UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ________________ to ________________
Commission file number
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of | (I.R.S. Employer |
| incorporation or organization) | Identification No.) |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including
area code: (
Securities registered pursuant to Section 12(b) of the Act: None
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.
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).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 ☐ | Accelerated filer ☐ | |
| Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by checkmark 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
There were shares of the registrant’s common stock outstanding as of March 12, 2025.
TABLE OF CONTENTS
| Page |
Unless the context otherwise indicates, when used in this report, the terms the “Company,” “Edgemode”, “we,” “us, “our” and similar terms refer to Edgemode, Inc. and our wholly owned subsidiaries, EdgeMode, a Wyoming corporation and Edgemode Mine Co UK Limited, a UK company. Our corporate website is www.edgemode.io. There we make available copies of Edgemode documents, news releases and our filings with the U.S. Securities and Exchange Commission including financial statements.
Unless specifically set forth to the contrary, the information that appears on our website is not part of this report.
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PART I – FINANCIAL INFORMATION
| ITEM 1. | FINANCIAL STATEMENTS |
Edgemode, Inc.
Consolidated Balance Sheets
(Unaudited)
| September 30, 2024 | December 31, 2023 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Intangible assets – cryptocurrencies | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Accrued payroll | ||||||||
| Equipment notes payable | ||||||||
| Notes payable | ||||||||
| Notes payable – related parties | ||||||||
| Convertible notes payable | ||||||||
| Derivative liabilities | ||||||||
| – | ||||||||
| Total current liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Stockholders’ deficit: | ||||||||
| Preferred shares, $ par value, shares authorized September 30, 2024 and December 31, 2023; issued and outstanding | ||||||||
| Common shares, $ par value, shares authorized September 30, 2024 and December 31, 2023; shares issued and outstanding, September 30, 2024 and December 31, 2023 | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Stockholders’ deficit | ( | ) | ( | ) | ||||
| Total liabilities and stockholders’ deficit | $ | $ | ||||||
See accompanying notes to the unaudited consolidated financial statements.
| 3 |
Edgemode, Inc.
Consolidated Statements of Operations
(unaudited)
| For the three months ended | For the nine months ended | |||||||||||||||
| September 30, 2024 | September 30, 2023 | September 30, 2024 | September 30, 2023 | |||||||||||||
| Operating expenses: | ||||||||||||||||
| General and administrative expenses | $ | $ | $ | $ | ||||||||||||
| Loss on cryptocurrencies | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense): | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Penalty on redemption of Preferred B shares | ( | ) | ||||||||||||||
| Other expense | ( | ) | ( | ) | ||||||||||||
| Refund of equipment deposit | ||||||||||||||||
| Change in fair value of derivatives | ( | ) | ( | ) | ||||||||||||
| Loss on settlement | ( | ) | ||||||||||||||
| Total other income (expense), net | ( | ) | ( | ) | ( | ) | ||||||||||
| Income (loss) before provision for income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Provision for income taxes | ||||||||||||||||
| Net income (loss) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Loss per common share - basic | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
| Loss per common share - diluted | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
| Weighted average shares outstanding – basic | ||||||||||||||||
| Weighted average shares outstanding - diluted | ||||||||||||||||
See accompanying notes to the unaudited consolidated financial statements.
| 4 |
Edgemode, Inc.
Consolidated Statements of Stockholders’ Equity (Deficit)
For the three and nine months ended September 30, 2024 and 2023
(Unaudited)
| Total | ||||||||||||||||||||
| Common | Additional | Stockholders' | ||||||||||||||||||
| Common | Stock | Paid-In | Accumulated | Equity | ||||||||||||||||
| Shares | Amount | Capital | Deficit | (Deficit) | ||||||||||||||||
| Balance December 31, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Net loss | – | ( | ) | ( | ) | |||||||||||||||
| Balance March 31, 2024 | ( | ) | ( | ) | ||||||||||||||||
| Net loss | – | ( | ) | ( | ) | |||||||||||||||
| Balance June 30, 2024 | ( | ) | ( | ) | ||||||||||||||||
| Net loss | – | ( | ) | ( | ) | |||||||||||||||
| Balance September 30, 2024 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Balance December 31, 2022 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Common shares issued for settlement of claims | ||||||||||||||||||||
| Stock-based compensation | – | |||||||||||||||||||
| Net loss | – | ( | ) | ( | ) | |||||||||||||||
| Balance March 31, 2023 | ( | ) | ( | ) | ||||||||||||||||
| Net income | – | |||||||||||||||||||
| Balance June 30, 2023 | ( | ) | ( | ) | ||||||||||||||||
| Net income | – | ( | ) | ( | ) | |||||||||||||||
| Balance September 30, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
See accompanying notes to the unaudited consolidated financial statements.
| 5 |
Edgemode, Inc.
