| - |
|
|
| i - |
|
|
| - |
|
|
| i - |
|
|
| - |
|
|
| i - |
|
|
| i 1,306,773 |
|
|
| i - |
|
|
| i 1,306,773 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
| - |
|
|
| i - |
|
|
| - |
|
|
| i - |
|
|
| - |
|
|
| i - |
|
|
| i - |
|
|
| ( i 2,586,917 | ) |
|
| ( i 2,586,917 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, September 30, 2022 |
|
| - |
|
| $ | i - |
|
|
| - |
|
| $ | i - |
|
|
| i 35,139,920 |
|
| $ | i 3,514 |
|
| $ | i 5,037,377 |
|
| $ | ( i 6,367,225 | ) |
| $ | ( i 1,326,334 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, December 31, 2022 |
|
| - |
|
| $ | i - |
|
|
| - |
|
| $ | i - |
|
|
| i 35,323,626 |
|
| $ | i 3,532 |
|
| $ | i 5,459,220 |
|
| $ | ( i 8,268,426 | ) |
| $ | ( i 2,805,674 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares for services |
|
| - |
|
|
| i - |
|
|
| - |
|
|
| i - |
|
|
| i 17,045 |
|
|
| i 2 |
|
|
| i 14,998 |
|
|
| i - |
|
|
| i 15,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares for financing costs |
|
| - |
|
|
| i - |
|
|
| - |
|
|
| i - |
|
|
| i 4,245 |
|
|
| i - |
|
|
| i 4,500 |
|
|
| i - |
|
|
| i 4,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares for the payment of accrued interest |
|
| - |
|
|
| i - |
|
|
| - |
|
|
| i - |
|
|
| i 5,655 |
|
|
| i 1 |
|
|
| i 7,587 |
|
|
| i - |
|
|
| i 7,588 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock based compensation |
|
| - |
|
|
| i - |
|
|
| - |
|
|
| i - |
|
|
| - |
|
|
| i - |
|
|
| i 253,851 |
|
|
| i - |
|
|
| i 253,851 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Settlement of derivative liability |
|
| - |
|
|
| i - |
|
|
| - |
|
|
| i - |
|
|
| - |
|
|
| i - |
|
|
| i 50,582 |
|
|
| i - |
|
|
| i 50,582 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
| - |
|
|
| i - |
|
|
| - |
|
|
| i - |
|
|
| - |
|
|
| i - |
|
|
| i - |
|
|
| ( i 3,410,353 | ) |
|
| ( i 3,410,353 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, March 31, 2023 |
|
| - |
|
| $ | i - |
|
|
| - |
|
| $ | i - |
|
|
| i 35,350,571 |
|
| $ | i 3,535 |
|
| $ | i 5,790,738 |
|
| $ | ( i 11,678,779 | ) |
| $ | ( i 5,884,506 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares for services |
|
| - |
|
|
| i - |
|
|
| - |
|
|
| i - |
|
|
| i 500,000 |
|
|
| i 50 |
|
|
| i 132,762 |
|
|
| i - |
|
|
| i 132,812 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares for the payment of accrued interest |
|
| - |
|
|
| i - |
|
|
| - |
|
|
| i - |
|
|
| i 7,661 |
|
|
| i 1 |
|
|
| i 6,512 |
|
|
| i - |
|
|
| i 6,513 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock based compensation |
|
| - |
|
|
| i - |
|
|
| - |
|
|
| i - |
|
|
| - |
|
|
| i - |
|
|
| i 330,524 |
|
|
| i - |
|
|
| i 330,524 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of warrants in connection with debt |
|
| - |
|
|
| i - |
|
|
| - |
|
|
| i - |
|
|
| - |
|
|
| i - |
|
|
| i 28,334 |
|
|
| i - |
|
|
| i 28,334 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares for intangible assets |
|
| - |
|
|
| i - |
|
|
| - |
|
|
| i - |
|
|
| i 362,319 |
|
|
| i 36 |
|
|
| i 249,964 |
|
|
| i - |
|
|
| i 250,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares for property and equipment |
|
| - |
|
|
| i - |
|
|
| - |
|
|
| i - |
|
|
| i 92,010 |
|
|
| i 9 |
|
|
| i 57,498 |
|
|
| i - |
|
|
| i 57,507 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of returnable shares |
|
| - |
|
|
| i - |
|
|
| - |
|
|
| i - |
|
|
| i 1,200,000 |
|
|
| i 120 |
|
|
| ( i 120 | ) |
|
| i - |
|
|
| i - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return of returnable shares |
|
| - |
|
|
| i - |
|
|
| - |
|
|
| i - |
|
|
| ( i 1,360,000 | ) |
|
| ( i 136 | ) |
|
| i 136 |
|
|
| i - |
|
|
| i - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Settlement of derivative liability |
|
| - |
|
|
| i - |
|
|
| - |
|
|
| i - |
|
|
| - |
|
|
| i - |
|
|
| i 5,844,608 |
|
|
| i - |
|
|
| i 5,844,608 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
| - |
|
|
| i - |
|
|
| - |
|
|
| i - |
|
|
| - |
|
|
| i - |
|
|
| i - |
|
|
| ( i 1,569,337 | ) |
|
| ( i 1,569,337 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, June 30, 2023 |
|
| - |
|
| $ | i - |
|
|
| - |
|
| $ | i - |
|
|
| i 36,152,561 |
|
| $ | i 3,615 |
|
| $ | i 12,440,956 |
|
| $ | ( i 13,248,116 | ) |
| $ | ( i 803,545 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares for the payment of accrued interest |
|
| - |
|
|
| i - |
|
|
| - |
|
|
| i - |
|
|
| i 28,896 |
|
|
| i 3 |
|
|
| i 18,553 |
|
|
| i - |
|
|
| i 18,556 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares for services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| i 39,843 |
|
|
|
|
|
|
| i 39,843 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock based compensation |
|
| - |
|
|
| i - |
|
|
| - |
|
|
| i - |
|
|
| - |
|
|
| i - |
|
|
| i 458,986 |
|
|
| i - |
|
|
| i 458,986 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of warrants in connection with debt |
|
| - |
|
|
| i - |
|
|
| - |
|
|
| i - |
|
|
| - |
|
|
| i - |
|
|
| i 1,322,648 |
|
|
| i - |
|
|
| i 1,322,648 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
| - |
|
|
| i - |
|
|
| - |
|
|
| i - |
|
|
| - |
|
|
| i - |
|
|
| i - |
|
|
| ( i 3,383,717 | ) |
|
| ( i 3,383,717 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, September 30, 2023 |
|
| - |
|
| $ | i - |
|
|
| - |
|
| $ | i - |
|
|
| i 36,181,457 |
|
| $ | i 3,618 |
|
| $ | i 14,280,986 |
|
| $ | ( i 16,631,833 | ) |
| $ | ( i 2,347,229 | ) |
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 5 |
| Table of Contents |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022
(Unaudited)
|
| For the nine months ended |
| |||||
|
|
| ||||||
|
| 2023 |
|
| 2022 |
| ||
Operating activities |
|
|
|
|
|
| ||
Net loss |
| $ | ( i 8,363,407 | ) |
| $ | ( i 5,261,707 | ) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
| i 152,485 |
|
|
| i 45,880 |
|
Amortization of debt discount |
|
| i 3,700,034 |
|
|
| i 685,639 |
|
Stock issued for services |
|
| i 187,655 |
|
|
| i 500,000 |
|
Stock-based compensation |
|
| i 1,043,361 |
|
|
| i 1,636,511 |
|
Financing costs |
|
| i 4,156,291 |
|
|
| i - |
|
Change in fair value of derivative liability |
|
| ( i 3,107,808 | ) |
|
| - |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
| i - |
|
|
| ( i 383,028 | ) |
Contract assets |
|
| i 556,082 |
|
|
| i - |
|
Inventory |
|
| i - |
|
|
| ( i 174,843 | ) |
Prepaid expenses and other current assets |
|
| ( i 301,589 | ) |
|
| ( i 94,983 | ) |
Accounts payable |
|
| ( i 114,656 | ) |
|
| ( i 4,633 | ) |
Accrued expenses |
|
| ( i 401,629 | ) |
|
| i 1,043,152 |
|
Customer deposits |
|
| i 3,076,771 |
|
|
| i 32,816 |
|
Net cash provided by (used in) operating activities |
|
| i 583,590 |
|
|
| ( i 1,975,196 | ) |
|
|
|
|
|
|
|
|
|
Investing activities |
|
|
|
|
|
|
|
|
Purchase of property and equipment |
|
| ( i 65,785 | ) |
|
| ( i 8,305 | ) |
Purchase of intangible assets |
|
| ( i 400,000 | ) |
|
| i - |
|
Net cash used in investing activities |
|
| ( i 465,785 | ) |
|
| ( i 8,305 | ) |
|
|
|
|
|
|
|
|
|
Financing activities |
|
|
|
|
|
|
|
|
Proceeds from issuance of notes payable |
|
| i - |
|
|
| i 1,930,000 |
|
Proceeds from issuance of convertible notes payable |
|
| i 3,474,950 |
|
|
| i - |
|
Repayment of notes payable |
|
| ( i 470,800 | ) |
|
| i - |
|
Proceeds from issuance of common stock |
|
| i - |
|
|
| i 150,000 |
|
Net cash provided by financing activities |
|
| i 3,004,150 |
|
|
| i 2,080,000 |
|
|
|
|
|
|
|
|
|
|
Net increase in cash |
| $ | i 3,121,955 |
|
| $ | i 96,499 |
|
Cash - beginning of period |
|
| i 96,308 |
|
|
| i 252,189 |
|
Cash - end of period |
| $ | i 3,218,263 |
|
| $ | i 348,688 |
|
|
|
|
|
|
|
|
|
|
Cash paid for income taxes |
| $ | i - |
|
| $ | i - |
|
Cash paid for interest |
| $ | i 245,136 |
|
| $ | i 32,141 |
|
|
|
|
|
|
|
|
|
|
Supplemental schedule of non-cash investing and financing activities |
|
|
|
|
|
|
|
|
Discount on notes payable from derivative liability |
| $ | i 1,563,929 |
|
| $ | i - |
|
Discount on convertible notes payable from derivative liability |
| $ | i 2,564,950 |
|
| $ | i - |
