Quarterly Report for Quarter Ending September 30, 2024 (Form 10-Q)

cipi_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024

OR

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File No. 000-55825

CORRELATE ENERGY CORP.

(Exact name of registrant as specified in its charter)

Nevada		84-4250492
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
176 S. Capitol Blvd., 2nd Floor Boise, Idaho		83702
(Address of Principal Executive Offices)		(Zip Code)

(855) 264-4060

(Registrant's telephone number, including area code)

_____________________________________________________________

(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. 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). 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	☒
Accelerated Filer	☐	Emerging growth company	☐
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 ☐ 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 14, 2024 was 78,280,884.

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

CORRELATE ENERGY CORP.

Index

			Pg. No.
PART I - Financial Information
Item 1.	Financial Statements			3
	Condensed Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023 (Unaudited)			3
	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2024 and 2023 (Unaudited)			4
	Condensed Consolidated Statements of Changes in Stockholders' Deficit for the Nine Months Ended September 30, 2024 and 2023 (Unaudited)			5
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2024 and 2023 (Unaudited)			6
	Notes to Condensed Consolidated Financial Statements			7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations			19
Item 3.	Quantitative and Qualitative Disclosures about Market Risk			21
Item 4.	Controls and Procedures			21
PART II - Other Information
Item 1.	Legal Proceedings			22
Item 1A.	Risk Factors			22
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds			22
Item 3.	Defaults Upon Senior Securities			22
Item 4.	Mine Safety Disclosures			22
Item 5.	Other Information			22
Item 6.	Exhibits			23
SIGNATURES			24

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Table of Contents

PART 1 - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CORRELATE ENERGY CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

SEPTEMBER 30, 2024 AND DECEMBER 31, 2023

(Unaudited)

		September 30,			December 31,
		2024			2023
Assets
Current assets
Cash		$	318,008			$	1,412,379
Accounts receivable			67,692				408,816
Contract assets			2,363,502				53,445
Prepaid expenses and other current assets			1,175,575				1,010,781
Total current assets			4,347,443				2,885,421
Property and equipment
Property and equipment, net			82,445				172,354
Total property and equipment			82,445				172,354
Other assets
Intangible assets - customer relationships, net			105,210				140,280
Intangible assets - development rights, net			394,941				599,784
Goodwill			762,851				762,851
Total other assets			1,263,002				1,502,915
Total assets		$	5,270,224			$	4,560,690
Liabilities and Stockholders' Deficit
Current liabilities
Accounts payable		$	5,391,848			$	304,400
Accounts payable, related party			471,000				800,346
Accrued expenses			836,395				1,136,099
Customer deposits			1,567,539				1,787,739
Shareholder advances			-				96,519
Line of credit			30,000				30,000
Notes payable, current portion, net of discount			1,397,216				1,229,773
Convertible notes payable, current portion, net of discount			213,031				1,420,160
Total current liabilities			9,907,029				6,805,036
Convertible notes payable, net of current portion and discount			-				935,307
Total liabilities			9,907,029				7,740,343
Stockholders' deficit
Preferred stock $0.0001 par value; authorized 50,000,000 shares with 5,154.32 and -0- issued and outstanding at September 30, 2024 and December 31, 2023, respectively			1				-
Common stock $0.0001 par value; authorized 400,000,000 shares with 78,280,884 and 36,270,674 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively			7,827				3,627
Additional paid-in capital			45,408,769				17,873,545
Accumulated deficit			(50,053,402	)			(21,056,825	)
Total stockholders' deficit			(4,636,805	)			(3,179,653	)
Total liabilities and stockholders' deficit		$	5,270,224			$	4,560,690

The accompanying notes are an integral part of these condensed consolidated financial statements.

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CORRELATE ENERGY CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023

(Unaudited)

		For the three months ended			For the nine months ended
		September 30,			September 30,
		2024			2023			2024			2023
Revenues		$	4,540,082			$	930,277			$	6,836,123			$	5,139,133
Cost of revenues			4,632,496				698,256				7,594,864				3,827,429
Gross (loss) profit			(92,414	)			232,021				(758,741	)			1,311,704
Operating expenses
General and administrative			730,764				805,756				2,857,624				2,195,003
Stock-based compensation			328,025				458,986				2,127,101				1,043,361
Legal and professional			426,814				465,977				1,104,568				1,098,221
Depreciation and amortization			92,170				89,841				276,521				152,485
Total operating expenses			1,577,773				1,820,560				6,365,814				4,489,070
Loss from operations			(1,670,187	)			(1,588,539	)			(7,124,555	)			(3,177,366	)
Other income (expense)
Interest expense			(20,319	)			(183,273	)			(431,289	)			(437,524	)
Amortization of debt discount			(242,675	)			(1,611,905	)			(4,181,295	)			(3,700,034	)
Financing costs			(230,000	)			-				(270,000	)			(4,156,291	)
Loss on settlement of liabilities			-				-				(16,861,344	)			-
Loss on disposition of assets			(132,497	)			-				(132,497	)			-
Other income			1,209				-				4,403				-
Change in fair value of derivative liability			-				-				-				3,107,808
Total other income (expense)			(624,282	)			(1,795,178	)			(21,872,022	)			(5,186,041	)
Net loss		$	(2,294,469	)		$	(3,383,717	)		$	(28,996,577	)		$	(8,363,407	)
Basic and diluted loss per share		$	(0.04	)		$	(0.09	)		$	(0.60	)		$	(0.23	)
Weighted average shares outstanding - basic and diluted			61,507,189				36,175,490				48,196,456				35,937,305

The accompanying notes are an integral part of these condensed consolidated financial statements.

