Item 1A. Risk Factors
Any investment in our securities involves a high
degree of risk. Investors should carefully consider the risks described below and all of the information contained in this filing before
deciding whether to purchase our securities. Our business, financial condition and results of operations could be materially adversely
affected by these risks if any of them actually occur. This filing also contains forward-looking statements that involve risks and uncertainties.
Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors,
including the risks we face as described below and elsewhere in this report.
There is substantial doubt about our ability to continue operating
as a going concern.
We have experienced losses from operations
since inception and have never generated positive cash flow. The success of our business plan during the next 12 months and beyond
will be contingent upon obtaining sufficient financing to cover our operating costs and business plan initiatives. This is because
we do not anticipate generating any revenue from operations nor being able to raise capital (prior to consummating a business
combination). As of December 31, 2023, the Company had approximately $1,600,000 of outstanding debt, not including interest,
penalties and other fees due under the notes. The reports from our independent registered public accounting firm for the fiscal year
ended December 31, 2023, and prior years include an explanatory paragraph stating the Company has recurring net losses from
operations, negative operating cash flows, does not yet generate revenue from operations and will need additional working capital
for ongoing operations. These factors, among others, raise substantial doubt about the Company's ability to continue as a going
concern. If we are unable to obtain sufficient funding and/or generate material revenue to fund our operations and business plan,
our business, prospects, financial condition and results of operations will be materially and adversely affected, we may be unable
to continue as a going concern in which case you in turn would lose your investment.
We currently have no operations, and investors therefore have no
basis on which to evaluate the Company’s future prospects.
We currently have no operations and will be reliant
upon a merger with or acquisition of an operating business to commence operations and generate material revenue. Because we have little
operations, investors have no basis upon which to evaluate our ability to achieve our business objective of locating and completing a
business combination with a target business. We have no current arrangements or understandings with any prospective target business concerning
a business combination and may be unable to complete a business combination in a reasonable timeframe, on reasonable terms or at all.
If we fail to complete a business combination as planned, we will never generate any operating revenues.
We may face difficulties or delays in our search for a business
combination, and we may not have access to sufficient capital to consummate a business combination.
We may face difficulty identifying a viable business
opportunity or negotiating or paying for any resulting business combination. Economic factors that are beyond our control, including the
economic downturns, as well as increased competition for acquisitions of operating entities that we expect to encounter as a result thereof,
may hinder our efforts to locate and/or obtain a business that is suitable for our business goals at a price we can afford and on terms
that will enable us to sufficiently grow our business to generate value to our shareholders. We have no capital, and we may not be able
to take advantage of any available business opportunities on favorable terms or at all due to the limited availability of capital. There
can be no assurance that we will have sufficient capital to provide us with the necessary funds to successfully develop and implement
our plan of operation or acquire a business we deem to be appropriate or necessary to accomplish our objectives, in which case we may
be forced to terminate our business plan and your investment in the Company could become worthless.
If we are not successful in acquiring a new business and generating
material revenues, investors will likely lose their investment.
If we are not successful in developing a viable
business plan and acquiring a new business through which to implement it, our investors’ entire investment in the Company could
become worthless. Even if we are successful in combining with or acquiring the assets of an operating entity, we can provide no assurances
that the Company will be able to generate significant revenue therefrom in the short-term or at all or that investors will derive a profit
from their investment. If we are not successful, our investors will likely lose their entire investment.
Because we have no capital, we may need to raise additional capital
in the future by issuing debt or equity securities, the terms of which may dilute our current investors and/or reduce or limit their liquidation
or other rights.
We may require additional capital to acquire a
business. We may not be able to obtain additional capital when required. Future business development activities, as well as administrative
expenses such as salaries, insurance, general overhead, legal and compliance expenses and accounting expenses will require a substantial
amount of additional capital. The terms of securities we issue in future capital raising transactions may be more favorable to new investors,
and may include liquidation preferences, superior voting rights or the issuance of other derivative securities, which could have a further
dilutive effect on or subordinate the rights of our current investors. Any additional capital raised through the sale of equity securities
will likely dilute the ownership percentage of our shareholders. Additionally, any debt securities we issue would likely create a liquidation
preference superior that of our current investors and, if convertible into shares of common stock, would also pose the risk of dilution.