|
Shares issued for settlement of accrued interest |
| $ | i 32,657 |
|
| $ | i - |
|
Accrued interest settled through note payable |
| $ | i 78,929 |
|
| $ | i - |
|
Settlement of derivative liability |
| $ | i 5,895,190 |
|
| $ | i - |
|
Shares issued for intangible assets |
| $ | i 250,000 |
|
| $ | i - |
|
Shares issued for property and equipment |
| $ | i 57,507 |
|
| $ | i - |
|
Returnable shares issued in connection with notes payable |
| $ | i 120 |
|
| $ | i - |
|
Return of returnable shares issued in connection with notes payable |
| $ | i 136 |
|
| $ | i - |
|
Discount on note payable from issuance of warrants |
| $ | i 1,350,982 |
|
| $ | i 1,216,442 |
|
Original issuance discount on note payable |
| $ | i - |
|
| $ | i 135,000 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 6 |
| Table of Contents |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
i
NOTE 1 – NATURE OF THE ORGANIZATION AND BUSINESS |
Nature of the Business
On June 8, 2023, Correlate Energy Corp. (the "Company") filed a certificate of amendment to its articles of incorporation with the Secretary of State of the State of Nevada pursuant to which it changed its corporate name from Correlate Infrastructure Partners Inc. to Correlate Energy Corp.
The accompanying condensed consolidated financial statements include the accounts of the Company, and its subsidiaries Correlate, Inc. (“Correlate”), a Delaware corporation, and Loyal Enterprises LLC dba Solar Site Design (“Loyal”), a Tennessee limited liability company.
Correlate Energy Corp., together with its subsidiaries, is a technology-enabled vertically integrated sales, development, and fulfillment platform focused on distributed clean and resilient energy solutions North America.
Loyal provided consulting services on acquisitions and project development tools to customers in the commercial solar industry. Effective November 2022, all of Loyal’s assets and operations were transferred to Correlate and Loyal was dissolved.
Going Concern
The accompanying condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the normal course of business. The Company has incurred losses since inception and has not generated positive cash flows from operations. These matters, among others, raise substantial doubt about the Company's ability to continue as a going concern.
The Company’s ability to continue in existence is dependent on its ability to develop additional sources of capital, and/or achieve profitable operations and positive cash flows. Management’s plans with respect to operations include aggressive marketing, acquisitions, and raising additional capital through sales of equity or debt securities as may be necessary to pursue its business plans and sustain operations until such time as the Company can achieve profitability. Management believes that aggressive marketing combined with acquisitions and additional financing as necessary will result in improved operations and cash flow in 2024 and beyond. However, there can be no assurance that management will be successful in obtaining additional funding or in attaining profitable operations. The accompanying condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
i
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
The accompanying condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and the interim reporting rules of the Securities and Exchange Commission (“SEC”) and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s latest Annual Report filed with the SEC on Form 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments (unless otherwise indicated), necessary for a fair presentation of the financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year.
Principles of Consolidation
i
The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant inter-company transactions and balances have been eliminated in consolidation.
Use of Estimates
i
The preparation of financial statements in conformity with GAAP 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 condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
| 7 |
| Table of Contents |
CORRELATE ENERGY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Cash and Cash Equivalents
i
The Company considers all highly liquid debt instruments and other short-term investments with maturity of three months or less, when purchased, to be cash equivalents. There were no cash equivalents as of September 30, 2023 and December 31, 2022.
The Company maintains its cash balances at financial institutions that are insured by the Federal Deposit Insurance Corporation (“FDIC”). The FDIC provides coverage of up to $ i 250,000 per depositor, per financial institution, for the aggregate total of depositors' interest and non-interest-bearing accounts. The Company's cash balances may exceed FDIC limits. The Company has not experienced any losses on these accounts and management does not believe that the Company is exposed to any significant risks.
/
Intangible Assets
i
Intangible assets are amortized over their estimated useful lives. Each period, the Company evaluates the estimated remaining useful life of its intangible assets and whether events or changes in circumstances warrant a revision to the remaining period of amortization. Management tests for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets.
Impairment Assessment
i
The Company evaluates intangible assets and other long-lived assets for possible impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. This includes but is not limited to significant adverse changes in business climate, market conditions or other events that indicate an asset's carrying amount may not be recoverable. Recoverability of these assets is measured by comparing the carrying amount of each asset to the future cash flows the asset is expected to generate. If the cash flows used in the test for recoverability are less than the carrying amount of these assets, the carrying amount of such assets is reduced to fair value.
The Company evaluates and tests the recoverability of its goodwill for impairment at least annually during its fourth quarter of each fiscal year or more often if and when circumstances indicate that goodwill may not be recoverable.
Revenue Recognition
i
The Company accounts for revenue in accordance with FASB ASC 606, "Revenue from Contracts with Customers."
A performance obligation is a promise in a contract to transfer a distinct good or service to the client and is the unit of accounting in ASC 606. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. For contracts with multiple performance obligations, the Company allocates the contract’s transaction price to each performance obligation based on the relative standalone selling price. Determining relative standalone selling price and identifying separate performance obligations requires judgment. Contract modifications may occur in the performance of the Company’s contracts. Contracts may be modified to account for changes in the contract specifications, requirements or duration. If a contract modification results in the addition of performance obligations priced at a standalone selling price or if the post-modification services are distinct from the services provided prior to the modification, the modification is accounted for separately. If the modified services are not distinct, they are accounted for as part of the existing contract.
The Company’s revenues are derived from contracts for engineering, procurement and construction services (“EPC”) and consulting. These contracts may have different terms based on the scope, performance obligations and complexity of the engagement, which may require us to make judgments and estimates in recognizing revenues.
| 8 |
| Table of Contents |
CORRELATE ENERGY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Company’s performance obligations are satisfied as work progresses or at a point in time (for defined milestones). The selection of the method to measure progress towards completion requires judgment and is based on the contract and the nature of the services to be provided.