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CORRELATE ENERGY CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023

(Unaudited)

		Preferred Stock			Common Stock			Additional Paid in			Accumulated
		Shares			Amount			Shares			Amount			Capital			Deficit			Total
Balances, December 31, 2022			-			$	-				35,323,626			$	3,532			$	5,459,220			$	(8,268,426	)		$	(2,805,674	)
Issuance of shares for services			-				-				17,045				2				14,998				-				15,000
Issuance of shares for financing costs			-				-				4,245				-				4,500				-				4,500
Issuance of shares for the payment of accrued interest			-				-				5,655				1				7,587				-				7,588
Stock based compensation			-				-				-				-				253,851				-				253,851
Settlement of derivative liability			-				-				-				-				50,582				-				50,582
Net loss			-				-				-				-				-				(3,410,353	)			(3,410,353	)
Balances, March 31, 2023			-			$	-				35,350,571			$	3,535			$	5,790,738			$	(11,678,779	)		$	(5,884,506	)
Issuance of shares for services			-				-				500,000				50				132,762				-				132,812
Issuance of shares for the payment of accrued interest			-				-				7,661				1				6,512				-				6,513
Stock based compensation			-				-				-				-				330,524				-				330,524
Issuance of warrants in connection with debt			-				-				-				-				28,334				-				28,334
Issuance of shares for intangible assets			-				-				362,319				36				249,964				-				250,000
Issuance of shares for property and equipment			-				-				92,010				9				57,498				-				57,507
Issuance of returnable shares			-				-				1,200,000				120				(120	)			-				-
Return of returnable shares			-				-				(1,360,000	)			(136	)			136				-				-
Settlement of derivative liability			-				-				-				-				5,844,608				-				5,844,608
Net loss			-				-				-				-				-				(1,569,337	)			(1,569,337	)
Balances, June 30, 2023			-			$	-				36,152,561			$	3,615			$	12,440,956			$	(13,248,116	)		$	(803,545	)
Issuance of shares for services			-				-				-				-				39,843				-				39,843
Issuance of shares for the payment of accrued interest			-				-				28,896				3				18,553				-				18,556
Stock based compensation			-				-				-				-				458,986				-				458,986
Issuance of warrants in connection with debt			-				-				-				-				1,322,648				-				1,322,648
Net loss			-				-				-				-				-				(3,383,717	)			(3,383,717	)
Balances, September 30, 2023			-			$	-				36,181,457			$	3,618			$	14,280,986			$	(16,631,833	)		$	(2,347,229	)
Balances, December 31, 2023			-			$	-				36,270,674			$	3,627			$	17,873,545			$	(21,056,825	)		$	(3,179,653	)
Issuance of shares for the payment of accrued interest			-				-				28,829				3				38,379				-				38,382
Issuance of shares for the cashless exercise of warrants			-				-				3,839,559				384				(384	)			-				-
Issuance of warrants in connection with debt			-				-				-				-				353,272				-				353,272
Stock based compensation			-				-				-				-				1,446,056				-				1,446,056
Net loss			-				-				-				-				-				(4,476,442	)			(4,476,442	)
Balances, March 31, 2024			-			$	-				40,139,062			$	4,014			$	19,710,868			$	(25,533,267	)		$	(5,818,385	)
Issuance of warrants in connection with debt			-				-				-				-				118,356				-				118,356
Issuance of shares in connection with debt			-				-				300,000				30				232,175				-				232,205
Issuance of shares and warrants for the settlement of liabilities			7,809				1				17,423,557				1,742				24,668,366				-				24,670,109
Stock based compensation			-				-				-				-				353,020				-				353,020
Net loss			-				-				-				-				-				(22,225,666	)			(22,225,666	)
Balances, June 30, 2024			7,809			$	1				57,862,619			$	5,786			$	45,082,785			$	(47,758,933	)		$	(2,670,361	)
Issuance of in-kind dividends			234				-				-				-				-				-				-
Issuance of shares for the cashless exercise of warrants							-				113,266				11				(11	)			-				-
Conversion of preferred into common			(2,889	)			-				20,304,999				2,030				(2,030	)			-				-
Stock based compensation			-				-				-				-				328,025				-				328,025
Net loss			-				-				-				-				-				(2,294,469	)			(2,294,469	)
Balances, September 30, 2024			5,154			$	1				78,280,884			$	7,827			$	45,408,769			$	(50,053,402	)		$	(4,636,805	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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CORRELATE ENERGY CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023

(Unaudited)