We may encounter difficulty locating and consummating a business
combination, including as a result of the competitive disadvantages we have.
We expect to face intense competition in our search
for a revenue-producing business to combine with or acquire. Given the current economic climate, venture capital firms, larger companies,
blank check companies such as special purpose acquisition companies and other investors are purchasing operating entities or the assets
thereof in high volumes and at relatively discounted prices. These parties may have greater capital or human resources than we do and/or
more experience in a particular industry within which we choose to search. Most of these competitors have a certain amount of liquid cash
available to take advantage of favorable market conditions for prospective business purchaser such as those caused by the recent pandemic.
Any delay or inability to locate, negotiate and enter into a business combination as a result of the relative illiquidity of our current
asset or other disadvantages we have relative to our competitors could cause us to lose valuable business opportunities to our competitors,
which would have a material adverse effect on our business.
We may expend significant time and capital on a prospective business
combination that is not ultimately consummated.
The investigation of each specific target business
and any subsequent negotiation and drafting of related agreements, SEC disclosure and other documents will require substantial amounts
of management’s time and attention and material additional costs in connection with outsourced services from accountants, attorneys
and other professionals. We will likely expend significant time and resources searching for, conducting due diligence on, and negotiating
transaction terms in connection with a proposed business combination that may not ultimately come to fruition. Unanticipated issues which
may be beyond our control or that of the seller of the applicable business may arise that force us to terminate discussions with a target
company, such as the target’s failure or inability to provide adequate documentation to assist in our investigation, a party’s
failure to obtain required waivers or consents to consummate the transaction as required by the inability to obtain the required audits,
applicable laws, charter documents and agreements, the appearance of a competitive bid from another prospective purchaser, or the seller’s
inability to maintain its operations for a sufficient time to allow the transaction to close. Such risks are inherent in any search for
a new business and investors should be aware of them before investing in an enterprise such as ours.
We may engage in a business combination that causes tax consequences
to us and our shareholders.
Federal and state tax consequences will, in all
likelihood, be a significant factor in considering any business combination that we may undertake. Under current federal law, such transactions
may be subject to significant taxation to the buyer and its shareholders under applicable federal and state tax laws. While we intend
to structure any business combination so as to minimize the federal and state tax consequences to the extent practicable in accordance
with our business objectives, there can be no assurance that any business combination we undertake will meet the statutory or regulatory
requirements of a tax-free reorganization or similar favorable treatment or that the parties to such a transaction will obtain the tax
treatment intended or expected upon a transfer of equity interests or assets. A non-qualifying reorganization, combination or similar
transaction could result in the imposition of significant taxation, both at the federal and state levels, which may have an adverse effect
on both parties to the transaction, including our shareholders.
It is unlikely that our shareholders will be afforded any opportunity
to evaluate or approve a business combination.
It is unlikely that our shareholders will be afforded
the opportunity to evaluate and approve a proposed business combination. In most cases, business combinations do not require shareholder
approval under applicable law, and our Articles of Incorporation and Bylaws do not afford our shareholders with the right to approve such
a transaction. In order to develop and implement our business plan, we may in the future hire lawyers, accountants, technical experts,
appraisers, or other consultants to assist with determining the Company’s direction and consummating any transactions contemplated
thereby. We may rely on such persons in making difficult decisions in connection with the Company’s future business and prospects.
The selection of any such persons will be made by our Board, and any expenses incurred, or decisions made based on any of the foregoing
could prove to be adverse to the Company in hindsight, the result of which could be diminished value to our shareholders.
We may attempt to complete a business combination with a private
target company about which little information is available, and such target entity may not generate revenue as expected or otherwise by
compatible with us as expected.