The Company’s contracts for consulting services are typically less than a year in duration and require us to a) assist the client in achieving certain defined milestones for milestone fees or b) provide a series of distinct services each period over the contract term for a pre-determined fee for each period. When contractual billings represent an amount that corresponds directly with the value provided to the client, revenues are recognized as amounts become billable in accordance with contract terms.
The Company’s contracts for EPC services are typically less than a year in duration and require us to a) provide engineering services, b) obtain materials, and c) install materials to agreed-upon specifications. The Company recognizes revenues for engineering services as the services are provided. Revenues for materials are recognized as materials are transferred to the client. Installation results in enhancements to customer-controlled assets and therefore installation revenues are recognized over time utilizing the input method wherein revenues are recognized on the basis of efforts or inputs to the satisfaction of the performance obligation.
Financial Instruments
i
The Company’s financial instruments include cash and cash equivalents, receivables, payables, and debt and are accounted for under the provisions of ASC Topic 825, “Financial Instruments”. The carrying amount of these financial instruments, with the exception of discounted debt, as reflected in the accompanying condensed consolidated balance sheets approximates fair value.
Fair Value Measurement
i
ASC Topic 820, “Fair Value Measurement”, requires that certain financial instruments be recognized at their fair values at our condensed consolidated balance sheet dates. However, other financial instruments, such as debt obligations, are not required to be recognized at their fair value, but GAAP provides an option to elect fair value accounting for these instruments. GAAP requires the disclosure of the fair values of all financial instruments, regardless of whether they are recognized at their fair values or carrying amounts in our condensed consolidated balance sheets. For financial instruments recognized at fair value, GAAP requires the disclosure of their fair values by type of instrument, along with other information, including changes in the fair values of certain financial instruments recognized in income or other comprehensive income. For financial instruments not recognized at fair value, the disclosure of their fair values is provided below under “Financial Instruments.”
Nonfinancial assets, such as property, plant and equipment, and nonfinancial liabilities are recognized at their carrying amounts in the Company’s condensed consolidated balance sheets. GAAP does not permit nonfinancial assets and liabilities to be remeasured at their fair values. However, GAAP requires the remeasurement of such assets and liabilities to their fair values upon the occurrence of certain events, such as the impairment of property, plant and equipment. In addition, if such an event occurs, GAAP requires the disclosure of the fair value of the asset or liability along with other information, including the gain or loss recognized in income in the period the remeasurement occurred.
Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities;
Level 2 - Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; or
Level 3 - Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).
| 9 |
| Table of Contents |
CORRELATE ENERGY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Company did not have any Level 1 or Level 2 assets and liabilities at September 30, 2023 or December 31, 2022. The derivative liabilities are Level 3 fair value measurements.
The following is a summary of activity of Level 3 liabilities during the nine months ended September 30, 2023:
i
Balance - December 31, 2022 |
| $ | i 722,328 |
|
Additions |
|
| i 8,280,670 |
|
Settlement |
|
| ( i 5,895,190 | ) |
Change in fair value |
|
| ( i 3,107,808 | ) |
Balance - September 30, 2023 |
| $ | i - |
|
Under the Company’s contract ordering policy, the Company first considers common shares issued and outstanding as well as reserved but unissued equity awards, such as under an equity award program. All remaining equity linked instruments such as, but not limited to, options, warrants, and debt and equity with conversion features are evaluated based on the date of issuance. If the number of shares which may be issued under the Company’s agreements exceed the authorized number of shares or are unable to be determined, equity linked instruments from that date forward are considered to be derivative liabilities until such time as the number of shares which may be issued under the Company’s agreements no longer exceed the authorized number of shares and are able to be determined.
On November 7, 2022 and December 21, 2022, the Company issued note payable agreements (Note 4) which contained default provisions that contain a conversion feature meeting the definition of a derivative liability which therefore require bifurcation. Further, pursuant to the Company’s contract ordering policy, the warrant and convertible note issuances subsequent to November 7, 2022, resulted in derivative liabilities.
At December 31, 2022, the Company estimated the fair value of the conversion feature derivatives embedded in the notes payable and warrants based on assumptions used in the Cox-Ross-Rubinstein binomial pricing model using the following inputs: the price of the Company’s common stock of $ i 1.06; risk-free interest rates ranging from i 4.41% to i 4.73%; expected volatility of the Company’s common stock ranging from i 164% to i 379%; exercise prices of $ i 1.00; and terms from one to two years.
During the six months ended June 30 2023, the Company repaid the November 7, 2022 and December 21, 2022 note payable agreements resulting in the reclassification of derivative liabilities totaling $ i 546,654 to additional paid in capital on the accompanying condensed consolidated statements of stockholders’ deficit. Additionally, pursuant to the Company’s contract ordering policy, the warrant (Note 5) and convertible note (Note 4) issuances from November 7, 2022 to June 30, 2023 no longer met the definition of derivative liabilities requiring bifurcation. Accordingly, pursuant to the Company’s contract ordering policy and ASC 815-15-35-4, derivative liabilities related to the warrants and convertible notes, which were estimated to have fair values of $ i 202,551 and $ i 5,145,985, respectively, as of June 30, 2023, were derecognized and reclassified to additional paid in capital on the accompanying condensed consolidated statements of stockholders’ deficit.
Commitments and Contingencies
i
Liabilities for loss contingencies arising from claims, assessments, litigation, fines, penalties and other sources are recorded when management assesses that it is probable that a liability has been incurred and the amount can be reasonably estimated.
Income Taxes
i
In accordance with FASB ASC Topic 740, "Income Taxes," the Company provides for the recognition of deferred tax assets if realization of such assets is more likely than not. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable or refundable for the period plus or minus the change during the period in deferred tax assets and liabilities.
In addition, the Company’s management performs an evaluation of all uncertain income tax positions taken or expected to be taken in the course of preparing the Company’s income tax returns to determine whether the income tax positions meet a “more likely than not” standard of being sustained under examination by the applicable taxing authorities. This evaluation is required to be performed for all open tax years, as defined by the various statutes of limitations, for federal and state purposes. If the Company has interest or penalties associated with insufficient taxes paid, such expenses are reported in income tax expense.
| 10 |
| Table of Contents |
CORRELATE ENERGY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Basic and Diluted Loss Per Share
i
FASB ASC Topic 260, “Earnings Per Share”, requires a reconciliation of the numerator and denominator of the basic and diluted earnings (loss) per share (“EPS”) computations.
Basic earnings (loss) per share are computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted earnings (loss) per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive.
The Company had potential additional dilutive securities outstanding at September 30, 2023 and 2022, as follows.
i
|
| September 30, |
|
|
| |||
|
| 2023 |
|
| 2022 |
| ||
Options |
|
| i 7,204,068 |
|
|
| i 4,184,068 |
|
Warrants |
|
| i 14,474,494 |
|
|
| i 3,280,000 |
|
Convertible notes payable |
|
| i 1,085,922 |
|
|
| i - |
|
|
|
| i 22,764,484 |
|
|
| i 7,464,068 |
|
Recently Issued Accounting Standards
i
During the period ended September 30, 2023, there were several new accounting pronouncements issued by the FASB. Each of these pronouncements, as applicable, has been or will be adopted by the Company. Management does not believe the adoption of any of these accounting pronouncements has had or will have a material impact on the Company’s condensed consolidated financial statements.
i
NOTE 3 – COMMITMENTS AND CONTINGENCIES |
From time to time, the Company may be involved in litigation in the ordinary course of business. The Company is not currently involved in any litigation that the Company believes could have a material adverse effect on its financial condition or results of operations.
i
NOTE 4 – DEBT |
Convertible Notes Payable
From January 24, 2023 to June 6, 2023, the Company entered into fourteen i 14% convertible note payable agreements with proceeds totaling $ i 2,564,950. i The convertible notes, which have identical terms, require quarterly interest payments with the principal due at maturity eighteen months from issuances and are convertible at $3.20 per share of common stock. The conversion features were valued at $461,238 and recorded as a derivative liability pursuant to the Company’s contract ordering policy (Note 1). In connection with the convertible notes, i the Company issued a total of 5,129,900 warrants to purchase shares of common stock exercisable at $0.85 per share. The warrants, which were immediately vested, were valued at $ i 4,510,387 and recorded as a derivative liability pursuant to the Company’s contract ordering policy. As a result of the derivative liabilities from the conversion features and warrants, and pursuant to ASC 815-15-30, the Company recorded debt discounts totaling $ i 2,564,950, which were limited to the net proceeds from the convertible notes, with the remaining $ i 2,406,675 recognized as financing costs on the accompanying condensed consolidated statements of operations.