		For the nine months ended
		September 30,
		2024			2023
Operating activities
Net loss		$	(28,996,577	)		$	(8,363,407	)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization			276,521				152,485
Amortization of debt discount			4,181,295				3,700,034
Stock issued for services			-				187,655
Stock-based compensation			2,127,101				1,043,361
Financing costs			270,000				4,156,291
Loss on settlement of liabilities			16,861,344				-
Loss on disposition of assets			132,497				-
Change in fair value of derivative liability			-				(3,107,808	)
Changes in operating assets and liabilities:
Accounts receivable			341,124				-
Contract assets			(2,310,057	)			556,082
Prepaid expenses and other current assets			(164,794	)			(301,589	)
Accounts payable			5,267,094				(114,656	)
Accrued expenses			128,069				(401,629	)
Customer deposits			(220,200	)			3,076,771
Net cash (used in) provided by operating activities			(2,106,583	)			583,590
Investing activities
Purchase of property and equipment			(79,196	)			(65,785	)
Purchase of intangible assets			-				(400,000	)
Net cash used in investing activities			(79,196	)			(465,785	)
Financing activities
Proceeds from issuance of notes payable			1,487,015				-
Proceeds from issuance of convertible notes payable			250,000				3,474,950
Repayment of notes payable			(645,607	)			(470,800	)
Net cash provided by financing activities			1,091,408				3,004,150
Net increase (decrease) in cash		$	(1,094,371	)		$	3,121,955
Cash - beginning of period			1,412,379				96,308
Cash - end of period		$	318,008			$	3,218,263
Cash paid for income taxes		$	-			$	-
Cash paid for interest		$	190,231			$	245,136
Supplemental schedule of non-cash investing and financing activities
Shares issued for settlement of accrued interest		$	38,382			$	32,657
Discount on notes payable from issuance of warrants		$	353,272			$	1,350,982
Discount on convertible notes payable from issuance of warrants		$	118,356			$	-
Discount on notes payable from issuance of common stock		$	232,205			$	-
Discount on notes payable		$	342,970			$	-
Discount on notes payable from derivative liability		$	-			$	1,563,929
Discount on convertible notes payable from derivative liability		$	-			$	2,564,950
Accrued interest settled through note payable		$	-			$	78,929
Settlement of derivative liability		$	-			$	5,895,190
Shares issued for intangible assets		$	-			$	250,000
Shares issued for property and equipment		$	-			$	57,507
Returnable shares issued in connection with notes payable		$	-			$	120
Return of returnable shares issued in connection with notes payable		$	-			$	136

The accompanying notes are an integral part of these condensed consolidated financial statements.

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CORRELATE ENERGY CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - NATURE OF THE ORGANIZATION AND BUSINESS

Nature of the Business

On June 8, 2023, Correlate Energy Corp. (the "Company" or "CIPI") 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") and Distributed Energy Capital, LLC ("Distributed").

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 in North America.

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.

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

The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary. All significant inter-company transactions and balances have been eliminated in consolidation.

Use of Estimates

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.

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CORRELATE ENERGY CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Cash and Cash Equivalents

The Company considers all highly liquid debt instruments and other short-term investments with a maturity of three months or less, when purchased, to be cash equivalents. There were no cash equivalents as of September 30, 2024, and December 31, 2023.

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. 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.

Accounts Receivable

Accounts receivable consist of invoiced and unpaid sales. 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 creditworthiness, 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. There were no doubtful accounts as of September 30, 2024, and December 31, 2023.

Contract Assets

The Company's contracts with customers contain milestone payments which do not coincide with revenue recognition. Accordingly, contract assets consist of earned but unbilled revenues.

Property and Equipment

Property and equipment are stated at historical cost net of accumulated depreciation. Repairs and maintenance are expensed as incurred.

Goodwill

Goodwill represents the excess of the purchase price over the fair value of assets acquired and liabilities assumed in a business combination.

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 the business climate, market conditions or other events that indicate an asset's carrying amount may not be recoverable. The 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. When assessing goodwill for impairment, the Company uses qualitative and, if necessary, quantitative methods in accordance with FASB ASC 350, "Goodwill."

Customer Deposits

The Company's contracts with customers contain milestone payments which do not coincide with revenue recognition. Accordingly, customer deposits consist of customer payments received prior to the performance of contractual obligations.

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 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 operates in one business segment in the United States and its 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.

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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 EPC services are typically less than one year in duration and require us to a) provide engineering services, b) purchase and obtain materials, and c) install equipment and materials to agreed-upon specifications. The EPC agreement typically may be terminated by either party in connection with a breach of the agreement that has not been timely cured, or at any time by either party provided all payments required to be made to the other party have been made, including expense reimbursement and other costs incurred by the non-terminating party in connection with preparing to provide services pursuant to the EPC agreement. The majority of our contracts provide an integrated service to the customer that includes multiple services: origination, design, analyzing, engineering, equipment procurement, construction, and testing services. For revenue recognition, we do not consider the integrated services to be distinct, combining separate scopes of work into a single commercial benefit for the customer. As a result, we typically identify a single performance obligation in our contracts. The Company recognizes revenue using the input method, by obtaining information from its subcontractors every reporting period on the progress of the project and multiplying the percentage completed (calculated based on costs incurred to date compared to total estimated costs) by the estimated total project revenue.

The Company's contracts for consulting services require us to assist the client in achieving certain defined project milestones. The consulting agreements typically may be terminated by either party in connection with a breach of the agreement that has not been timely cured, or at any time by either party provided all payments required to be made to the other party have been made, including expense reimbursement and other costs incurred by the non-terminating party in connection with preparing to provide services pursuant to the agreement. Revenues are recognized over time as the Company performs the consulting services and value is provided to the client.

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 accompanying condensed consolidated balance sheets approximates fair value.

Fair Value Measurement

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).

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CORRELATE ENERGY CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Company did not have any Level 1, Level 2 or Level 3 assets and liabilities at September 30, 2024, or December 31, 2023.

The following is a summary of activity of Level 3 liabilities during the nine months ended September 30, 2023:

Balance - December 31, 2022		$	722,328
Additions			8,280,670
Settlement			(5,895,190	)
Change in fair value			(3,107,808	)
Balance - September 30, 2023		$	-

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.

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 reasonably estimated.