In pursuing our search for a business to acquire,
we will likely seek to complete a business combination with a privately held company. Very little public information generally exists
about private companies, and the only information available to us prior to making a decision may be from documents and information provided
directly to us by the target company in connection with the transaction. Such documents or information or the conclusions we draw therefrom
could prove to be inaccurate or misleading. As such, we may be required to make our decision on whether to pursue a potential business
combination based on limited, incomplete or faulty information, which may result in our subsequent operations generating less revenue
than expected, which could materially harm our financial condition and results of operations.
Our ability to assess the management of a prospective target business
may be limited and, as a result, we may acquire a target business whose management does not have the skills, qualifications or abilities
to enable a seamless transition, which could, in turn, negatively impact our results of operations.
When evaluating the desirability of a potential
business combination, our ability to assess the target business’s management may be limited due to a lack of time, resources or
information. Our management’s assessment of the capabilities of the target’s management, therefore, may prove to be incorrect
and such management may lack the skills, qualifications or abilities expected. Further, in most cases the target’s management may
be expected to want to manage us and replace our Chief Executive Officer. Should the target’s management not possess the skills,
qualifications or abilities necessary to manage a public company or assist with their former entity’s merger or combination into
ours, the operations and profitability of the post-acquisition business may be negatively impacted, and our shareholders could suffer
a reduction in the value of their shares.
Changes in laws or regulations, or a failure to comply with the
laws and regulations applicable to us, may adversely affect our business, ability to negotiate and complete a business combination, and
results of operations.
We are subject to laws and regulations enacted
by federal, state and local governments. In addition to SEC regulations, any business we acquire in the future may be subject to substantial
legal or regulatory oversight and restrictions, which could hinder our growth and expend material amounts on compliance. Compliance with,
and monitoring of, applicable laws and regulations may be difficult, time consuming and costly. Those laws and regulations and their interpretation
and application by courts and administrative judges may also change from time to time, and any such changes could be unfavorable to us
and could have a material adverse effect on our business, investments and results of operations. In addition, a failure to comply with
applicable laws or regulations, as interpreted and applied, could result in material defense or remedial costs and/or damages have a material
adverse effect on our financial condition.
Future issuance of our common stock could dilute the interests of
our existing shareholders, particularly in connection with an acquisition and any resulting financing.
We may issue additional shares of our common stock
in the future. The issuance of a substantial amount of our common stock could substantially dilute the interests of our shareholders.
In addition, the sale of a substantial amount of common stock in the public market, either in the initial issuance or in a subsequent
resale by the target company in a business combination which received our common stock as consideration or by investors who has previously
acquired such common stock could have an adverse effect on the market price of our common stock.
Our registration under the Securities Exchange Act of 1934 could
be revoked by the Securities and Exchange Commission if we fail to file required reports.
If we fail to file reports as required under the
Exchange Act, we may lose our registration. While we intend to comply with the Exchange Act’s reporting requirements moving forward,
due to lack of working capital we may be unable to comply in the future as we did in the past. If we are unable to comply with the SEC
reporting provisions in the future, such failure will affect the liquidity of our common stock and act as a depressant to the price.
Due to recent changes to Rule 15c2-11 under the Exchange Act, our
common stock may become subject to limitations or reductions on stock price, liquidity or volume.
On September 16, 2020, the SEC adopted amendments
to Rule 15c2-11 under the Exchange Act. This Rule applies to broker-dealers who quote securities listed on over-the-counter markets such
as our common stock. The Rule as amended prohibits broker-dealers from publishing quotations on OTC markets for an issuer’s securities
unless they are based on current publicly available information about the issuer. When it becomes effective, the amended Rule will also
limit the Rule’s “piggyback” exception, which allows broker-dealers to publish quotations for a security in reliance
on the quotations of a broker-dealer that initially performed the information review required by the Rule, to issuers with current publicly
available information or issuers that are up to date in their Exchange Act reports. As of this date, we are uncertain as to what actual
effect the Rule may have on us. The Rule changes could harm the liquidity and/or market price of our common stock by either preventing
our shares from being quoted or driving up our costs of compliance.