Included in the fourteen convertible notes payable is a i 14% convertible note payable agreement with proceeds totaling $ i 100,000 with the Company’s CEO issued on January 24, 2023. i The convertible note requires quarterly interest payments with the principal due at maturity eighteen months from issuance and is convertible at $3.20 per share of common stock. The conversion feature was valued at $ i 22,569 and recorded as a derivative liability pursuant to the Company’s contract ordering policy (Note 1). In connection with the convertible note, i the Company issued i 200,000 warrants to purchase shares of common stock exercisable at $0.85 per share / . The warrants, which were immediately vested, were valued at $ i 209,180 and recorded as a derivative liability pursuant to the Company’s contract ordering policy. As a result of the derivative liabilities from the conversion features and warrants, and pursuant to ASC 815-15-30, the Company recorded a debt discount totaling $ i 100,000, which were limited to the net proceeds from the convertible notes, with the remaining $ i 131,749 recognized as financing costs on the accompanying condensed consolidated statements of operations.
| 11 |
| Table of Contents |
CORRELATE ENERGY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
From June 30, 2023 to August 31, 2023, the Company entered into seven i 14% convertible note payable agreements with proceeds totaling $ i 910,000. i The convertible notes, which have identical terms, require quarterly interest payments with the principal due at maturity eighteen months from issuance and are convertible at $3.20 per share of common stock. In connection with the note agreements, i the Company issued a total of 1,820,000 warrants exercisable at $0.85 per share which expire two years from issuance. The warrants, which were immediately vested, were valued at $ i 1,160,925 and resulted in additional discount on the notes totaling $ i 508,607 pursuant to ASC 470-20-30, “Debt”.
The following table presents a summary of the Company’s convertible notes payable at September 30, 2023:
i
|
|
|
|
|
|
| Conversion |
| Balances - At Issuance |
|
| Balances - 9/30/2023 |
| |||||||||||
Origination |
| Maturity |
| Interest |
|
| Rate |
| Principal |
|
| Discount |
|
| Principal |
|
| Discount |
| |||||
i 1/24/2023 |
| i 7/24/2024 |
|
| i 14 | % |
| $ i 3.20/Share |
| $ | i 100,000 |
|
| $ | i 100,000 |
|
| $ | i 100,000 |
|
| $ | i 54,552 |
|
i 1/25/2023 |
| i 7/25/2024 |
|
| i 14 | % |
| $ i 3.20/Share |
|
| i 74,975 |
|
|
| i 74,975 |
|
|
| i 74,975 |
|
|
| i 41,155 |
|
i 1/30/2023 |
| i 7/30/2024 |
|
| i 14 | % |
| $ i 3.20/Share |
|
| i 100,000 |
|
|
| i 100,000 |
|
|
| i 100,000 |
|
|
| i 55,552 |
|
i 2/17/2023 |
| i 8/17/2024 |
|
| i 14 | % |
| $ i 3.20/Share |
|
| i 1,000,000 |
|
|
| i 1,000,000 |
|
|
| i 1,000,000 |
|
|
| i 583,330 |
|
i 3/7/2023 |
| i 9/7/2024 |
|
| i 14 | % |
| $ i 3.20/Share |
|
| i 100,000 |
|
|
| i 100,000 |
|
|
| i 100,000 |
|
|
| i 62,664 |
|
i 3/14/2023 |
| i 9/10/2024 |
|
| i 14 | % |
| $ i 3.20/Share |
|
| i 250,000 |
|
|
| i 250,000 |
|
|
| i 250,000 |
|
|
| i 159,666 |
|
i 3/27/2023 |
| i 9/27/2024 |
|
| i 14 | % |
| $ i 3.20/Share |
|
| i 100,000 |
|
|
| i 100,000 |
|
|
| i 100,000 |
|
|
| i 66,164 |
|
i 3/30/2023 |
| i 9/30/2024 |
|
| i 14 | % |
| $ i 3.20/Share |
|
| i 79,975 |
|
|
| i 79,975 |
|
|
| i 79,975 |
|
|
| i 53,316 |
|
i 4/6/2023 |
| i 10/6/2024 |
|
| i 14 | % |
| $ i 3.20/Share |
|
| i 50,000 |
|
|
| i 50,000 |
|
|
| i 50,000 |
|
|
| i 33,332 |
|
i 4/7/2023 |
| i 10/7/2024 |
|
| i 14 | % |
| $ i 3.20/Share |
|
| i 400,000 |
|
|
| i 400,000 |
|
|
| i 400,000 |
|
|
| i 266,668 |
|
i 5/5/2023 |
| i 11/5/2024 |
|
| i 14 | % |
| $ i 3.20/Share |
|
| i 200,000 |
|
|
| i 200,000 |
|
|
| i 200,000 |
|
|
| i 144,445 |
|
i 5/9/2023 |
| i 11/9/2024 |
|
| i 14 | % |
| $ i 3.20/Share |
|
| i 50,000 |
|
|
| i 50,000 |
|
|
| i 50,000 |
|
|
| i 37,388 |
|
i 5/12/2023 |
| i 11/12/2024 |
|
| i 14 | % |
| $ i 3.20/Share |
|
| i 50,000 |
|
|
| i 50,000 |
|
|
| i 50,000 |
|
|
| i 37,388 |
|
i 6/6/2023 |
| i 12/6/2024 |
|
| i 14 | % |
| $ i 3.20/Share |
|
| i 10,000 |
|
|
| i 10,000 |
|
|
| i 10,000 |
|
|
| i 7,776 |
|
i 6/30/2023 |
| i 12/30/2024 |
|
| i 14 | % |
| $ i 3.20/Share |
|
| i 50,000 |
|
|
| i 28,334 |
|
|
| i 50,000 |
|
|
| i 23,612 |
|
i 7/7/2023 |
| i 1/7/2025 |
|
| i 14 | % |
| $ i 3.20/Share |
|
| i 25,000 |
|
|
| i 14,775 |
|
|
| i 25,000 |
|
|
| i 12,315 |
|
i 7/21/2023 |
| i 1/21/2025 |
|
| i 14 | % |
| $ i 3.20/Share |
|
| i 35,000 |
|
|
| i 20,103 |
|
|
| i 35,000 |
|
|
| i 17,319 |
|
i 7/26/2023 |
| i 1/26/2025 |
|
| i 14 | % |
| $ i 3.20/Share |
|
| i 100,000 |
|
|
| i 56,527 |
|
|
| i 100,000 |
|
|
| i 49,747 |
|
i 8/10/2023 |
| i 2/10/2025 |
|
| i 14 | % |
| $ i 3.20/Share |
|
| i 500,000 |
|
|
| i 268,545 |
|
|
| i 500,000 |
|
|
| i 243,625 |
|
i 8/24/2023 |
| i 2/24/2023 |
|
| i 14 | % |
| $ i 3.20/Share |
|
| i 100,000 |
|
|
| i 60,313 |
|
|
| i 100,000 |
|
|
| i 56,412 |
|
i 8/31/2023 |
| i 2/28/2025 |
|
| i 14 | % |
| $ i 3.20/Share |
|
| i 100,000 |
|
|
| i 60,010 |
|
|
| i 100,000 |
|
|
| i 56,676 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | i 3,474,950 |
|
| $ | i 2,063,102 |
|
Notes Payable
On May 29, 2020, Loyal received a $ i 20,400 Economic Injury Disaster Loan through the Small Business Administration. The note bears interest at i 3.75% until maturity in i March 2050. i The note requires $100 monthly payments beginning in May 2022 until maturity.
On January 11, 2022, the Company entered into a i 10% note agreement with P&C Ventures, Inc. totaling $ i 1,485,000, including an original issuance discount of $ i 135,000. The note requires i quarterly interest payments with the principal due at maturity on January 11, 2023.