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 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, 2024, and 2023, all of which were antidilutive, as follows:

		September 30,			September 30,
		2024			2023
Options			8,021,081				7,204,068
Warrants			11,639,323				14,474,494
Convertible notes payable			159,625				1,085,922
			19,820,029				22,764,484

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CORRELATE ENERGY CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Recently Issued Accounting Standards

During the period ended September 30, 2024, 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.

NOTE 4 - DEBT

Conversion Agreements

Between June 6, 2024, and June 14, 2024, the Company entered into debt conversion agreements with noteholders for the conversion of an aggregate of $7,203,270 of outstanding notes payable and convertible notes payable (including principal and interest) and with other entities and persons owed money by the Company in the aggregate amount of $605,495 consisting of outstanding advances payable and accounts payable (the "Debt Conversion"). In connection with the Debt Conversion, the Company issued an aggregate of 7,808.767 shares of its Series A Preferred Stock and 17,423,557 shares of Common Stock to the former debtholders. Additionally, the Company agreed to extend the term of outstanding warrants held by the noteholders that converted their debt for a period of three (3) years from their current expiration dates. In connection with the issuance of the Series A Preferred Stock and the Common Stock, each holder entered into a Lockup/Leakout Agreement with the Company, pursuant to which none of the shares of Common Stock issuable upon conversion of the Preferred Stock may be sold for a period of six months from the date of issuance and seventy percent (70%) of the shares of Common Stock issued in connection with the debt conversion may be sold 1/7th per month during each thirty (30) day period commencing thirty (30) days after the date of the Lockup/Leakout Agreement. A summary of the settlement is as follows:

Liabilities settled:
Notes payable		$	2,068,929
Convertible notes payable			4,744,950
Accrued interest payable			389,391
Accounts payable			605,495
		$	7,808,765
Value of equity issued:
Series A Preferred Stock		$	11,358,499
Common Stock			11,121,637
Extension of Warrants			2,189,974
		$	24,670,110
Loss on settlement of liabilities		$	16,861,345

Convertible Notes Payable

On May 9, 2024, the Company entered into a convertible note agreement with Mr. Charles Markovic, CFO, totaling $100,000. The note, which bears interest at 2% per month, matured on July 5, 2024. In connection with the convertible note agreement, the Company issued 100,000 warrants exercisable at $0.85 per share. The warrants were fully vested at issuance and expire on May 6, 2027. The warrants, valued at approximately $119,000, represented approximately 54% of the total consideration received and resulted in an additional discount on the notes totaling $54,391 pursuant to ASC 470-20-30.

On May 17, 2024, the Company entered into a convertible note agreement with Mr. Todd Michaels, former CEO, totaling $80,000. The note, which bears interest at 2% per month, matured on July 17, 2024. In connection with the convertible note agreement, the Company issued 80,000 warrants exercisable at $0.85 per share. The warrants were fully vested at issuance and expire on May 17, 2027. The warrants, valued at approximately $71,000, represented approximately 47% of the total consideration received and resulted in an additional discount on the notes totaling $37,684 pursuant to ASC 470-20-30.

On May 20, 2024, the Company entered into a convertible note agreement totaling $70,000. The note, which bears interest at 2% per month, matures on May 20, 2025. In connection with the convertible note agreement, the Company issued 70,000 warrants exercisable at $0.85 per share. The warrants were fully vested at issuance and expire on May 20, 2027. The warrants, valued at approximately $42,000, represented approximately 38% of the total consideration received and resulted in an additional discount on the notes totaling $26,281 pursuant to ASC 470-20-30.

The following table presents a summary of the Company's convertible notes payable at September 30, 2024

									Balances - At Issuance			Balances - 9/30/2024
Origination		Maturity		Interest			Conversion Rate		Principal			Discount			Principal			Discount
12/18/2023		6/18/2025			14	%		$3.20Share			50,000				35,241				50,000				16,970
5/9/2024		7/5/2024			24	%		$1.25/Share			100,000				54,391				100,000				-
5/17/2024		7/17/2024			24	%		$1.25/Share			80,000				37,684				80,000				-
																		$	230,000			$	16,970

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CORRELATE ENERGY CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table presents a summary of the Company's convertible notes payable at December 31, 2023:

						Balances - At Issuance			Balances - 12/31/2023
Origination		Maturity		Interest			Conversion Rate		Principal			Discount			Principal			Discount
1/24/2023		7/24/2024			14	%		$3.20/Share		$	100,000			$	100,000			$	100,000			$	37,884
1/25/2023		7/25/2024			14	%		$3.20/Share			74,975				74,975				74,975				28,660
1/30/2023		7/30/2024			14	%		$3.20/Share			100,000				100,000				100,000				38,884
2/17/2023		8/17/2024			14	%		$3.20/Share			1,000,000				1,000,000				1,000,000				416,663
3/7/2023		9/7/2024			14	%		$3.20/Share			100,000				100,000				100,000				45,996
3/14/2023		9/10/2024			14	%		$3.20/Share			250,000				250,000				250,000				117,999
3/27/2023		9/27/2024			14	%		$3.20/Share			100,000				100,000				100,000				49,496
3/30/2023		9/30/2024			14	%		$3.20/Share			79,975				79,975				79,975				39,987
4/6/2023		10/6/2024			14	%		$3.20/Share			50,000				50,000				50,000				24,998
4/7/2023		10/7/2024			14	%		$3.20/Share			400,000				400,000				400,000				200,002
5/5/2023		11/5/2024			14	%		$3.20/Share			200,000				200,000				200,000				111,112
5/9/2023		11/9/2024			14	%		$3.20/Share			50,000				50,000				50,000				29,054
5/12/2023		11/12/2024			14	%		$3.20/Share			50,000				50,000				50,000				29,054
6/6/2023		12/6/2024			14	%		$3.20/Share			10,000				10,000				10,000				6,108
6/30/2023		12/30/2024			14	%		$3.20/Share			50,000				28,334				50,000				18,893
7/7/2023		1/7/2025			14	%		$3.20/Share			25,000				14,775				25,000				9,853
7/21/2023		1/21/2025			14	%		$3.20/Share			35,000				20,103				35,000				13,969
7/26/2023		1/26/2025			14	%		$3.20/Share			100,000				56,527				100,000				40,326
8/10/2023		2/10/2025			14	%		$3.20/Share			500,000				268,545				500,000				198,867
8/24/2023		2/24/2023			14	%		$3.20/Share			100,000				60,313				100,000				46,360
8/31/2023		2/28/2025			14	%		$3.20/Share			100,000				60,010				100,000				46,674
10/10/2023		4/10/2025			14	%		$3.20/Share			375,000				246,871				375,000				214,871
11/3/2023		5/3/2025			14	%		$3.20/Share			150,000				115,950				150,000				103,808
11/7/2023		5/7/2025			14	%		$3.20/Share			50,000				38,237				50,000				35,613
11/7/2023		5/7/2025			14	%		$3.20/Share			50,000				38,237				50,000				35,613
11/28/2023		5/28/2025			14	%		$3.20/Share			50,000				36,925				50,000				34,674
12/4/2023		6/4/2025			14	%		$3.20/Share			25,000				18,295				25,000				17,407
12/6/2023		6/8/2025			14	%		$3.20/Share			500,000				358,064				500,000				342,064
12/18/2023		6/18/2025			14	%		$3.20/Share			50,000				35,241				50,000				34,594
																		$	4,724,950			$	2,369,483

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CORRELATE ENERGY CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Notes Payable

From January 29, 2024, to March 29, 2024, the Company and seven holders of notes payable which matured between January 29, 2024, and March 29, 2024, agreed to extend the maturity of the note payables, which had outstanding principal balances totaling $580,000, by six months. The Company accounted for each amendment as an extinguishment of existing debt and issuance of new debt pursuant to ASC 470-50-40. In connection with the amendments, the Company agreed to extend the exercise date of 580,000 warrants to purchase shares of common stock, originally issued with the notes payable and set to expire on the maturity date of the notes payable, exercisable at $1.00 per share by approximately three years. The extension of the warrants, which were valued at $906,669, resulted in a discount on the notes totaling $353,271 pursuant to ASC 470-20-30.

On April 10, 2024, the Company received funding from a Bridge Loan and Security Agreement ("Agreement") entered into with Clearview Funding Group LLC ("Lender") on March 26, 2024. Pursuant to the terms of the Agreement, the Company borrowed an aggregate of $800,000 from the Lender and is required to repay to Lender a total of $1,080,000 ("Repayment Amount"). The Repayment Amount will be made to Lender over a period of forty-eight (48) weeks on a weekly basis. The Company shall pay $7,375 per week during the first twelve weeks and $27,375 per week for the next thirty-six weeks. In connection with the Agreement, the Company has granted a security interest to Lender in certain of the Company's assets, subject to prior security interests as more fully described in the Agreement, as collateral for the repayment of the Repayment Amount. The Company may prepay the then outstanding Repayment Amount at any time, however, if the Company seeks to repay the Repayment Amount within 120 days from April 10, 2024 the Lender has agreed to provide the Company an early prepayment discount. In connection with the Agreement, the Company agreed to issue 100,000 shares of its common stock to the Lender as a commitment fee. The common stock, valued at $144,000, resulted in a discount totaling $121,251 pursuant to ASC 470-20-30.

On June 11, 2024, the Company's board of directors authorized the Company to enter into a Bridge Loan and Security Agreement ("Agreement") with Clearview Funding Group LLC ("Lender"). Pursuant to the terms of the Agreement, the Company will borrow an aggregate of $600,000 from the Lender and is required to repay to Lender a total of $870,000 ("Repayment Amount"). On June 14, 2024, the Lender advanced $200,000 of the loan to the Company pursuant to the Agreement. The Repayment Amount will be paid to Lender over a period of twenty-eight (28) weeks on a weekly basis ("Term"). In connection with the Agreement, the Company granted a security interest to Lender in certain of the Company's assets, subject to prior security interests as more fully described in the Agreement, as collateral for the repayment of the Repayment Amount. The Company may prepay the then outstanding Repayment Amount at any time, however, if the Company repays the Repayment Amount within sixty days from the date of the Agreement the Lender has agreed to provide the Company an early prepayment discount. In connection with the Agreement, the Company agreed to issue 200,000 shares of its common stock to the Lender as a commitment fee. The common stock, valued at $137,800, resulted in a discount totaling $110,954 pursuant to ASC 470-20-30.