Consolidated Statements of Cash Flows
(unaudited)
| For the nine months ended | ||||||||
| September 30, 2024 | September 30, 2023 | |||||||
| Operating Activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Amortization of discounts | ||||||||
| Penalty on redemption of Preferred B shares | ||||||||
| Loss on settlement | ||||||||
| Stock-based compensation | ||||||||
| Loss on cryptocurrency transactions | ||||||||
| Change in fair value of derivative liabilities | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Accounts payable and accrued expenses | ( | ) | ||||||
| Accrued payroll | ||||||||
| Net cash provided by (used in) operating activities | ||||||||
| Investing Activities: | ||||||||
| Proceeds from sale of cryptocurrencies | ||||||||
| Purchase of cryptocurrencies | ( | ) | ||||||
| Net cash provided by (used in) investing activities | ( | ) | ||||||
| Financing Activities: | ||||||||
| Payments on preferred B shares | ( | ) | ||||||
| Proceeds from convertible notes payable | ||||||||
| Proceeds from related party advances | ||||||||
| Payments on convertible notes | ( | ) | ( | ) | ||||
| Net cash provided by (used in) financing activities | ( | ) | ( | ) | ||||
| Net change in cash | ||||||||
| Cash - beginning of period | ||||||||
| Cash - end of period | $ | $ | ||||||
| Supplemental Disclosures: | ||||||||
| Interest paid | $ | $ | ||||||
| Income taxes paid | $ | $ | ||||||
| Supplemental Disclosures of Noncash Financing Information: | ||||||||
| Convertible notes issued in exchange for cryptocurrency | $ | $ | ||||||
| Note payable issued in exchange for cryptocurrency | $ | $ | ||||||
| Cryptocurrency used to pay accounts payable | $ | $ | ||||||
See accompanying notes to the unaudited consolidated financial statements.
| 6 |
Edgemode, Inc.
Notes to the Consolidated Financial Statements
(Unaudited)
NOTE 1 – Basis of Presentation
The accompanying unaudited interim financial statements of Edgemode, Inc. (“we”, “our”, “Edgemode” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America and the 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 Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as amended, as filed with the SEC. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for our interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements that would substantially duplicate the disclosure contained in the audited financial statements for fiscal 2023, as reported in the Form 10-K for the fiscal year ended December 31, 2023 of the Company, have been omitted.
NOTE 2 – Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make certain estimates and assumptions that affect the amounts reported in the financial statements and footnotes thereto. Actual results could materially differ from these estimates. It is reasonably possible that changes in estimates will occur in the near term.
Principals of consolidation
The accompanying consolidated financial statements include the accounts of Edgemode, Inc., the accounts of its 100% owned subsidiaries, EdgeMode and Edgemode Mine Co UK Limited. All intercompany transactions and balances have been eliminated in consolidation.
Fair Value Measurements
Generally accepted accounting principles define fair value as the price that would be received to sell an asset or be paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price) and such principles also establish a fair value hierarchy that prioritizes the inputs used to measure fair value using the following definitions (from highest to lowest priority):
| · | Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. | |
| · | Level 2 – Observable inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data by correlation or other means. | |
| · | Level 3 – Prices or valuation techniques requiring inputs that are both significant to the fair value measurement and unobservable. |
The following fair value hierarchy tables present information about the Company’s liabilities measured at fair value on a recurring basis:
| Fair Value Measurements at September 30, 2024 | ||||||||||||
| Level 1 | Level 2 | Level 3 | ||||||||||
| Liabilities: | ||||||||||||
| Derivative liabilities | $ | $ | $ | |||||||||
| Fair Value Measurements at December 31, 2023 | ||||||||||||
| Level 1 | Level 2 | Level 3 | ||||||||||
| Liabilities: | ||||||||||||
| Derivative liabilities | $ | $ | $ | |||||||||
The Company had no assets valued using level 1, level 2, or level 3 inputs as of September 30, 2024 or December 31, 2023.
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Derivative Financial Instruments
Derivatives are measured at their fair value on the balance sheet. In determining the appropriate fair value, the Company uses a binomial calculator model. Changes in fair value are recorded in the consolidated statements of operations.
Revenue Recognition
We recognize revenue in accordance with ASC 606, Revenue from Contracts with Customers. This standard provides a single comprehensive model to be used in the accounting for revenue arising from contracts with customers and supersedes current revenue recognition guidance, including industry-specific guidance. The standard’s stated core principle is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve this core principle, ASC 606 includes provisions within a five-step model that includes identifying the contract with a customer, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction price to the performance obligations, and recognizing revenue when, or as, an entity satisfies a performance obligation.
The Company has entered into digital asset mining pools by executing contracts, as amended from time to time, with the mining pool operators to provide computing power to the mining pool. The contracts are terminable at any time by either party and the Company’s enforceable right to compensation only begins when the Company provides computing power to the mining pool operator. In exchange for providing computing power, the Company is entitled to a fractional share of the fixed cryptocurrency award the mining pool operator receives (less digital asset transaction fees to the mining pool operator which are recorded as a component of cost of revenues), for successfully adding a block to the blockchain. The terms of the agreement provides that neither party can dispute settlement terms after thirty-five days following settlement. The Company’s fractional share is based on the proportion of computing power the Company contributed to the mining pool operator to the total computing power contributed by all mining pool participants in solving the current algorithm.