On January 11, 2023, the Company and P&C Ventures, Inc. agreed to amend the January 11, 2022, note payable. The Company accounted for the amendment as an extinguishment of existing debt and issuance of new debt pursuant to ASC 470-50-40. As part of the agreement, $ i 78,929 in accrued and unpaid interest was added to the principal balance, bringing the total principal balance of the note payable to $ i 1,563,929. Additionally, the interest rate and maturity date were amended to i 14% and October 11, 2023, respectively. In connection with the amendment, the Company issued P&C Ventures, Inc. i 3,127,858 warrants to purchase shares of common stock exercisable at $ i 0.85 per share. The warrants, which were immediately vested, were valued at $ i 3,309,045 and recorded as a derivative liability pursuant to the Company’s contract ordering policy (Note 1). As a result of the derivative liability from the warrants, and pursuant to ASC 815-15-30, the Company recorded a debt discount totaling $ i 1,563,929, which was limited to the net proceeds from the note, with the remaining $ i 1,745,116 recognized as financing costs on the accompanying condensed consolidated statements of operations. On July 10, 2023, the Company and P&C Ventures, Inc. agreed to extend the maturity of the note payable, which had an outstanding principal balance of $ i 1,563,929, from October 11, 2023 to December 11, 2023. The Company accounted for the amendment as an extinguishment of existing debt and issuance of new debt pursuant to ASC 470-50-40. In connection with the amendment, the Company agreed to extend the exercise date of i 2,700,000 warrants to purchase shares of common stock exercisable at $ i 0.25 per share from July 11, 2023 to December 11, 2023. The extension of the warrants, which were revalued at $ i 1,825,800, resulted in a discount on the note totaling $ i 842,375 pursuant to ASC 470-20-30.
| 12 |
| Table of Contents |
CORRELATE ENERGY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following table presents a summary of the Company’s notes payable at September 30, 2023:
i
|
|
|
|
|
|
| Balances - At Issuance |
|
| Balances - 9/30/2023 |
| |||||||||||
Origination |
| Maturity |
| Interest |
|
| Principal |
|
| Discount |
|
| Principal |
|
| Discount |
| |||||
i 5/29/2020 |
| i 3/31/2050 |
|
| i 4 | % |
| $ | i 20,400 |
|
| $ | i - |
|
| $ | i 20,400 |
|
| $ | i - |
|
i 7/29/2022 |
| i 1/29/2024 |
|
| i 10 | % |
|
| i 50,000 |
|
|
| i 29,664 |
|
|
| i 50,000 |
|
|
| i 6,592 |
|
i 8/11/2022 |
| i 2/11/2024 |
|
| i 10 | % |
|
| i 150,000 |
|
|
| i 88,247 |
|
|
| i 150,000 |
|
|
| i 22,058 |
|
i 8/15/2022 |
| i 2/15/2024 |
|
| i 10 | % |
|
| i 50,000 |
|
|
| i 29,513 |
|
|
| i 50,000 |
|
|
| i 7,373 |
|
i 8/31/2022 |
| i 2/28/2024 |
|
| i 10 | % |
|
| i 80,000 |
|
|
| i 45,827 |
|
|
| i 80,000 |
|
|
| i 12,729 |
|
i 9/1/2022 |
| i 3/1/2024 |
|
| i 10 | % |
|
| i 50,000 |
|
|
| i 29,922 |
|
|
| i 50,000 |
|
|
| i 8,316 |
|
i 9/7/2022 |
| i 3/7/2024 |
|
| i 10 | % |
|
| i 50,000 |
|
|
| i 29,922 |
|
|
| i 50,000 |
|
|
| i 8,316 |
|
i 9/12/2022 |
| i 3/12/2024 |
|
| i 10 | % |
|
| i 50,000 |
|
|
| i 30,316 |
|
|
| i 50,000 |
|
|
| i 9,266 |
|
i 9/29/2022 |
| i 3/29/2024 |
|
| i 10 | % |
|
| i 100,000 |
|
|
| i 59,839 |
|
|
| i 100,000 |
|
|
| i 19,947 |
|
i 11/9/2022 |
| i 5/9/2024 |
|
| i 10 | % |
|
| i 25,000 |
|
|
| i 25,000 |
|
|
| i 25,000 |
|
|
| i 10,416 |
|
i 11/15/2022 |
| i 5/15/2024 |
|
| i 10 | % |
|
| i 100,000 |
|
|
| i 100,000 |
|
|
| i 100,000 |
|
|
| i 41,663 |
|
i 7/10/2023 |
| i 12/11/2023 |
|
| i 14 | % |
|
| i 1,563,929 |
|
|
| i 1,563,929 |
|
|
| i 1,563,929 |
|
|
| i 393,108 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | i 2,289,329 |
|
| $ | i 539,784 |
|
The following table presents a summary of the Company’s notes payable at December 31, 2022:
|
|
|
|
|
|
| Balances - At Issuance |
|
| Balances - 12/31/2022 |
| |||||||||||
Origination |
| Maturity |
| Interest |
|
| Principal |
|
| Discount |
|
| Principal |
|
| Discount |
| |||||
i 5/29/2020 |
| i 3/31/2050 |
|
| i 4 | % |
| $ | i 20,400 |
|
| $ | i - |
|
| $ | i 20,400 |
|
| $ | i - |
|
i 1/11/2022 |
| i 1/11/2023 |
|
| i 10 | % |
|
| i 1,350,000 |
|
|
| i 934,128 |
|
|
| i 1,485,000 |
|
|
| i 38,922 |
|
i 7/29/2022 |
| i 1/29/2024 |
|
| i 10 | % |
|
| i 50,000 |
|
|
| i 29,664 |
|
|
| i 50,000 |
|
|
| i 21,424 |
|
i 8/11/2022 |
| i 2/11/2024 |
|
| i 10 | % |
|
| i 150,000 |
|
|
| i 88,247 |
|
|
| i 150,000 |
|
|
| i 66,185 |
|
i 8/15/2022 |
| i 2/15/2024 |
|
| i 10 | % |
|
| i 50,000 |
|
|
| i 29,513 |
|
|
| i 50,000 |
|
|
| i 22,133 |
|
i 8/31/2022 |
| i 2/28/2024 |
|
| i 10 | % |
|
| i 80,000 |
|
|
| i 45,827 |
|
|
| i 80,000 |
|
|
| i 35,643 |
|
i 9/1/2022 |
| i 3/1/2024 |
|
| i 10 | % |
|
| i 50,000 |
|
|
| i 29,922 |
|
|
| i 50,000 |
|
|
| i 23,274 |
|
i 9/7/2022 |
| i 3/7/2024 |
|
| i 10 | % |
|
| i 50,000 |
|
|
| i 29,922 |
|
|
| i 50,000 |
|
|
| i 23,274 |
|
i 9/12/2022 |
| i 3/12/2024 |
|
| i 10 | % |
|
| i 50,000 |
|
|
| i 30,316 |
|
|
| i 50,000 |
|
|
| i 24,422 |
|
i 9/29/2022 |
| i 3/29/2024 |
|
| i 10 | % |
|
| i 100,000 |
|
|
| i 59,839 |
|
|
| i 100,000 |
|
|
| i 49,866 |
|
i 11/7/2022 |
| i 11/7/2023 |
|
| i 7 | % |
|
| i 200,000 |
|
|
| i 220,000 |
|
|
| i 235,400 |
|
|
| i 192,499 |
|
i 11/9/2022 |
| i 5/9/2024 |
|
| i 10 | % |
|
| i 25,000 |
|
|
| i 25,000 |
|
|
| i 25,000 |
|
|
| i 22,917 |
|
i 11/15/2022 |
| i 5/15/2024 |
|
| i 10 | % |
|
| i 100,000 |
|
|
| i 100,000 |
|
|
| i 100,000 |
|
|
| i 91,667 |
|
i 12/21/2022 |
| i 12/21/2023 |
|
| i 7 | % |
|
| i 200,000 |
|
|
| i 220,000 |
|
|
| i 235,400 |
|
|
| i 210,833 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | i 2,681,200 |
|
| $ | i 823,059 |
|
Line of Credit
On October 3, 2014, the Company entered into a $ i 30,000 line of credit agreement with a former member of Loyal. The line of credit has no maturity with interest at i 8.00%. As of September 30, 2023 and December 31, 2022, the outstanding principal and accrued interest totaled $ i 31,408 and $ i 42,130, respectively.
| 13 |
| Table of Contents |
CORRELATE ENERGY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Future Maturities
The table below summarizes future maturities of the Company’s debt as of September 30, 2023:
i
December 31, |
| Amount |
| |
2023 |
| $ | i 1,593,929 |
|
2024 |
|
| i 3,319,950 |
|
2025 |
|
| i 860,000 |
|
2026 |
|
| i - |
|
2027 |
|
| i - |
|
Thereafter |
|
| i 20,400 |
|
|
|
| i 5,794,279 |
|
Less - Discounts |
|
| ( i 2,602,886 | ) |
|
| $ | i 3,191,393 |
|
i
NOTE 5 – EQUITY |
Common Stock
During January 2023, the Company issued i 4,245 shares of common stock valued at $ i 4,500 for financing costs.
