WARRANTS

3 Months Ended

Mar. 31, 2023

WARRANTS

WARRANTS

NOTE 9 – WARRANTS

On August 11, 2021, the Company signed an agreement with Boustead Securities, LLC (the “Representative”), which was amended on or about March 18, 2022, with respect to a number of proposed financing transactions. Included in the agreement was the initial public offering (“IPO”) of the Company’s common stock for which a listing on NASDAQ was successfully applied for, the private placement of Hempacco securities prior to the IPO (“pre-IPO Financings”), and other financings separate from the IPO or the pre-IPO Financings (each such other financing an “Other Financing”). See Note 12 below for further details.

In addition to the other compensation delineated in the agreement, the Company agreed to issue and sell to the Representative (and/or its designees) on the closing date of an IPO or Other Financing as applicable, five-year warrants to purchase shares of the Company’s common stock. The warrants are equal to 7% of the gross offering amount at an initial exercise price of 150% of the offering price per share in the IPO, or 100% of the offering price in Other Financing.

On January 25, 2023, the Company issued fully vested warrants to purchase 500,000 shares of the Company’s common stock to non-employees as compensation for services (“Compensation Warrants”). The Compensation Warrants have an exercise price of $1.00 and a contractual life of 5 years. Stock-based compensation expense related to the Compensation Warrants was $12,900 for the three months ended March 31, 2023. As of March 31, 2023, total compensation costs related to the common stock warrants not yet recognized amounted to approximately $361,971 and will be recognized over a period of approximately 4.83 years. The amounts were recorded as prepaid compensation, for which there is a current and noncurrent portion that is amortized over the life of the contract. As of March 31, 2023, the current portion of $74,891 is included in prepaid expenses and other current assets on the balance sheet and the noncurrent portion of $287,080 is included in other assets. During the three months ended March 31, 2023, $12,482 was amortized into expense.

The Black-Scholes model uses the following variables to calculate the value of an option or warrant for the three months ended March 31, 2023, and the twelve months ended December 31, 2022:

	Input Range		Input Range
	March 31		December 31
Description	2023		2022
a) Price of the Issuer’s Security	$	0.75-$1.25	$	1.00 - $7.00
b) Exercise (strike) price of Security	$	1.00	$	0.75 - $1.50
c) Time to Maturity in years		5 years		3 to 5 years
d) Annual Risk-Free Rate		5-year T-Bill		2-year T-Bill
e) Annualized Volatility (Beta)		90% - 100%		59% - 100%