Providing computing power in digital asset transaction verification services is an output of the Company’s ordinary activities. The provision of providing such computing power is the only performance obligation in the Company’s contracts with mining pool operators. The transaction consideration the Company receives, if any, is noncash consideration, which the Company measures at fair value on the date received, which is not materially different than the fair value at contract inception or the time the Company has earned the award from the pools. The consideration is all variable. Because it is not probable that a significant reversal of cumulative revenue will not occur, the consideration is constrained until the mining pool operator successfully places a block (by being the first to solve an algorithm) and the Company receives confirmation of the consideration it will receive, at which time revenue is recognized. There is no significant financing component in these transactions.
Fair value of the cryptocurrency award received is determined using the quoted price of the related cryptocurrency at the time of receipt. There is currently no specific definitive guidance under GAAP or alternative accounting framework for the accounting for cryptocurrencies recognized as revenue or held, and management has exercised significant judgment in determining the appropriate accounting treatment. In the event authoritative guidance is enacted by the FASB, the Company may be required to change its policies, which could have an effect on the Company’s consolidated financial position and results from operations.
| 8 |
Stock-Based Compensation
The Company accounts for equity instruments issued to employees in accordance with the provisions of ASC 718 Stock Compensation (ASC 718) and Equity-Based Payments to Non-employees pursuant to ASC 2018-07 (ASC 2018-07). All transactions in which the consideration provided in exchange for the purchase of goods or services consists of the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date of the fair value of the equity instrument issued is the earlier of the date on which the counterparty’s performance is complete or the date at which a commitment for performance by the counterparty to earn the equity instruments is reached because of sufficiently large disincentives for nonperformance.
The Company accounts for equity-based transactions with non-employees under the provisions of ASC Topic No. 505-50, “Equity-Based Payments to Non-Employees” (“Topic No. 505-50”). Topic No. 505-50 establishes that equity-based payment transactions with non-employees shall be measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable.
Long-Lived Assets – Cryptocurrencies
We account for our cryptocurrencies, intangible assets and long-term license agreement in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Subtopic 350-30, General Intangibles Other Than Goodwill, and ASC Subtopic 360-10-05, Accounting for the Impairment or Disposal of Long-Lived Assets. ASC Subtopic 350-30 requires assets to be measured based on the fair value of the consideration given or the fair value of the assets (or net assets) acquired, whichever is more clearly evident and, thus, more reliably measurable. Our cryptocurrencies are deemed to have an indefinite useful life; therefore amounts are not amortized, but rather are assessed for impairment as further discussed in our impairment policy. Under ASC Subtopic 350-30 any intangible asset with a useful life is required to be amortized over that life and the useful life is to be evaluated every reporting period to determine whether events or circumstances warrant a revision to the remaining period of amortization. If the estimate of useful life is changed the remaining carrying amount of the intangible asset is amortized prospectively over the revised remaining useful life. Costs of internally developing, maintaining, or restoring intangible assets are recognized as an expense when incurred.
Recent Accounting Pronouncements
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires disclosure of incremental segment information on an annual and interim basis. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024 on a retrospective basis. The Company is currently evaluating the effect of this pronouncement on its disclosures.
In December 2023, the FASB issued ASU 2023-08, Intangibles—Goodwill and Other—Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets (“ASU 2023-08”). This ASU is intended to improve the accounting for certain crypto assets by requiring an entity to measure those crypto assets at fair value each reporting period with changes in fair value recognized in net income. The amendments also improve the information provided to investors about an entity’s crypto asset holdings by requiring disclosure about significant holdings, contractual sale restrictions, and changes during the reporting period. ASU 2023-08 requires a cumulative-effect adjustment to the opening balance of retained earning as of the beginning of the annual reporting period in which the entity adopts the amendment and is effective for all reporting companies for fiscal years beginning after December 15, 2024, including interim periods within those fiscal years, with early adoption permitted. The Company is evaluating the impact that this ASU may have on its consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which expands the disclosures required for income taxes. This ASU is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The amendment should be applied on a prospective basis while retrospective application is permitted. The Company is currently evaluating the effect of this pronouncement on its disclosures.
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NOTE 3 – Going Concern
These financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which assumes that the Company will be able to meet its obligations and continue its operations for its next fiscal year. Realization values may be substantially different from carrying values as shown and these financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going concern. At September 30, 2024, the Company had not yet achieved profitable operations and expects to incur further losses as it has suspended its operations until such time, if any, that the Company receives adequate funding, all of which raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s management has also begun exploring possible opportunities for the Company involving mergers, acquisitions or other business combination transactions in an effort to diversify our business. The Company is not currently a party to any definitive agreement or understandings with any third parties, and there are no assurances even if the Company’s management locates an opportunity which it believes will be in the best interests of the Company’s shareholders that it will ever consummate such a transaction. Accordingly, investors should not place undue reliance on these efforts. The Company’s ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management has no formal plan in place to address this concern.