During January 2023, the Company paid $ i 7,589 in accrued interest due to four noteholders by issuing i 5,655 shares of common stock.
During March 2023, the Company issued i 17,045 shares of common stock valued at $ i 15,000 for services.
During April 2023, the Company entered into a consulting agreement. Pursuant to the consulting agreement, the Company issued i 500,000 shares of common stock valued at $ i 425,000. i 125,000 shares vested immediately, with the remaining i 375,000 shares vested over 24 months.
During April 2023, the Company paid $ i 6,995 in accrued interest due to four noteholders by issuing i 7,661 shares of common stock. Included in these shares were i 1,350 shares issued to the wife of the Company’s CEO and i 2,815 shares issued to the Company’s CEO.
In connection with a repayment plan created for the November 7, 2022 and December 21, 2022 notes payable (Note 4), the Company issued i 1,200,000 shares of returnable common stock as security. On June 30, 2023, the notes were paid in full and 1,360,000 returnable shares were returned to the Company and retired.
During April 2023, the Company issued i 92,010 shares of common stock valued at $ i 57,507 in connection with the purchase of software.
During June 2023, the Company issued i 362,319 shares of common stock valued at $ i 250,000 in connection with a settlement agreement wherein the Company acquired development rights.
During July 2023, the Company paid $ i 18,537 in accrued interest due to eight noteholders by issuing i 28,896 shares of common stock. Included in i these shares were 1,943 shares issued to the wife of the Company’s CEO and 5,441 shares issued to the Company’s CEO.
/
| 14 |
| Table of Contents |
CORRELATE ENERGY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Warrants
During the period ended September 30, 2023, the Company calculated the fair value of the warrants granted based on assumptions used in the Cox-Ross-Rubinstein binomial pricing model using the following inputs: the price of the Company’s common stock on the date of issuance; risk-free interest rates ranging from i 3.66% to i 5.00%; volatility ranging from i 195% to i 346% based on the historical volatility of the Company’s common stock; exercise prices ranging from $ i 0.70 to $ i 0.85; and terms of i 24 to i 60 months.
On January 11, 2023, the Company issued i 3,127,858 warrants valued at $ i 3,309,000 as part of a note agreement amendment (Note 4).
From January 24, 2023 to August 31, 2023, the Company issued warrants to purchase i 6,949,900 shares of common stock valued at approximately $ i 5,671,000 as part of note agreements (Note 4). Included in these warrants is a warrant to purchase i 200,000 shares of common stock which was issued to the Company’s CEO.
During April 2023, the Company issued i 58,496 warrants to purchase shares of common stock exercisable at $ i 0.85 per share for two years. The warrants, which were immediately vested, were valued at $ i 47,858.
During July 2023, the Company issued i 58,240 warrants to purchase shares of common stock exercisable at $ i 0.70 per share for two years. The warrants, which were immediately vested, were valued at $ i 35,952.
During August 2023, the Company issued i 500,000 warrants to purchase shares of common stock exercisable at $ i 0.70 per share for five years. The warrants, which vest over 24 months, were valued at $ i 329,434.
The table below summarizes the Company’s warrants for the period ended September 30, 2023:
i
|
| Number of Shares |
|
| Weighted Average Exercise Price |
|
| Weighted Average Remaining Life (in years) |
| |||
Warrants as of December 31, 2022 |
|
| i 3,780,000 |
|
| $ | i 0.48 |
|
|
| i 0.87 |
|
Issued |
|
| i 10,694,494 |
|
| $ | i 0.84 |
|
|
| i 3.02 |
|
Exercised |
|
| - |
|
| $ | i - |
|
|
| - |
|
Warrants as of September 30, 2023 |
|
| i 14,474,494 |
|
| $ | i 0.75 |
|
|
| i 1.96 |
|
Options
During the period ended September 30, 2023, the Company calculated the fair value of the options granted based on assumptions used in the Cox-Ross-Rubinstein binomial pricing model using the following inputs: the price of the Company’s common stock on the date of issuance; risk-free interest rates ranging from i 3.39% to i 4.29%; volatility ranging from i 277% to i 281% based on the historical volatility of the Company’s common stock; exercise prices ranging from $ i 0.54 to $ i 0.99; and terms of i 5 years. The fair value of options granted is expensed as vesting occurs over the applicable service periods.
During September 2023, the Company’s Stockholders approved an amendment of the 2021 Equity Incentive Plan to increase the numbers of issuable shares from i 5,000,000 to i 10,000,000
From March 1, 2023 to September 1, 2023, the Company issued i 1,920,000 options to purchase shares of common stock exercisable at prices ranging from $ i 0.54 to $ i 0.99 per share. The options, which vest over i 12 to i 36 months, were valued at $ i 1,549,018.
Included in the i 1,920,000 options issued above were i 250,000 options to purchase shares of common stock exercisable at $ i 0.77 per share for five years which were issued to the Company’s former CFO for ongoing consulting services.
The following table summarizes the Company’s options for the period ended September 30, 2023:
i
|
| Number of Shares |
|
| Weighted Average Exercise Price |
|
| Weighted Average Remaining Life (in years) |
| |||
Options as of December 31, 2022 |
|
| i 5,284,068 |
|
| $ | i 0.80 |
|
|
| i 4.17 |
|
Issued |
|
| i 1,920,000 |
|
| $ | i 0.83 |
|
|
| i 5.00 |
|
Exercised |
|
| - |
|
| $ | i - |
|
|
| - |
|
Options as of September 30, 2023 |
|
| i 7,204,068 |
|
| $ | i 0.81 |
|
|
| i 3.76 |
|
At September 30, 2023, options to purchase i 3,617,041 shares of common stock were vested and options to purchase i 3,587,027 shares of common stock remained unvested. The Company expects to incur expenses for the unvested options totaling $ i 2,602,630 as they vest.
| 15 |
| Table of Contents |
CORRELATE ENERGY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
i
NOTE 6 – RELATED PARTY TRANSACTIONS |
Shareholder Advances and Payables
At September 30, 2023 and December 31, 2022, the Company had advances payable of $ i 22,154, respectively, due to the Company’s President and CEO, Mr. Todd Michaels. Mr. Michaels is also a member of the Company’s Board of Directors and holds approximately i 10% of the Company’s common stock.
At September 30, 2023 and December 31, 2022, the Company had advances payable of $ i 11,865, respectively, due to an individual who holds less than i 5% of the Company’s common stock.
At September 30, 2023 and December 31, 2022, the Company had advances payable of $ i 62,500 due to an individual who is the Company’s largest shareholder.
At September 30, 2023 and December 31, 2022, the Company had accounts payable of $ i 258,000 and $ i 256,000, respectively, due to Elysian Fields Disposal, LLC, an entity owned by the Company’s largest shareholder. The Company incurred $ i 3,000 of operating expenses with the entity during the period ended September 30, 2023.
At September 30, 2023 and December 31, 2022, the Company had accounts payable of $ i 78,346 and $ i 73,000, respectively, due to Loutex Production Company, an entity owned by the Company’s largest shareholder. The Company incurred $ i 4,900 of operating expenses with the entity during the period ended September 30, 2023.