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CORRELATE ENERGY CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table presents a summary of the Company's notes payable at September 30, 2024:

							Balances - At Issuance			Balances - 9/30/2024
Origination		Maturity		Interest			Principal			Discount			Principal			Discount
5/29/2020		3/31/2050			4	%		$	20,400			$	-			$	20,400			$	-
8/11/2022		8/11/2024			10	%			150,000				88,247				150,000				-
3/26/2024		3/15/2025		-	%			960,000				313,736				711,750				150,566
6/11/2024		1/11/2025		-	%			720,000				261,439				642,643				127,011
6/14/2024		6/30/2024			5	%			100,000				-				100,000				-
7/25/2024		7/31/2024			5	%			50,000				-				50,000				-
																$	1,674,793			$	277,577

The following table presents a summary of the Company's notes payable at December 31, 2023:

					Balances - At Issuance			Balances - 12/31/2023
Origination		Maturity		Interest			Principal			Discount			Principal			Discount
5/29/2020		3/31/2050			4	%		$	20,400			$	-			$	20,400			$	-
7/29/2022		1/29/2024			10	%			50,000				29,664				50,000				1,648
8/11/2022		2/11/2024			10	%			150,000				88,247				150,000				7,876
8/15/2022		2/15/2024			10	%			50,000				29,513				50,000				2,630
8/31/2022		2/28/2024			10	%			80,000				45,827				80,000				5,091
9/1/2022		3/1/2024			10	%			50,000				29,922				50,000				3,661
9/7/2022		3/7/2024			10	%			50,000				29,922				50,000				3,658
9/12/2022		3/12/2024			10	%			50,000				30,316				50,000				4,382
9/29/2022		3/29/2024			10	%			100,000				59,839				100,000				9,974
11/9/2022		5/9/2024			10	%			25,000				25,000				25,000				6,372
11/15/2022		5/15/2024			10	%			100,000				100,000				100,000				25,486
12/8/2023		7/8/2024			14	%			1,563,929				1,563,929				1,563,929				988,778
																$	2,289,329			$	1,059,556

Line of Credit

On October 3, 2014, the Company entered into a $30,000 line of credit agreement with a former member of the Company. The line of credit has no maturity with interest at 8.00%. As of September 30, 2024, the outstanding principal and accrued interest totaled $33,815.

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CORRELATE ENERGY CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Future Maturities

The table below summarizes current and future maturities of the Company's debt as of September 30, 2024:

September 30,		Amount
2025 (current)		$	1,844,393
2026			-
2027			-
2028			-
2029			-
Thereafter			20,400
			1,864,793
Less - Discounts			(294,546	)
		$	1,570,247

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.

During the period ended September 30, 2024, 2,888.71 shares of Series A Preferred Stock were converted into 20,304,999 shares of common stock.

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CORRELATE ENERGY CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Warrants

During the period ended September 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, nine warrant holders cashless exercised a total of 5,657,500 warrants to purchase common stock, resulting in the issuance of 3,952,825 shares of common stock.

The table below summarizes the Company's warrants for the period ended September 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			(5,657,500	)		$	0.55				2.30
Warrants as of September 30, 2024			11,639,323			$	0.86				4.43

At September 30, 2024, warrants to purchase 11,451,823 shares of common stock were vested and warrants to purchase 187,500 shares of common stock remained unvested. The Company expects to incur expenses for the unvested warrants totaling $124,000 as they vest.

Options

During the period ended September 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 rates ranging from 3.97% to 4.23%; volatility ranging from 267% to 272% based on the historical volatility of the Company's common stock; exercise prices ranging from $0.40 to $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 September 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			600,000			$	1.69				5.00
Forfeited			(1,602,987	)		$	0.92				3.39
Exercised			-			$	-				-
Options as of September 30, 2024			8,021,081			$	0.88				3.13

At September 30, 2024, options to purchase 6,420,718 shares of common stock were vested and options to purchase 1,600,363 shares of common stock remained unvested. The Company expects to incur expenses for the unvested options totaling $1,047,000 as they vest.

NOTE 6 - REVENUE

During the nine months ended September 30, 2024, the Company recognized revenue of $1,609,043 that was included in the customer deposits balance at December 31, 2023.

During the nine months ended September 30, 2024, the Company did not recognize revenue related to performance obligations satisfied in prior periods.

The Company had $9,539,675 in remaining performance obligations at September 30, 2024.

Concentrations

For the nine months ended September 30, 2024 and 2023, the Company had the following revenue concentrations:

		Revenues
Customer		2024			2023
Customer A			51	%		88%
Customer B			34	%		*
Customer C			11	%		*
Customer D		*			*
Customer E		*			*
* = Less than 10%

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CORRELATE ENERGY CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7 - RELATED PARTY TRANSACTIONS

Shareholder Advances and Payables

At December 31, 2023, the Company had advances payable of $22,154 due to the Company's former President and former CEO, Mr. Todd Michaels. Mr. Michaels was also a member of the Company's Board of Directors. The advances payable balance was settled during June 2024, as detailed in Note 4.

At December 31, 2023, the Company had advances payable of $11,865 due to a significant shareholder. The advances payable balance was settled during June 2024, as detailed in Note 4.

At December 31, 2023, the Company had advances payable of $62,500 due to the Company's largest shareholder. The advances payable balance was settled during June 2024, as detailed in Note 4.

At December 31, 2023, the Company had accounts payable of $258,000 due to Elysian Fields Disposal, LLC, an entity owned by the Company's largest shareholder. The accounts payable balance was settled during June 2024, as detailed in Note 4.

At December 31, 2023, the Company had accounts payable of $78,346 due to Loutex Production Company, an entity owned by the Company's largest shareholder. The accounts payable balance was settled during June 2024, as detailed in Note 4.

At September 30, 2024 and December 31, 2023, the Company had accounts payable of $290,000 and $120,000, respectively, due to P&C Ventures, Inc. The Company incurred $180,000 of operating expenses with P&C Ventures Inc. during the period ended September 30, 2024. Mr. Cory Hunt, who was formerly a director of the Company, is an officer of P&C Ventures, Inc.