NOTE 4 – Related Party Transactions
As of September 30, 2024, the Company owed
the executive officers of the Company $
During the nine months ended September 30, 2024,
the executive officers of the Company advanced $
NOTE 5 – Equity
Preferred shares
We are authorized to issue shares of preferred stock. Shares of preferred stock may be issued from time to time in one or more series as may be determined by our Board. The voting powers and preferences, the relative rights of each such series and the qualifications, limitations and restrictions of each series will be established by the Board. Our directors may issue preferred stock with multiple votes per share and dividend rights which would have priority over any dividends paid with respect to the holders of our common stock. In connection with the Transaction, the only outstanding preferred stock was converted into common stock. As of the date of this report, there are no outstanding shares of preferred stock.
Series B
On July 19, 2022, the Company designated
shares of its original authorized shares of Preferred Stock as Series B Preferred Stock with a $ par value and a stated
value of $1.00 per share. The Series B Convertible Preferred Stock ranks senior to the common stock with respect to dividends and right
of liquidation and has no voting rights. The Series B Convertible Preferred Stock has an
| 10 |
Common shares
The Company has authorized shares of common stock, par value of $, and as of September 30, 2024 has issued shares of common stock. All of the common shares have the same voting rights and liquidation preferences.
Stock Options
As of September 30, 2024, the Company has $ of value remaining to be expensed based upon completions of milestones, of which $ is contingently subject to expense recognition based on the timing of when the Company is able to close on a purchase of at least $15 million of crypto mining equipment as describe above, and $ of remaining amortization to expensed pursuant to the vesting terms.
The following table summarizes the stock option activity for the nine months ended September 30, 2024:
| Options | Weighted-Average Exercise Price Per Share | |||||||
| Outstanding, December 31, 2023 | $ | |||||||
| Granted | ||||||||
| Exercised | ||||||||
| Forfeited | ||||||||
| Expired | ||||||||
| Outstanding, September 30, 2024 | $ | |||||||
As of September 30, 2024, the Company had stock options that were exercisable and that are in dispute. The weighted average remaining life of all outstanding stock options was 3 years as of September 30, 2024. Aggregate intrinsic value is calculated as the difference between the exercise price of the underlying stock option and the fair value of the Company’s common stock for stock options that were in-the-money at period end. As of September 30, 2024, the intrinsic value for the options vested and outstanding was $ and $, respectively.
Stock Warrants
The following table summarizes the stock warrant activity for the nine months ended September 30, 2024:
| Warrants | Weighted-Average Exercise Price Per Share | |||||||
| Outstanding, December 31, 2023 | $ | |||||||
| Granted | ||||||||
| Exercised | ||||||||
| Forfeited | ||||||||
| Expired | ||||||||
| Outstanding, September 30, 2024 | $ | |||||||
| 11 |
NOTE 6 – Notes Payable and Convertible Notes Payable
Notes Payable
Pursuant to the Company’s Agreement and
Plan of Merger and Reorganization effective January 31, 2022, the Company acquired outstanding note payables in the amount of $
Equipment Notes Payable
In 2021, the Company entered into multiple financing
agreements whereby the company agreed to purchase assets related to its crypto mining operations. The financing agreements required a
down payments in the aggregate of $
On July 11, 2022, the Company terminated its agreements
with the vendor for the financed equipment described above. As of September 30, 2023, no agreement or communication from the vendor has
been received confirming the terms of the termination, and therefore the Company has maintained these balances in equipment notes payable
on the Company's balance sheet. The balance of the loans as of September 30, 2024 is $
Convertible notes payable
1800 Diagonal Lending Notes
On April 11, 2023, the Company entered into a
Securities Purchase Agreement effective April 20, 2023 with 1800 Diagonal Lending LLC, an accredited investor, pursuant to which the Company
sold the investor an unsecured promissory note in the principal amount of $
In addition, on April 11, 2023, the Company entered
into an additional Securities Purchase Agreement effective April 20, 2023 with 1800 Diagonal Lending LLC, pursuant to which the Company
sold the investor an unsecured promissory note in the principal amount of $
| 12 |
On August 4, 2023, the Company entered into a
Securities Purchase Agreement with 1800 Diagonal Lending LLC, an accredited investor, pursuant to which the Company sold the investor
an unsecured original issuance discount promissory note in the principal amount of $
Other Convertible Promissory Notes
On April 25, 2023, the Company entered into a
Securities Purchase Agreement with an accredited investor, pursuant to which the Company sold the investor an unsecured promissory note
in the principal amount of $
In addition, on April 26, 2023, the Company entered
into a Promissory Note Purchase Agreement with another investor, pursuant to which the Company sold the investor an unsecured convertible
promissory note in the principal amount of $
The investors may in their option, at any time following the 180-day anniversary from the issuance date, as defined in the Promissory Notes, convert all or any part of the outstanding and unpaid amount of the Promissory Notes into fully paid and non-assessable shares of Common Stock. If the Promissory Notes are not repaid on or prior to the maturity date, the conversion price will be $0.20 or 50% of the preceding five day VWAP on the six month anniversary, which is lower, subject to a floor conversion price of $0.01 per share. On the 180-day anniversary date the resulting conversion price is equal to $0.01. Furthermore, the Promissory Notes contain a “most favored nation” provision that allows each investor to claim any preferable terms from any future securities, excluding certain exempt issuances.
