EQUITY

6 Months Ended

Jun. 30, 2024

NOTE 5 – EQUITY

Common Stock

During February 2024, the Company paid $38,382 in accrued interest due to noteholders by issuing 28,829 shares of common stock.

Preferred Stock

During June 2024, the Company designated 12,000 shares of Preferred Stock as Series A Preferred Stock. The Series A Preferred Stock has a stated value of $1,000 per share and shall accrue dividends on a quarterly basis at a rate of 12% per annum which shall be paid in kind. The Series A Preferred Stock is convertible, at any time after issuance, into shares of the Company’s common stock at $850 per share of Series A Preferred Stock, proportionately adjusted in the event of a stock split, stock combination or similar event. Thereafter, the conversion price shall be equal to the product of the: (i) VWAP on the conversion date and (ii) 0.75. In no event shall the conversion price ever be less than $100 per share, proportionately adjusted in the event of a stock split, stock combination or similar event up to a maximum adjustment of $500 per share. The Company may redeem all, or a portion, of the Series A Preferred Stock outstanding at any time, in cash at a price equal to the stated value plus accrued dividends. The Series A Preferred Stock will rank, with respect to rights to the distribution of assets in the event of any liquidation, dissolution or winding up of the Company: (i) senior to the Company’s Common Stock, par value $0.0001 per share (“Common Stock”); (ii) on parity with all Preferred Stock of the Company with terms specifically providing that such Preferred Stock rank on parity with the Series A Preferred Stock with respect to rights to the distribution of assets upon any liquidation, dissolution or winding up of the Company; (iii) senior to all Preferred Stock of the Company with terms specifically providing that such Preferred Stock rank junior to the Series A Preferred Stock with respect to rights to the distribution of assets upon any liquidation, dissolution or winding up of the Company, and (iv) junior to all Preferred Stock of the Company with terms specifically providing that such Preferred Stock rank senior to the Series A Preferred Stock with respect to rights to the distribution of assets upon any liquidation, dissolution or winding up of the Company.

Warrants

During the period ended June 30, 2024, 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 4.10% to 4.60%; volatility ranging from 209% to 302% based on the historical volatility of the Company’s common stock; exercise prices of $0.85 to $1.00; and terms of 36 to 43 months.

From January 10, 2024, to February 20, 2024, eight warrant holders cashless exercised a total of 5,457,500 warrants to purchase common stock, resulting in the issuance of 3,839,559 shares of common stock.

The table below summarizes the Company’s warrants for the period ended June 30, 2024:

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Life (in years)
Warrants as of December 31, 2023		17,046,823		$	0.76		1.73
Issued		250,000		$	0.85		3.00
Forfeited		-		$	-		-
Exercised		(5,457,500	)	$	0.54		2.22
Warrants as of June 30, 2024		11,839,323		$	0.86		4.68

At June 30, 2024, warrants to purchase 11,589,323 shares of common stock were vested and warrants to purchase 250,000 shares of common stock remained unvested. The Company expects to incur expenses for the unvested warrants totaling $165,000 as they vest.

Options

During the period ended June 30, 2024, 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 rate of 3.97%; volatility of 267% based on the historical volatility of the Company’s common stock; exercise price of $1.95; and terms of 5 years. The fair value of options granted is expensed as vesting occurs over the applicable service periods.

The following table summarizes the Company’s options for the period ended June 30, 2024:

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Life (in years)
Options as of December 31, 2023		9,024,068		$	0.83		3.77
Issued		500,000		$	1.95		5.00
Forfeited		(1,000,000	)	$	0.96		3.05
Exercised		-		$	-		-
Options as of June 30, 2024		8,524,068		$	0.88		3.42

At June 30, 2024, options to purchase 6,196,307 shares of common stock were vested and options to purchase 2,327,761 shares of common stock remained unvested. The Company expects to incur expenses for the unvested options totaling $1,308,000 as they vest.

Correlate Energy Corp. 10-Q