We are subject to the “penny stock” rules
which will adversely affect the liquidity of our common stock.
The SEC has adopted regulations which generally
define “penny stock” to be an equity security that has a market price of less than $5.00 per share, subject to specific exemptions.
We do not expect our stock price to be above $5.00 in the foreseeable future. The “penny stock” designation will require any
broker-dealer selling our securities to disclose certain information concerning the transaction, obtain a written agreement from the purchaser
and determine that the purchaser is reasonably suitable to purchase the securities. These rules will limit the ability of broker-dealers
to solicit purchases of our common stock and therefore reduce the liquidity of the public market for our shares.
Broker-dealers are increasingly reluctant to permit
investors to buy or sell speculative unlisted stock and often impose costs which make it uneconomical for small shareholders to do so.
Moreover, as a result of apparent regulatory pressure from the SEC and the Financial Industry Regulatory Authority (“FINRA”),
a growing number of broker-dealers decline to permit investors to purchase and sell or otherwise make it difficult to sell shares of penny
stocks. The “penny stock” designation may have a depressive effect upon our common stock price.
The issuance of shares upon exercise of our outstanding options
or warrants or the conversion of the outstanding promissory notes may cause immediate and substantial dilution to our existing shareholders.
We presently have options and warrants that if
exercised would result in the issuance of an additional 402,814,669 shares of our common stock, and our outstanding convertible notes
are presently convertible into approximately 179,123,056 shares of common stock. However, 307,239,206 of the outstanding options are only
exercisable upon the company reaching certain capital purchasing requirements. The issuance of shares upon exercise of warrants and options
and/or the conversion of shares underlying our convertible notes will result in dilution to the interests of other shareholders.
We are a shell company and as such shareholders can only rely on
the provisions of Rule 144 for the resale of their shares when certain conditions are met.
We are a shell company as defined under Rule 405
of the Securities Act of 1933 (“Securities Act”). As securities issued by a former shell company, the securities issued by
us can only be resold under Rule 144 when certain conditions are met, including that: (i) we are subject to the reporting requirements
of Section 13 or 15(d) of the Exchange Act and (ii) we have filed all required reports under the Exchange Act of the preceding
12 months.
Item 1B. Unresolved Staff Comments.
None.
Item 1C. Cybersecurity.
We are a “blank check” company with
no business operations. Since late 2023, our sole business activity has been identifying and evaluating suitable acquisition transaction
candidates. Therefore, we do not consider that we face significant cybersecurity risk and have not adopted any cybersecurity risk management
program or formal processes for assessing cybersecurity risk. Our board of directors is generally responsible for the oversight of risks
from cybersecurity threats, if any.
Item 2. Properties.
We maintain our corporate offices at 110 East
Broward Blvd, Fort Lauderdale, Florida. We lease these premises under a monthly rental agreement at a nominal cost.
Item 3. Legal Proceedings.
On October 20, 2023 the Company received notice
from 1800 Diagonal Lending LLC, the holder of the April Promissory Note, Convertible Note and August Promissory Note (collectively, the
“1800 Notes”) that such notes were in default. The holder has made demand for the immediate payment of the 1800 Notes of a
sum representing 150% of the remaining outstanding principal balances of the 1800 Notes in the aggregate of $250,008.99, together with
accrued interest and default interest as provided for in the 1800 Notes. As a result of the default, the 1800 Notes are convertible into
common stock.
Item 4. Mine Safety Disclosures
Not applicable.
PART II
Our common stock is quoted on the OTC Pink Markets
under the symbol “EDGM”. Our common stock was previously quoted under the symbol “FWAV.” As of April 25, 2024,
the last reported sale price of our common stock as reported by the OTC Markets was $0.002 per share. As of that date, there were approximately
200 shareholders of record. This number does not include beneficial owners whose shares are held in the names of various securities brokers,
dealers and registered clearing agencies.