| 13 |
NOTE 7 – Derivative Liabilities
The fair values of the conversion option of outstanding convertible notes payable and common stock warrants were determined to be derivative liabilities under ASC 815 due to the default on convertible notes payable disclosed above, which resulted in a variable conversion price on the outstanding convertible note payable. The fair value of the derivative liabilities was estimated using a binomial model with the following assumptions:
| As of September 30, 2024 | ||||||||
| Conversion Option | Warrants | |||||||
| Volatility | ||||||||
| Dividend Yield | ||||||||
| Risk-free rate | ||||||||
| Expected term | ||||||||
| Stock price | $ | $ | ||||||
| Exercise price | $ | $ | ||||||
| Derivative liability fair value | $ | $ | ||||||
| Number of shares issued upon conversion, exercise, or satisfaction of required conditions as of September 30, 2024 | ||||||||
All fair value measurements related to the derivative liabilities are considered significant unobservable inputs (Level 3) under the fair value hierarchy of ASC 820.
The table below presents the change in the fair value of the derivative liability during the nine months ended September 30, 2024:
| Fair value as of December 31, 2023 | $ | |||
| Fair value on the date of cash repayments | ( | ) | ||
| Change in fair value of derivatives | ||||
| Fair value as of September 30, 2024 | $ | |||
The total impact of derivative liabilities recognized
in the Company’s consolidated statements of operations includes the change in fair value of derivatives and derivative liabilities
settled upon cash repayments, with the Company recognizing a total loss of $
NOTE 8 – Cryptocurrency Assets
The Company conducts various business activities using its cryptocurrency assets. The below table represents the cryptocurrency activities during the nine months ended September 30, 2024:
| Cryptocurrency at December 31, 2023 | $ | |||
| Purchases of cryptocurrency | ||||
| Loss on cryptocurrency | ( | ) | ||
| Cryptocurrency at September 30, 2024 | $ | |||
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NOTE 9 – Commitments and Contingencies
Legal Contingencies
On February 8, 2022, the Company was notified
of a potential lawsuit related to the termination of our Advisory Panel Membership agreement with Taylor Black Wealth, Ltd. (“Taylor”).
The Company engaged Taylor for assistance with capital raises and was to be partially compensated with stock options, subject to vesting.
Taylor claims that the Company terminated the agreement unlawfully and therefore are still entitled to the remaining unvested options
which the Company believes to be cancelled. The total number of stock options being contested is
NOTE 10 – Subsequent Events
On January 21, 2025, the Company entered into a Master Services Agreement with Cudo Ventures Ltd, a cloud computing company. Under this agreement, the Company will provide Tier 3 data center hosting infrastructure and colocation services to Cudo Ventures supporting 1 MW capacity for a term of 5 years, but can be terminated early by either party if certain conditions are met. the colocation space is designated for SingularityNet’s 1st modular datacenter container from Ecoblox. The Company will also provide optional smart hands engineering support at an hourly rate of $130 per hour, with a 50% premium for evening and weekend services. In consideration of the services the Company shall receive Electricity Fees: Passed through at a variable base cost x PUE + admin charge capped at 5%. The minimum fee increase of 3% is waived for the first 3 years and annual CPI increase is capped at 2% for the first 3 years and 5% for the final 2 years. The monthly rental payable is $75,887.18. An initial payment of $303,548.72 to the Company was made on February 18, 2025. The Company shall initially provide the services through Synthesis Group AB, a company located in Sweden (“SG”) pursuant to an oral agreement. The Company is negotiating a formal agreement with SG. There are no assurances that the Company will complete a transaction with SG.
On February 20, 2025 (the “Effective Date”), in full satisfaction of $769,989 of the Accrued Salary for each of Mr. Faulkner and Mr. Wajcenberg, the Company (1) issued to each of Charles Faulkner and Simon Wajcenberg 256,660,163 shares of restricted common stock (the “Conversion Shares”) at a conversion price of $0.003 per share (the “Share Conversions”), and (2) amended options held by each of Mr. Faulkner and Mr. Wajcenberg to (i) purchase up to 76,619,603 shares of the Company’s common stock at an exercise price of $0.10 per share, as amended on March 3, 2023 which vest upon the closing of the purchase of at least $15 million of crypto mining equipment (the “2022 Options”) and (ii) purchase up to77,000,000 shares of the Company’s common stock at an exercise price of $0.04 per share, which shall vest upon the Company closing on the purchase of at least $15 million of crypto mining equipment (the “2023 Options”), to eliminate the vesting requirements of the 2022 Options and 2023 options. The 2022 Options and 2023 Options are fully vested as of the Effective Date. As of the date of filing, the shares owed to each of Mr. Faulkner and Mr. Wajcenberg have not been issued by the Company until the Company increases its authorized shares of common stock as described below.