At September 30, 2023, the Company had accounts payable of $ i 70,000 due to P&C Ventures, Inc. The Company incurred $ i 160,000 of operating expenses with P&C Ventures Inc. during the period ended September 30, 2023. Mr. Cory Hunt, who was named a director of the Company on December 28, 2021, is an officer of P&C Ventures, Inc.
Michaels Consulting
At September 30, 2023 and December 31, 2022, the Company had accounts payable of $ i 344,000, respectively, due to Michaels Consulting, an entity owned by the wife of Mr. Michaels.
Notes Payable
During January 2023, the Company amended the January 2022 note agreement with P&C Ventures, Inc. and issued warrants related to the amendment, as disclosed in Note 4. During July 2023, the Company amended the January 2023 agreement and modified warrants related to the original note, as disclosed in Note 4.
Convertible Notes Payable
During January 2023, the Company entered into a convertible note agreement with Mr. Michaels totaling $ i 100,000 and issued i 200,000 warrants, valued at approximately $ i 209,000, related to the note, as disclosed in Note 4.
Accrued Bonus
At September 30, 2023, the Company accrued bonus compensation for its CEO and former CFO of approximately $ i 150,000 and $ i 115,000, respectively. The accrued bonus compensation was unchanged from December 31, 2022.
| 16 |
| Table of Contents |
CORRELATE ENERGY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
i
NOTE 7 – INTANGIBLE ASSETS |
The Company’s intangible assets as of September 30, 2023 are summarized as follows:
i
|
|
|
|
| Accumulated |
|
|
| ||||||
Type |
| Useful Life |
| Amount |
|
| Amortization |
|
| Net |
| |||
Development rights |
| i 2- i 3 years |
| $ | i 769,383 |
|
| $ | i 101,318 |
|
| $ | i 668,065 |
|
Customer relationships |
| i 5 years |
|
| i 233,800 |
|
|
| i 81,830 |
|
|
| i 151,970 |
|
Developed technology |
| i 2 years |
|
| i 27,750 |
|
|
| i 24,290 |
|
|
| i 3,460 |
|
|
|
|
| $ | i 1,030,933 |
|
| $ | i 207,438 |
|
| $ | i 823,495 |
|
The Company’s intangible assets as of December 31, 2022 are summarized as follows:
|
|
|
|
| Accumulated |
|
|
| ||||||
Type |
| Useful Life |
| Amount |
|
| Amortization |
|
| Net |
| |||
Development rights |
| i 2- i 3 years |
| $ | i 119,383 |
|
| $ | i 6,639 |
|
| $ | i 112,744 |
|
Customer relationships |
| i 5 years |
|
| i 233,800 |
|
|
| i 46,760 |
|
|
| i 187,040 |
|
Developed technology |
| i 2 years |
|
| i 27,750 |
|
|
| i 13,880 |
|
|
| i 13,870 |
|
|
|
|
| $ | i 380,933 |
|
| $ | i 67,279 |
|
| $ | i 313,654 |
|
Future amortization of the Company’s intangible assets as of September 30, 2023 are as follows:
i
December 31, |
| Amount |
| |
2023 |
| $ | i 83,431 |
|
2024 |
|
| i 319,884 |
|
2025 |
|
| i 286,852 |
|
2026 |
|
| i 133,328 |
|
|
| $ | i 823,495 |
|
i
NOTE 8 – SUBSEQUENT EVENTS |
The Company has evaluated subsequent events through the date these condensed consolidated financial statements were available to be issued and has determined that the following subsequent events require disclosure.
During October 2023, the Company issued i 33,911 shares of common stock for payment of accrued interest on notes payable at September 30, 2023.
During October 2023, the Company issued i 72,329 warrants to purchase shares of common stock exercisable at $ i 0.85 per share for five years.
During October 2023, the Company issued i 250,000 options to each of the non-executive members of the board of directors – Matthew Flemming, Cory Hunt, Bob Powell, and Eli Albrecht. The options exercisable at $ i 0.86 per share for five years.
On October 10, 2023, the Company entered into a i 14% convertible note payable agreement with proceeds totaling $ i 375,000. The convertible note requires quarterly interest payments with the principal due at maturity eighteen months from issuance and is convertible at $ i 3.20 per share of common stock. In connection with the note agreements, the Company issued a total of i 750,000 warrants exercisable at $ i 0.85 per share for two years.
From October 10, 2023 to November 7, 2023, the Company entered into four i 14% convertible note payable agreements with proceeds totaling $ i 625,000. The convertible notes, which have identical terms, require quarterly interest payments with the principal due at maturity eighteen months from issuance and are convertible at $ i 3.20 per share of common stock. In connection with the note agreements, the Company issued a total of i 1,250,000 warrants exercisable at $ i 0.85 per share which expire two years from issuance. The warrants, which were immediately vested, were valued at $ i 1,558,376 and resulted in additional discount on the notes totaling $ i 439,295 pursuant to ASC 470-20-30.
| 17 |
| Table of Contents |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our results of operations and financial condition should be read in conjunction with our financial statements and related notes appearing elsewhere in this report. This discussion and analysis contain forward looking statements that involve risks, uncertainties and assumptions. The actual results may differ materially from those anticipated in these forwarding looking statements as a result of certain factors, including but not limited to, those which are not within our control.
The following discussion and analysis of the results of financial condition and results of operations for the three and nine months ended September 30, 2023 and September 30, 2022 should be read in conjunction with our condensed consolidated financial statements, and the notes to those condensed consolidated financial statements that are included elsewhere in this prospectus.
Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors. We use words such as “anticipate,” “believe,” “estimate,” “intend,” “could,” “should,” “would,” “may,” “seek,” “plan,” “might,” “will,” “expect,” “anticipate,” “predict,” “project,” “forecast,” “potential,” “continue,” and the negatives thereof or similar expressions to identify forward-looking statements. See “Cautionary Statement Regarding Forward-Looking Statements.”
Overview
Correlate Energy Corp. (OTCQB: CIPI), formerly Correlate Infrastructure Partners Inc., through its main operating subsidiary, Correlate Inc., offers a complete suite of proprietary clean energy assessment and fulfilment solutions for the commercial real estate industry. The Company believes scaling distributed clean energy solutions is critical in mitigating the effects of climate change. We believe that we are at the forefront in creating an industry-leading energy solution and financing platform for the commercial and industrial sector. The Company sees tremendous market opportunity in reducing site-specific energy consumption and deploying clean energy generation and energy efficiency solutions at scale.
Recently Issued Accounting Pronouncements
During the year ended December 31, 2022, and through September 30, 2023, there were several new accounting pronouncements issued by the Financial Accounting Standards Board (“FASB”). Each of these pronouncements, as applicable, has been or will be adopted by the Company. Management does not believe the adoption of any of these accounting pronouncements has had or will have a material impact on the Company’s condensed consolidated financial statements.
All other new accounting pronouncements issued but not yet effective or adopted have been deemed not to be relevant to us, hence are not expected to have any impact once adopted.
Summary of Significant Accounting Policies
There have been no changes from the Summary of Significant Accounting Policies described in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 2023.
| 18 |
| Table of Contents |
Liquidity and Capital Resources
At September 30, 2023, the Company had a cash balance of $3,218,263, as compared to a cash balance of $96,308 at December 31, 2022. The Company incurred positive cash flow from operations of $583,590 for the nine months ended September 30, 2023, as compared to negative cash flow from operations of $1,975,196 in the comparable prior year period. The increase in cash flow from operations was primarily the result of increased revenues and contract assets during the current period. Cash used in investing activities during the nine months ended September 30, 2023 totaled $465,785 and were the result of the purchase of property and equipment and intangible assets. Cash flows from financing activities during the nine months ended September 30, 2023, totaled $3,004,150 and were the result of $3,474,950 in proceeds from loan agreements and $470,800 in repayments of loan agreements. Going forward, the Company expects capital expenditures to increase significantly as operations are expanded pursuant to its current growth plans. The Company anticipates the requirement to raise significant debt or equity capital in order to fund future operations.