Michaels Consulting

At September 30, 2024 and December 31, 2023, the Company had accounts payable of $172,000 and $344,000, respectively due to Michaels Consulting, an entity owned by the wife of Mr. Michaels. $172,000 of the accounts payable balance was settled during June 2024, as detailed in Note 4.

Notes Payable

During January 2022, the Company entered into a note agreement with P&C Ventures, Inc. totaling $1,485,000 and issued 2,700,000 warrants related to the note. During January 2023, the Company amended the January 2022 note agreement with P&C Ventures, Inc. and issued warrants related to the amendment. During July 2023, the Company amended the January 2023 agreement and modified warrants related to the original note. During December 2023, the Company amended the July 2023 agreement and modified warrants related to the original note. P&C Ventures, Inc. was the holder of the $1,563,929 note maturing on July 8, 2024. This note, along with accrued interest payable of $96,085, was one of the notes settled during June 2024, as detailed in Note 4.

The wife of Mr. Michaels was the holder of a $50,000 note maturing on September 7, 2024. This note was one of the notes extended during March 2024, as detailed in Note 4. 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 50,000 warrants to purchase shares of common stock, originally issued with the note payable and set to expire on the maturity date of the note payable, exercisable at $1.00 per share by approximately three years. The extension of the warrants, which were valued at $73,725, resulted in a discount on the notes totaling $29,794 pursuant to ASC 470-20-30. This note, along with accrued interest payable of $2,274, was one of the notes settled during June 2024, as detailed in Note 4.

Mr. Michaels is the holder of the $100,000 note which matured on June 30, 2024, and the $50,000 note which matured on July 31, 2024 (Note 4).

The Company's largest shareholder was the holder of the $25,000 note maturing on May 9, 2024. This note, along with accrued interest payable of $1,137, was one of the notes settled during June 2024, as detailed in Note 4.

Convertible Notes Payable

Mr. Michaels was the holder of the $100,000 convertible note maturing on July 24, 2024. This note, along with accrued interest payable of $6,367, was one of the notes settled during June 2024, as detailed in Note 4.

Mr. Charles Markovic, CFO, is the holder of the $100,000 convertible note which matured on July 5, 2024 (Note 4).

Mr. Michaels is the holder of the $80,000 convertible note which matured on July 17, 2024 (Note 4).

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CORRELATE ENERGY CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Director Options

During January 2024, two of the Company's directors, Dr. Christine Gulbranson and Alina Zagaytova, each received 250,000 options (Note 5) valued at approximately $474,000. The options vested immediately upon issuance.

Accrued Bonus

At September 30, 2024, and December 31, 2023, the Company had accrued bonus compensation for Todd Michaels of approximately $150,000.

At September 30, 2024 and December 31, 2023, the Company had accrued bonus compensation for its former CFOs of approximately $115,000.

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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.

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," "predict," "project," "forecast," "potential," "continue," and the negatives thereof or similar expressions to identify forward-looking statements.

Overview

Correlate Energy Corp. (OTCQB: CIPI), 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 nine months ended September 30, 2024, and through the issuance of this report, 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 April 1, 2024.

Liquidity and Capital Resources

At September 30, 2024, the Company had a cash balance of $318,008, as compared to a cash balance of $1,412,379 at December 31, 2023. The Company reported net cash flows used in operating activities of $2,106,583 for the nine months ended September 30, 2024, compared to net cash provided by operating activities of $583,590 for the nine months ended September 30, 2023. The $2,690,173 increase in cash flows used in operating activities for the nine months ended September 30, 2024, was primarily driven by an increase in cash used for contract liabilities and contract assets of $3,296,971 and $2,866,139, respectively, partially offset by an increase in accounts payable of $5,381,750. The Company reported cash flows used in investing activities of $79,196 during the nine months ended September 30, 2024 compared to cash flows used in investing activities of $465,785 for the nine months ended September 30, 2023. Cash used for investing activities in 2024 was related to software implementation costs, which were written off and recorded as a loss on disposal during the third quarter of 2024. Cash flows used in investing activities in 2023 were all related to the purchase of intangible assets and property and equipment. The Company had net cash flows from financing activities of $1,091,408 during the nine months ended September 30, 2024, compared to $3,004,150 during the nine months ended September 30, 2023. Cash flows from financing activities during the nine months ended September 30, 2024, were the result of $1,487,015 in proceeds from loan agreements and $645,607 in repayments of loan agreements and $250,000 in proceeds from the issuance of convertible notes. Cash flows from financing activities during the nine months ended September 30, 2023, were the result of $3,474,950 in proceeds from the issuance of convertible notes and $470,800 in repayments of loan agreements.

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.

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Results of Operations

Comparison of the Three Months Ended September 30, 2024 and 2023

For the three months ended September 30, 2024 and 2023, the Company's revenues totaled $4,540,082 and $930,277, respectively. The source of our revenues comes from engineering, procurement and construction services ("EPC") and consulting services performed for solar energy projects. Gross loss for the three months ended September 30, 2024, totaled $92,414 compared to gross profit of $232,021 in the comparable prior year period. The Company recognized revenues on three additional projects during the third quarter accounting for the increase in revenues. The pressure on gross margin continued in the third quarter due to unexpected cost overruns on one of our core projects which resulted in lower revenue recognition in the third quarter and a decrease in our profit margin on this project. We anticipate the Company's revenues and gross margins in upcoming quarters to increase from the current level as revenues are recognized from projects in progress and in the pipeline and as we commercialize new project opportunities and cover more fixed costs within cost of sales expanding our margins.