On February 27, 2025 the board of directors of the Company adopted a resolution to amend the Company’s Articles of Incorporation for the Charter Amendment to increase the number of authorized shares of common stock to 7 billion. On March 3, 2025, shareholder approval was obtained through the written consent of the holder of the Series C Preferred Stock. The Charter Amendment will become effective on the date of filing of a Certificate of Amendment to the Company’s Articles of Incorporation with the office of the Secretary of State of the State of Nevada. The Certificate of Amendment shall be filed 20 calendar days after the mailing of an Information Statement to the Company’s non-consenting shareholders.
On March 3, 2025, the Company filed with the Nevada Secretary of State a Certificate of Designation of Series C Preferred Stock (the “Certificate of Designation”). Pursuant to the Certificate of Designation, the Company’s Board of Directors designated a new series of the Company’s preferred stock, the Series C Preferred Stock, par value $0.001 per share. The Certificate of Designation authorized the Company to issue one share of Series C Preferred Stock. The share was issued to the Company’s Chief Executive Officer.
The Series C Preferred Stock is not convertible, does not have any redemption, preferential dividend or liquidation rights. Holders of Series C Preferred Stock shall only be entitled to vote on the approval of an amendment to the Company’s Articles of Incorporation authorizing an increase in the Company’s authorized capital stock (the “Charter Amendment”) and shall be entitled to a voting power equal to one vote more than the total combined voting power of the Company’s common stock. Any Series C Preferred Stock issued and outstanding on the record date to vote and/or consent to the Charter Amendment shall be automatically surrendered and cancelled for no consideration following the Charter Amendment.
Subsequent to September 30, 2024, the Company received a debt waiver from the vendor of the equipment notes payable in which the vendor agreed to waive the debt completely with no additional amount owed.
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| ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
The following discussion and analysis should be read in conjunction with our unaudited consolidated financial statements, and the notes thereto, and other financial information appearing elsewhere in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023. The following discussion and analysis compares our consolidated results of operations for the three months ended September 30, 2024 (the “2024 Quarter”) with those for the three months ended September 30, 2023 (the “2023 Quarter”) and our consolidated results of operations for the nine months ended September 30, 2024 (the “2024 Period”) with those for the nine months ended September 30, 2023 (the “2023 Period”).
Cautionary Note Regarding Forward-Looking Statements
This report contains “forward-looking statements”. These statements include, among other things, statements regarding expanding our business and our liquidity as well as other statements regarding our future operations, financial condition and prospects, and business strategies. Forward-looking statements generally can be identified by words such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “projects,” “will be,” “will continue,” “will likely result,” and similar expressions. These forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties, which could cause our actual results to differ materially and adversely from those reflected in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, our ability to raise capital to buy crypto mining machines we have commitments to purchase, regulatory issues which affect our business model, and those discussed under the caption "Risk Factors" in our Form 10-K for the year ended December 31, 2023 and those discussed in other documents we file with the SEC. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.
Business Overview
Since our incorporation, the Company has attempted to become involved in a number of business ventures, all of which, excluding Edgemode Wyoming, were unsuccessful and which have been abandoned. Edgemode Wyoming historically mined Ethereum from late 2020 until September 2022. Although Edgemode Wyoming historically mined Ethereum, due to the change of Ethereum (ETH) from Proof of Work (POW) to Proof of stake (POS), the Company terminated all rental agreements and future purchase orders related to Ethereum mining operations. We now intend to build Tier 3 AI data center infrastructure and lease our data centers to tenants who require custom built high performance computing facilities, subject to financing. However, we require significant financing to commence building these data centers. Since late 2024 we have focused on securing equity and debt capital. We cannot provide any assurances we will receive any capital under a debt facility. Any financing will be used to finance the build of High Performance computing data centers. We have suspended our daily operations subject to receiving additional funding. There are no assurances we will receive adequate financing. Our management has also begun exploring possible opportunities for the Company involving mergers, acquisitions or other business combination transactions in an effort to diversify our business. We are not currently a party to any definitive agreement with any third parties, and there are no assurances that we will ever consummate any merger, acquisition or business combination. Accordingly, investors should not place undue reliance on these efforts.
Although we have been in discussions with potential partners and acquisition targets, we have not entered into any definitive agreements. The evaluation and selection of a business opportunity is a complex and uncertain process. Business opportunities that we believe are in the best interests of the Company and its shareholders may be scarce, or we may be unable to attract the businesses we identify as viable for our objectives, including due to competitive forces in the marketplace beyond our control.