Our ability to successfully execute our business plan is contingent upon us obtaining additional financing and/or upon realizing revenues sufficient to fund our ongoing expenses. Until we are able to sustain our ongoing operations through revenues, we intend to fund operations through debt and/or equity financing arrangements, which may be insufficient to fund our capital expenditures, working capital, or other cash requirements. There can be no assurance that such additional financing will be available to us on acceptable terms, or at all.
The Company expects to raise significant debt or equity capital in order to fund expanding operations in the near future.
Results of Operations
Comparison of the Three Months Ended September 30, 2023 and 2022
For the three months ended September 30, 2023 and 2022, the Company’s revenues totaled $930,277 and $2,312,577, respectively. The decrease in revenues for the three months ended September 30, 2023, is primarily driven by the timing of contracted revenue recognized for engineering, procurement and construction services (“EPC”) and consulting. We anticipate the Company’s revenues in upcoming quarters to grow as revenues are recognized from projects in progress and in the pipeline. Gross profit for the three months ended September 30, 2023, totaled $232,021 compared to $143,439 in the comparable prior year period. We anticipate future gross margins to increase from the current level as we commercialize new project opportunities and cover more fixed costs within cost of sales and expand our margins.
For the three months ended September 30, 2023, our operating expenses decreased to $1,820,560 compared to $2,429,478 for the comparable period in 2022. The decrease of $608,918, or 25%, was primarily driven by a decrease in compensation expenses, including stock-based compensation. Compensation expenses for the three months ended September 30, 2023 included approximately $533,000 and $459,000 in salaries and wages and the non-cash expenses of stock-based compensation, respectively, compared to approximately $735,000 and $1,307,000, respectively, in the prior period. We anticipate future operating expenses to increase with the expansion of operations, resulting in increased expenses related to wages and compensation, advertising, and insurance partially offset by added contribution margins from anticipated revenue growth.
For the three months ended September 30, 2023, other expenses totaled $1,795,178, compared to $300,878 in the comparable prior year period. This increase in other expenses was primarily driven by $1,611,905 and $183,273 in amortization of debt discount and interest expense, respectively, incurred during the period ended September 30, 2023 compared to $257,497 and $43,381, respectively, during the prior year period. We anticipate our other expenses to remain elevated as the Company incurs interest from debt and related financing costs to expand its operations.
The activities above resulted in net losses of $3,383,717 and $2,586,917 for the three months ended September 30, 2023 and 2022, respectively.
Comparison of the Nine Months Ended September 30, 2023 and 2022
For the nine months ended September 30, 2023 and 2022, the Company’s revenues totaled $5,139,133 and $2,617,675, respectively. The increase in revenues is primarily driven from a higher volume of contracts for engineering, procurement and construction services (“EPC”) and consulting for the nine months ended September 30, 2023. We anticipate the Company’s revenues in upcoming quarters to continue to grow as revenues are recognized from projects in progress and in the pipeline. Gross profit for the nine months ended September 30, 2023, totaled $1,311,704 compared to $185,477 in the comparable prior year period. We anticipate future gross margins to increase from the current level as we commercialize new project opportunities and cover more fixed costs within cost of sales and expand our margins.
For the nine months ended September 30, 2023, our operating expenses decreased to $4,489,070 compared to $4,647,800 for the comparable period in 2022. The decrease of $158,730, or 3%, was primarily driven by increased travel costs and compensation expenses associated with added strategic management and staff offset by a decrease in legal and professional fees and stock based compensation. Compensation expenses for the nine months ended September 30, 2023 included approximately $1,532,000 and $1,043,000 in salaries and wages and the non-cash expenses of stock-based compensation, respectively, compared to approximately $1,341,000 and $1,637,000, respectively, in the prior period. We anticipate future operating expenses to increase with the expansion of operations, resulting in increased expenses related to wages and compensation, advertising, and insurance partially offset by added contribution margins from anticipated revenue growth.
For the nine months ended September 30, 2023, other expenses totaled $5,186,041, compared to $799,384 in the comparable prior year period. This increase in other expenses was primarily driven by financing costs totaling $4,156,291 which were the result of derivative liabilities, and $3,700,034 in amortization of debt discount incurred during the period ended September 30, 2023 compared to $685,639 during the prior year period. The expenses during the period ended September 30, 2023 were partially offset by a $3,107,808 decrease in the fair value of derivative liabilities. We anticipate our other expenses to remain elevated as the Company incurs interest from debt and related financing costs to expand its operations.
The activities above resulted in net losses of $8,363,407 and $5,261,707 for the nine months ended September 30, 2023 and 2022, respectively.
Off Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
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Item 3. Qualitative and Quantitative Disclosures about Market Risk.
We are a smaller reporting company and, therefore, we are not required to provide information required by this item.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures: Our management carried out an evaluation of the effectiveness and design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended (the Exchange Act). Based on that evaluation, our Chief Executive Officer and Interim Chief Financial Officer has concluded that, at September 30, 2023, such disclosure controls and procedures were not effective.
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 the information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to management including our Chief Executive Officer and Interim Chief Financial Officer, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.
Limitations on the Effectiveness of Controls: Our disclosure controls and procedures are designed to provide reasonable, not absolute, assurance that the objectives of our disclosure control system are met. Because of inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected. Our Chief Executive Officer and Interim Chief Financial Officer has concluded, based on his evaluation as of the end of the period covered by this Quarterly Report that our disclosure controls and procedures were not sufficiently effective to provide reasonable assurance that the objectives of our disclosure control system were met.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal controls over financial reporting that occurred during the nine-month period ended September 30, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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None.
We are a smaller reporting company and, therefore, we are not required to provide information required by this item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
During the three-month period ended September 30, 2023, we sold an aggregate of $860,000 of our convertible promissory notes and issued an aggregate of 1,720,000 warrants to purchase shares of our common stock in connection with the issuance of the notes. Each of the purchasers of the notes represented to the Company that such purchaser is an “accredited” for purposes of Rule 501 of Regulation D. The issuance of the warrants was made in a private placement exempt from registration under Section 4(2) of the Act and/or Rule 506 of Regulation D promulgated under the Act.
Item 3. Defaults upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
None.
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Exhibit No. |
| Description of Document |
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101.INS |
| XBRL Instance Document |
101.SCH |
| XBRL Taxonomy Extension Schema Document |
101.CAL |
| XBRL Taxonomy Calculation Linkbase Document |
101.DEF |
| XBRL Taxonomy Definition Linkbase Document |
101.LAB |
| XBRL Taxonomy Label Linkbase Document |
101.PRE |
| XBRL Taxonomy Presentation Linkbase Document |
* A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
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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.
Dated: November 14, 2023 |
| Correlate Energy Corp. (Registrant)
/s/ Todd Michaels |
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| Todd Michaels Chief Executive Officer and Interim Chief Financial Officer (Principal Executive Officer and Principal Financial Officer) |
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| This ‘10-Q’ Filing | Date | Other Filings | ||
|---|---|---|---|---|
 | ||||
| 12/31/23 | ||||
| 12/11/23 | ||||
| Filed on: | 11/14/23 | |||
| 11/13/23 | ||||
| 11/7/23 | ||||
| 10/11/23 | 4 | |||
| 10/10/23 | ||||
| For Period end: | 9/30/23 | |||
| 9/1/23 | ||||
| 8/31/23 | 8-K | |||
| 7/11/23 | ||||
| 7/10/23 | ||||
| 6/30/23 | 10-Q | |||
| 6/8/23 | ||||
| 6/6/23 | ||||
| 3/31/23 | 10-K, 10-Q | |||
| 3/1/23 | ||||
| 1/24/23 | 4 | |||
| 1/11/23 | 4 | |||
| 12/31/22 | 10-K | |||
| 12/21/22 | 8-K | |||
| 11/7/22 | ||||
| 9/30/22 | 10-Q | |||
| 6/30/22 | 10-Q | |||
| 3/31/22 | 10-Q | |||
| 1/11/22 | ||||
| 12/31/21 | 10-K, NT 10-K | |||
| 12/28/21 | 3 | |||
| 5/29/20 | 10-K | |||
| 10/3/14 | ||||
| List all Filings | ||||