For the three months ended September 30, 2024, our operating expenses were $1,577,773 compared to $1,820,560 for the comparable period in 2023. The decrease of $242,787, or 13%, was primarily driven by lower stock-based compensation of $130,961 and a net decrease in general and administrative expenses of $74,992 in the third quarter of 2024 driven by lower marketing and legal costs partially offset by an increase in payroll and related expenses associated with added strategic management. 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, 2024, other expenses totaled $624,282 compared to $1,795,178 in the comparable prior year period. The $1,170,896 decrease in other expenses was primarily driven by the decrease in amortization of debt discount of $1,369,230 and lower interest expense of $162,954 related to 2023 note agreements with no similar activity in the comparable period of 2024, as the majority of these notes were converted during the second quarter of 2024. We anticipate other expenses to continue to be driven by these factors on a comparable basis throughout 2024. During the third quarter of 2024, we recognized a loss on disposal of assets of $132,497 due to the write-off of software implementation costs.

The activities above resulted in net losses of $2,294,469 and $3,383,717 for the three months ended September 30, 2024 and 2023, respectively.

Comparison of the Nine months ended September 30, 2024 and 2023

For the nine months ended September 30, 2024 and 2023, the Company's revenues were $6,836,123 and $5,139,133, respectively. The source of our revenues comes from engineering, procurement and construction services ("EPC") and consulting services performed for solar energy projects. Gross loss for the nine months ended September 30, 2024, totaled $758,741 compared to gross profit of $1,311,704 in the comparable prior year period. The Company experienced a slowdown in one of its core projects due to unexpected cost overruns which resulted in lower revenue recognition during the year and a decrease in our profit margin on this project. We anticipate the Company's revenues and gross margins in upcoming quarters to continue to increase from the current level as revenues are recognized from projects in progress and in the pipeline and as we commercialize new project opportunities and cover more fixed costs within cost of sales expanding our margins.

For the nine months ended September 30, 2024, operating expenses were $6,365,814 compared to $4,489,070 in the comparable prior year period. The increase of $1,876,744, or 42%, was primarily driven by an increase in stock-based compensation expenses of $1,083,740 and payroll and related expenses of $829,434 (included in general and administrative expenses). These increases were the result of the addition of strategic management as well as both internal and outsourced staff to support our continued expansion efforts. 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, 2024, other expenses totaled $21,872,022, compared to $5,186,041 in the comparable prior year period. The $16,685,981 increase in other expenses was primarily driven by the $16,861,344 loss on conversion of debt. We expect other expenses to be driven by the loss on conversion on a comparable basis throughout the remainder of 2024.

The activities above resulted in net losses of $28,996,577 and $8,363,407 for the nine months ended September 30, 2024 and 2023, 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 conducted an evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act) as of September 30, 2024, pursuant to Exchange Act Rule 13a-15. Such disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company is accumulated and communicated to the appropriate management on a basis that permits timely decisions regarding disclosure. Based upon that evaluation, our management concluded that the Company's disclosure controls and procedures as of September 30, 2024, were effective to provide reasonable assurance that information required to be disclosed in the Company's periodic filings under the Exchange Act is accumulated and communicated to our management to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal controls over financial reporting during the quarter ended September 30, 2024, that have materially affected or are reasonably likely to materially affect our internal controls over financial reporting.

Limitations on the Effectiveness of Controls

Our disclosure controls and procedures provide our management with reasonable assurances that our disclosure controls and procedures will achieve their objectives. However, our management does not expect that our disclosure controls and procedures or our internal control over financial reporting can or will prevent all human error. A control system, no matter how well designed and implemented, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Furthermore, the design of a control system must reflect the fact that there are internal resource constraints, and the benefit of controls must be weighed relative to their corresponding costs. Because of the limitations in all control systems, no evaluation of controls can provide complete assurance that all control issues and instances of error, if any, within our company are detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur due to human error or mistake. Additionally, controls, no matter how well designed, could be circumvented by the individual acts of specific persons within the organization. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated objectives under all potential future conditions.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

None.

Item 1A. Risk Factors.

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.

None.

Item 3. Defaults upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

On November 15, 2024, we received notices from Messer's Bill Powers, Flaviu Forgaciu and Kerry Lutz of their resignation from the Board of Directors which stated no disagreements with our policies or accounting procedures. On November 18, 2024, we received notices from Ms. Alina Zagaytova and Ms. Christine Gulbranson of their resignation from the Board of Directors which stated no disagreements with our policies or accounting procedures. On November 18, 2024, we extended the role of Chuck Markovic as Interim CFO and appointed Roger Baum as Interim CEO.

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Item 6. Exhibits.

Exhibit No.		Description of Document
31.1 *		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934.
31.2 *		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934.
32.1 *		Certification pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350).
32.2 *		Certification pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350).
101.INS		Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).
101.SCH		Inline XBRL Taxonomy Extension Schema Document
101.CAL		Inline XBRL Taxonomy Calculation Linkbase Document
101.DEF		Inline XBRL Taxonomy Definition Linkbase Document
101.LAB		Inline XBRL Taxonomy Label Linkbase Document
101.PRE		Inline XBRL Taxonomy Presentation Linkbase Document
104		Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).

* 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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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		Correlate Energy Corp. (Registrant)
Dated: November 19, 2024		/s/ Roger Baum
		Roger Baum Chief Executive Officer (Principal Executive Officer)

		Correlate Energy Corp. (Registrant)
Dated: November 19, 2024		/s/ Charles Markovic
		Charles Markovic Chief Financial Officer (Principal Financial and Accounting Officer)

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