As stated above, at September 30, 2024, the Company had no sources of revenue and has no specific business plan or purpose without significant financing. Therefore, the Company’s business plan is to also seek an acquisition or merger candidate. As a result, the Company is considered a “blank check” or “shell” company. See the Risk Factors included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.
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Critical Accounting Policies and Estimates
We discuss the material accounting policies that are critical in making the estimates and judgments in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, under the caption “Management’s Discussion and Analysis—Critical Accounting Policies and Estimates”. There has been no material change in critical accounting policies or estimates during the period covered by this report.
Recent Accounting Pronouncements
For information on recent accounting pronouncements and impacts, see Note 1 to the unaudited consolidated financial statements.
Three Months Ended September 30, 2024 Compared to the Three Months Ended September 30, 2023
Results of operations
Our operating expenses for the 2024 Quarter was $380,738 compared to $647,078, for the 2023 Quarter, a decrease of 41%. The 2024 Quarter had lower expenses as the Company continues to reduce cost compared to the 2023 Quarter.
Our other expense for the 2024 Quarter was $1,017,534 compared to other expense of $20,323 for the 2023 Quarter. Other expense in the 2024 quarter was comprised of $13,493 in interest expense and $1,279,091 for the loss on the change in fair value of derivative liabilities offset by income of $275,000 on the refund of an equipment deposit. Other expense for the 2023 quarter was comprised of $20,323 in interest expense.
Nine Months Ended September 30, 2024 Compared to the Nine Months Ended September 30, 2023
Results of operations
Our operating expenses for the 2024 Period was $1,102,756 compared to $3,006,483, for the 2023 Period, a decrease of 63%. In the 2024 Quarter, the Company incurred stock-based compensation expense of $0 compared to $1,465,522 for the 2023 Quarter. The stock-based compensation for the 2023 Quarter was related to the amendment of options to the officers of the Company and new options issued to a consultant.
Our other expense for the 2024 Period was $1,062,198 compared to other income of $394,676 for the 2023 Period. Other expense in the 2024 quarter was comprised of $56,045 in interest expense and $1,431,143 for the loss on the change in fair value of derivative liabilities offset by income of $425,000 on the refund of an equipment deposit. Other income for the 2023 quarter was comprised of $42,710 in interest expense, $51,859 in prepayment penalties on the preferred B shares, loss on legal settlement of $9,975, offset by income of $500,000 in deposits from equipment refunds.
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Liquidity and Capital Resources
As of September 30, 2024, Company had approximately $5,000 of cash on hand. Our liquidity was primarily derived from debt and equity investments from accredited investors and the refund of deposits paid to suppliers in 2022. To commence our Tier 3 data center colocation operations and fund operations for the next 12 months, the Company is seeking to raise $2 million in equity capital. We currently have no available sources of capital and we can provide no assurances that any debt financings will be available in the future. Additionally, the Company is (i) in default under the 1800 Notes in the sum of 150% of the remaining outstanding principal balances of the 1800 Notes in the aggregate of approximately $206,000, plus accrued interest and default interest as defined under such notes, (ii) in default under two other notes in the aggregate principal amount of approximately $120,000 and (iii) owes a significant amount of money to its executive officers for accrued salary.
If we fail to close on a debt or equity facility or raise sufficient additional funds from other sources, we will be required to abandon our plan of operations.
The Company has terminated agreements for approximately $1.6 million of debt for equipment that the Company was using for mining and returned the equipment to the vendor to settle the outstanding liabilities. The Company is making no further payments against the potential balance. Subsequent to September 30, 2024, the Company received a debt waiver from the vendor in which they agreed to waive the debt completely with no additional amount owed.
See Note 10 – Subsequent Events to the unaudited consolidated financial statements including in this report.
Summary of cash flows
| September 30, 2024 | September 30, 2023 | |||||||
| Net cash provided by (used in) operating activities | $ | 22,740 | $ | 51,683 | ||||
| Net cash provided by (used in) investing activities | $ | (4,600 | ) | $ | 31,999 | |||
| Net cash provided by (used in) financing activities | $ | (13,275 | ) | $ | (76,109 | ) | ||
During the 2024 Quarter and the 2023 Quarter, our sources and uses of cash were as follows:
Operating Activities
During the 2024 Period, cash provided by operating activities of $22,740 primarily resulted from the refund of prepaid hosting services, offset by the net loss of $2,164,954, change in fair value of derivative liabilities of $1,431,143, increases in accounts payable and accrued expenses of $68,492 and increases in accrued payroll of $653,338.
During the 2023 Period, cash provided by operating activities of $51,683 primarily resulted from the refund of prepaid hosting services, offset by the net loss of $2,611,807 and stock-based compensation of $1,465,522.
Investing Activities
Cash used in investing activities in the 2024 Period of $4,600 resulted from the purchase of cryptocurrency assets.
Cash provided by investing activities in the 2023 Period of $31,999 resulted from the sale of cryptocurrency assets.
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Financing Activities
In the 2024 Period, cash used in financing activities of $13,275 consisted of $30,000 for the repayment of convertible notes payable, offset by proceeds from related party advances of $16,725.
