The accompanying notes are an integral part of these condensed consolidated financial statements.
The accompanying notes are an integral part of these condensed consolidated financial statements.
The accompanying notes are an integral part of these condensed consolidated financial statements.
The accompanying notes are an integral part of these condensed consolidated financial statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – NATURE OF THE ORGANIZATION AND BUSINESS |
Name Change
Effective April 5, 2022, Triccar, Inc. changed its name to Correlate Infrastructure Partners Inc. (“CIPI” or the “Company”) to better reflect its operations.
Nature of the Business
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 Infrastructure Partners, Inc. is a tech-enabled development, finance, and fulfillment platform for distributed energy solutions across North America. Our integrated solutions include solar, cogeneration, energy storage, electric vehicle infrastructure, and intelligent efficiency retrofits for community-scale applications. We reduce costs, improve comfort, and increase energy reliability for home, work, and commerce while eliminating the adoption barriers to net zero carbon goals.
Loyal was integrated into Correlate for its solar project development tools.
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 2022 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.
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 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
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.
CORRELATE INFRASTRUCTURE PARTNERS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles 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.
Cash and Cash Equivalents
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, 2022 and December 31, 2021.
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 $250,000 per depositor, per financial institution, for the aggregate total of depositors' interest and non-interest-bearing accounts. At September 30, 2022, $65,497 of the Company's cash balances were in excess of 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.
Accounts Receivable
Accounts receivable consists of unpaid revenues. The Company records an allowance for doubtful accounts to allow for any amounts that may not be recoverable, which is based on an analysis of the Company’s prior collection experience, customer credit worthiness, and current economic trends. Accounts are considered delinquent when payments have not been received within the agreed upon terms and are written off when management determines that collection is not probable. As of September 30, 2022 and December 31, 2021, the Company’s allowance for doubtful accounts was $90,189, respectively.
Intangible Assets
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
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.
CORRELATE INFRASTRUCTURE PARTNERS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Revenue Recognition
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 Topic 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 require 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.
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
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 balance sheets approximates fair value.
Commitments and Contingencies
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 reasonable estimated.
CORRELATE INFRASTRUCTURE PARTNERS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Income Taxes
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.
Basic and Diluted Loss Per Share
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 (loss) 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 no potential additional dilutive securities outstanding at September 30, 2022 except for the options and warrants detailed at Note 5.
Recently Issued Accounting Standards
During the period ended September 30, 2022, 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.
| 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.
Executive Employment Agreements
On January 18, 2022, the Company entered into an employment agreement with Mr. Channing Chen, CFO, providing for an annual salary of $200,000 per year. As part of the agreement, the Company issued Mr. Chen 1,000,000 options exercisable at $0.96 per share for ten years. The options, valued at approximately $868,000, vest monthly over 36 months from issuance.
CORRELATE INFRASTRUCTURE PARTNERS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Notes Payable
On May 29, 2020, Loyal received a $20,400 Economic Injury Disaster Loan through the Small Business Administration. The note bears interest at 3.75% until maturity in March 2050. The note requires $100 monthly payments beginning in May 2022 until maturity.
On January 11, 2022, the Company entered into a 10% note agreement with P&C Ventures, Inc. totaling $1,485,000, including an original issuance discount of $135,000. The note requires quarterly interest payments with the principal due at maturity on January 11, 2023. In connection with the note agreement, the Company issued P&C Ventures, Inc., 2,700,000 warrants exercisable at $0.25 per share (Note 5). The warrants were fully vested at issuance and expire on July 11, 2023. The warrants, valued at approximately $1,958,000, represented approximately 59% of the total consideration received and resulted in an additional discount on the note totaling $799,128 pursuant to FASB ASC 470-20-30, Debt. The discount is being amortized over the life of the note with a discount balance of $272,454 at September 30, 2022.
From July 29, 2022 to September 29, 2022, the Company entered into eight 10% note agreements totaling $580,000. The notes, which have identical terms, require quarterly interest payments with the principal due at maturity eighteen months from issuance. In connection with the note agreement, the Company issued a total of 580,000 warrants exercisable at $1.00 per share (Note 5). The warrants were fully vested at issuance and expire from January 29, 2024 to September 29, 2024. The warrants, valued at approximately $842,000, represented approximately 59% of the total consideration received and resulted in an additional discount on the notes totaling $417,314 pursuant to FASB ASC 470-20-30, Debt. The discount is being amortized over the life of the notes with a discount balance of $393,349 at September 30, 2022.
Line of Credit
On October 3, 2014, Loyal entered into a $30,000 line of credit agreement. The line of credit has no maturity with interest increasing from 8.00% at issuance to 34.00% for the period ended September 30, 2022. As of September 30, 2022, the outstanding principal and accrued interest totaled $41,530.
The total number of common stock authorized that may be issued by the Company is four hundred million (400,000,000) shares of common stock with a par value of one hundredth of one cent ($0.0001) per share.
The total number of preferred stock authorized that may be issued by the Company is fifty million (50,000,000) shares of preferred stock with a par value of one hundredth of one cent ($0.0001) per share.
At December 31, 2021, common stock authorized consisted of three hundred seventy-two million five hundred thousand (372,500,000) Class A shares with 1:1 voting rights and twenty-seven million five hundred thousand (27,500,000) Class B shares with 20:1 voting rights, and fifty million (50,000,000) shares of preferred stock with a par value of one hundredth of a cent ($0.0001) per share.
On April 5, 2022, the Company amended its Articles of Incorporation such that Class A and Class B common shares were eliminated and replaced by a single class of common stock with 1:1 voting rights.
At September 30, 2022, common stock authorized consisted of four hundred million (400,000,000) common shares with 1:1 voting rights and fifty million (50,000,000) shares of preferred stock with a par value of one hundredth of a cent ($0.0001) per share.
To the fullest extent permitted by the laws of the state of Nevada (currently set forth in NRS 78.195), as the same now exists or may hereafter be amended or supplemented, the board of directors may fix and determine the designations, rights, preferences or other variations of each class or series within each class of capital stock of the corporation.
During January 2022, the Company received proceeds totaling $150,000 for 600,000 Class A shares issued in December 2021.
During May 2022, the Company issued 500,000 shares of common stock valued at $500,000 for services.
CORRELATE INFRASTRUCTURE PARTNERS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Warrants
During the period ended September 30, 2022, 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 0.70% to 4.16%, volatility ranging from 378% to 428% based on the historical volatility of the Company’s common stock, exercise prices ranging from $0.25 to $1.00, and terms of 18 to 24 months.
During January 2022, the Company issued 2,700,000 warrants valued at approximately $1,958,000 as part of a note agreement (Note 4).
From July 29, 2022 to September 29, 2022, the Company issued 580,000 warrants valued at approximately $842,000 as part of note agreements (Note 4).
The following table presents the Company’s warrants as of September 30, 2022:
| | Number of Shares | | | Weighted Average Exercise Price | | | Weighted Average Remaining Life (in years) | |
Warrants as of December 31, 2021 | | | - | | | $ | - | | | | - | |
Issued | | | 3,280,000 | | | | 0.38 | | | | 1.55 | |
Exercised | | | - | | | | - | | | | - | |
Warrants as of September 30, 2022 | | | 3,280,000 | | | $ | 0.38 | | | | 0.95 | |
At September 30, 2022, all of the Company’s outstanding warrants were vested.
Options
During the period ended September 30, 2022, 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 1.65% to 3.87%, volatility ranging from 282% to 330% based on the historical volatility of the Company’s common stock, exercise prices ranging from $0.92 to $1.55, and terms ranging from 3 to 5 years. The fair value of options granted is expensed as vesting occurs over the applicable service periods.
During January 2022, the Company issued 1,000,000 options valued at approximately $868,000 as part of an executive employment agreement (Note 3). The options vest monthly over 36 months from issuance.
From February to July 2022, the Company issued 345,000 options valued at approximately $351,000 as part of five non-executive employment agreements. The options vest monthly over 24 months from issuance.
From May to September 2022, the Company issued 30,000 options valued at approximately $38,000 as part of three consulting agreements. The options vest monthly over 36 months from issuance.
During August 2022, the Company issued 750,000 options valued at approximately $1,123,000 as part of compensation to three directors (Note 7). The options vested immediately upon issuance.
CORRELATE INFRASTRUCTURE PARTNERS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following table presents the Company’s options as of September 30, 2022:
| | Number of Shares | | | Weighted Average Exercise Price | | | Weighted Average Remaining Life (in years) | |
Options as of December 31, 2021 | | | 2,059,068 | | | $ | 0.52 | | | | 5.13 | |
Issued | | | 2,125,000 | | | | 1.16 | | | | 4.97 | |
Forfeited | | | - | | | | - | | | | - | |
Exercised | | | - | | | | - | | | | - | |
Options as of September 30, 2022 | | | 4,184,068 | | | $ | 0.85 | | | | 4.45 | |
At September, 2022, options to purchase 1,621,350 shares of common stock were vested and options to purchase 2,562,718 shares of common stock remained unvested. The Company expects to incur expenses for the unvested options totaling $1,680,658 as they vest.
The Company had the following revenue concentrations for the three and nine months ended September 30, 2022 and 2021 and accounts receivable concentrations as of September 30, 2022 and December 31, 2021:
| | Revenues | | | Revenues | | | Accounts Receivable | |
| | Three Months Ended September 30, | | | Nine Months Ended September 30, | | | September 30, | | | December 31, | |
Customer | | 2022 | | | 2021 | | | 2022 | | | 2021 | | | 2022 | | | 2021 | |
Customer A | | | 41% | | | * | | | | 42% | | | * | | | * | | | * | |
Customer B | | | 39% | | | * | | | | 39% | | | * | | | | 56% | | | * | |
Customer C | | | 14% | | | * | | | | 12% | | | * | | | | 24% | | | * | |
Customer D | | * | | | | 100% | | | * | | | | 69% | | | * | | | * | |
Customer E | | * | | | * | | | * | | | | 31% | | | * | | | | 69% | |
Customer F | | * | | | * | | | * | | | * | | | | 16% | | | * | |
Customer F | | * | | | * | | | * | | | * | | | * | | | | 19% | |
Customer F | | * | | | * | | | * | | | * | | | * | | | | 12% | |
| | | | | | | | | | | | | | | | | | | | | | | | |
* = Less than 10% | | | | | | | | | | | | | | | | | | | | | |
NOTE 7 – RELATED PARTY TRANSACTIONS |
Shareholder Advances and Payables
At September 30, 2022 and December 31, 2021, the Company had informal advances payable of $22,154, respectively, due to the Company’s President and CEO, Mr. Todd Michaels.