In the 2023 Period, cash used in financing activities of $76,109 consisted of the repayment of Series B preferred shares of $270,549 and payments on convertible notes of $41,560, offset by proceeds from convertible notes payable of $220,000.
| ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Not applicable.
| ITEM 4. | CONTROLS AND PROCEDURES |
Evaluation of Disclosure Controls and Procedures. We are required to maintain “disclosure controls and procedures” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”). Based on their evaluation as of the end of the period covered by this report, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures were not effective to ensure that the information relating to our company, required to be disclosed in our Securities and Exchange Commission (“SEC”) reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure as a result of material weaknesses in our internal control over financial reporting result from limited segregation of duties and limited multiple levels of review in the financial close process, along with a lack of well-established policies and procedures to identify, approve, and report related party transactions.
The continuing weakness resulted in our management’s failure to account for 5,000,000 options to purchase shares of our common stock granted to a consultant with a fair value of approximately $230,000 during the period ended March 31, 2023.
We will continue to monitor our internal control over financial reporting on an ongoing basis and are committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow. We do not, however, expect that the material weaknesses in our disclosure controls will be remediated until such time as we have added additional personnel, including additional accounting and administrative staff, allowing improved internal control over financial reporting.
Changes in Internal Control Over Financial Reporting. There were no changes in our internal control over financial reporting as defined in Rule 13a-15(f) and Rule 15d-15(f) under the Exchange Act that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II – OTHER INFORMATION
| ITEM 1. | LEGAL PROCEEDINGS |
From time to time, the Company may become a party to legal actions or proceedings in the ordinary course of its business. At September 30, 2024, there were no such actions or proceedings, either individually or in the aggregate, that, if decided adversely to the Company’s interests, the Company believes would be material to its operation or cash flow.
| ITEM 1A. | RISK FACTORS |
While we attempt to identify, manage, and mitigate risks and uncertainties associated with our business to the extent practical under the circumstances, some level of risk and uncertainty will always be present. Our “Risk Factors” in the Form 10-K for the fiscal year ended December 31, 2023 describes some of the risks and uncertainties associated with our business, which we strongly encourage you to review. These risks and uncertainties have the potential to materially affect our business, financial condition, results of operations, cash flows, projected results, and future prospects. There have been no material changes in our risk factors from those disclosed in the Form 10-K for the fiscal year ended December 31, 2023.
| ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
There were no unregistered sales of the Company’s equity securities during the 2024 Quarter.
| ITEM 3. | DEFAULTS UPON SENIOR SECURITIES |
None.
| ITEM 4. | MINE SAFETY DISCLOSURES |
Not Applicable.
| ITEM 5. | OTHER INFORMATION |
During the quarter ended September 30, 2024, no
director or officer
| ITEM 6. | EXHIBITS |
The exhibits listed in the accompanying “Index to Exhibits” are filed or incorporated by reference as part of this Form 10-Q.
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.
Dated: March 12, 2025
| EDGEMODE, INC. | |
|
By: /s/ Charlie Faulkner Charlie Faulkner Chief Executive Officer (Principal Executive Officer)
By: /s/Simon Wajcenberg Simon Wajcenberg Chief Financial Officer (Principal Financial and Accounting Officer)\ |
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EXHIBIT INDEX
| Incorporated by Reference |
||||||
| Exhibit No. |
Exhibit Description | Form | Date | Number | Filed or Furnished Herewith | |
| 2.1 | Agreement and Plan of Merger and Reorganization + | 8-K | 12/8/2021 | 2.1 | ||
| 3.1 | Certificate of Incorporation, as Amended and Restated | 10-K | 4/12/2022 | 3.1 | ||
| 3.2 | Bylaws | 8-K | 2/7/2022 | 3.2 | ||
| 3.2(a) | Amendment No. 1 to the Bylaws | 8-K | 4/15/2022 | 3.1 | ||
| 31.1 | CEO Certification (302) | Filed | ||||
| 31.2 | CFO Certification (302) | Filed | ||||
| 32.1 | CEO Certification (906) | Furnished | ||||
| 32.2 | CFO Certification (906) | Furnished | ||||
| 101.INS | XBRL Instance Document | Filed | ||||
| 101.SCH | XBRL Taxonomy Extension Schema Document | Filed | ||||
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | Filed | ||||
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | Filed | ||||
| 101.LAB | XBRL Taxonomy Extension Label Linkbase Document | Filed | ||||
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | Filed | ||||
| 104 | Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101) | |||||
+ Exhibits and/or Schedules have been omitted. The Company hereby agrees to furnish to the Staff of the Securities and Exchange Commission upon request any omitted information. Copies of this filing (including the financial statements) and any of the exhibits referred to above will be furnished at no cost to our shareholders who make a written request to Edgemode, Inc., 110 E. Broward Blvd., Suite 1700, Ft. Lauderdale, FL 33301; Attention: Corporate Secretary.
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