At September 30, 2022 and December 31, 2021, the Company had advances payable of $11,865, respectively, due to an individual who holds 3% of the Company’s Common Stock.
At September 30, 2022 and December 31, 2021, the Company had advances payable of $62,500, respectively due to an individual who is the Company’s largest shareholder.
At September 30, 2022 and December 31, 2021, the Company had accounts payable of $120,000, respectively, due to Elysian Fields Disposal, LLC, an entity owned by the Company’s largest shareholder.
Michaels Consulting
As of September 30, 2022 and December 31, 2021, the Company had accounts payable due to Michaels Consulting totaling $344,000 and $364,000, respectively.
CORRELATE INFRASTRUCTURE PARTNERS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
P&C Ventures, Inc.
Mr. Cory Hunt, who was named a director of the Company on December 28, 2021, is an owner and officer of P&C Ventures, Inc. During January 2022, the Company entered into a note agreement with P&C Ventures, Inc. and issued warrants related to the note, as disclosed in Note 4.
Director Options
During August 2022, the Company’s directors, Robert Powell, Cory Hunt, and Matthew Flemming, each received 250,000 options valued at approximately $374,000 (Note 5). The options vested immediately upon issuance.
Accrued Bonus
At September 30, 2022, the Company accrued bonus compensation for its CEO and CFO of approximately $112,500 and $85,151, respectively.
NOTE 8 – SUBSEQUENT EVENTS |
Options
During October 2022, the Company issued 100,000 options valued at $168,678 as part of a non-executive employment agreement.
Asset Purchase Agreement
During October 2022, the Company entered into an Asset Purchase Agreement whereby the Company acquired the rights to solar projects from a third party. As consideration, the Company agreed to pay the third party 25% of the developer fees received for each of the projects that are developed and issued the third party 75,000 warrants. The warrants, valued at $238,765, vested immediately and are exercisable for three years at an exercise price of $1.59 per share.
Securities Purchase Agreement
During November 2022, the Company entered into a securities purchase agreement with a third party Investor whereby the Company may issue up to five notes in the aggregate principal amount of $1,100,000. Each note shall have a face amount of $220,000, including an original issuance discount of $20,000, a guaranteed interest rate of 7%, and ten installments of $23,540 every 30 days commencing 90 days from the issuance date until maturity 12 months after issuance. The guaranteed interest shall be added to the principal balance immediately on the issuance date. Each note shall be issued with commitment shares, returnable shares, and detachable warrants.
On the closing date of the first note, the Company shall issue the Investor a total of 9,500 commitment shares as additional consideration for the purchase of the note (the “First Closing Commitment Shares”). The value of each of the Commitment Shares shall be equal to the closing price of the Company’s Common Stock on the Closing Date. At each subsequent closing, the Company will issue the Buyer that number of commitment shares equal in monetary value to the value of the First Closing Commitment Shares on the first closing date.
On the closing date of the first note, the Company shall issue the Investor a total of 80,000 restricted shares of common stock as returnable shares (the “First Closing Returnable Shares”). The shares shall be returned to the Company by the Investor if no event of default occurs under the note. At each subsequent closing, the Company will issue the Investor that number of returnable shares equal in monetary value to the value of the First Closing Returnable Shares on the first closing date.
On the closing date of each note, the Company shall issue the Investor warrants to purchase 150,000 shares of common stock at an exercise price of $1.00 per share. The warrants shall vest immediately and be exercisable for two years from the issuance date.
Any time following an Event of Default, the Investor shall have the right to convert the note into common stock of the Company. The conversion price shall be fixed at $1.00 per share. However, if the Company’s common stock has a closing price below $1.00 for at least 5 consecutive trading days, then the fixed conversion price shall be adjusted to $0.50 per share and the Investor may convert any amounts due under the note into the lower of the $0.50 fixed conversion price or 70% of the lowest daily VWAP of the Company’s common stock for the 20 trading days immediately preceding the delivery of a conversion notice.
On November 7, 2022, the Company and the Investor closed on the first of the notes under the Securities Purchase Agreement and issued a note payable in the amount of $220,000. The note included an original issuance discount of $20,000, a guaranteed interest rate of 7%, and ten installments of $23,540 every 30 days commencing 90 days from the issuance date until maturity on November 7, 2023. In connection with the note, the Company issued the investor 9,500 shares of common stock valued at $11,875 for the First Closing Commitment Shares, 80,000 restricted shares of common stock for the First Closing Returnable Shares, and warrants to purchase 150,000 shares of common stock valued at $186,151.