Recent Sales of Unregistered Securities
None.
Item 6. [Reserved]
The following discussion and analysis should be
read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this report on Form 10-K.
Overview
The Company currently has no sources of revenue
and absent significant financing to fund Bitcoin mining operations, has no specific business plan or purpose. The Company’s business
plan is to seek a business combination. The evaluation and selection of a business opportunity is a complex and uncertain process, and
the Company not yet identified a target operating business for acquisition. 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. There is no assurance that we will be able to locate
compatible business opportunities for the Company.
12 Months Ended December 31, 2023 (“2023 Period”) Compared
to the 12 Months Ended December 31, 2022 (“2022 Period”).
Results of operations
We had no revenues for the 2023 Period compared
to $438,042 for the 2022 Period. The reason for the decrease was that we ceased Ethereum mining operations in September 2022 when Ethereum
switched its consensus protocol to proof of stake.
We had no cost of revenues for the 2023 Period
compared to $812,882 for the 2022 Period. The reason for the decrease was a decrease in hosting fees incurred as a result of the power
outages and seizing of Ethereum mining operations in September 2022.
Our operating expenses for the 2023 Period was
$3,133,679 compared to $31,014,864, for the 2022 Period. In the 2023 Period, the Company incurred stock-based compensation expense of
$1,236,487 compared to $24,582,181 for the 2022 Period, along with decreased loss on cryptocurrencies due to decreased transactions and
changes in market prices.
Our other income for the 2023 Period was $347,933
compared to other expense of $856,293 for the 2022 Period. Other income for the 2023 period was comprised primarily of $700,000 related
to a refund of equipment deposit offset by interest expense of $346,162 and a prepayment penalty on the preferred B shares of $51,859.
Other expense for the 2022 Period was comprised of $148,119 in interest expense and $708,174 in loss related to the termination of a prepaid
hosting arrangement
Subject to receiving funding, we expect that our
operating expenses will increase as we attempt to develop our new mining operations and we devote additional resources toward new business
opportunities. However, as set forth elsewhere in this report, our ability to develop our business and achieve our operational goals is
dependent upon our ability to raise significant additional working capital. As the availability of this capital is unlikely and we are
unable to quantify at this time the expected increases in operating expenses in future periods.
Liquidity and Capital Resources
As of April 26, 2024, the Company had approximately
$3,500 of cash. Our liquidity was primarily derived from debt and equity investments from accredited investors and also from selling the
crypto that we mined through September 2022. To recommence our mining operations and fund operations for the next 12 months, the Company
is seeking to raise $45 million in debt facility. We currently have no available sources for capital and we can provide no assurances
that any debt financings will be available in the future. Therefore, we primarily intend to seek a business combination.
We have suspended our operations. If we fail to
close on a debt facility or raise sufficient additional funds from other sources, we will be required to abandon our plan of operations.
The Company has terminated the 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. No confirmation has been received
from 2CRSI and as such the balance remains outstanding on the Company’s balance sheet in the accompanying financial statements.
Convertible notes payable
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 $60,760 (the “April Promissory Note”). The
Company received net proceeds of $50,000 in consideration of issuance of the April Promissory Note after original issue discount
of $6,510 and legal fees of $4,250. The aggregate debt discount of $10,760 is being amortized to interest expense over the respective
term of the note. The April Promissory Note shall incur a one-time interest charge of 13%, which is added to the principal balance,
has a maturity date of March 11, 2024, and requires monthly payments of $7,629 beginning on September 15, 2023. The
April Promissory Note is convertible into common shares of the Company upon an event of default, at a rate of 71% of the lowest price
for the preceding 20 trading days. In addition, upon default, the Company must repay an amount equal to 150% of the then outstanding amount
of principal and accrued interest combined. As of the date of filing, the note is in default. In addition, on April 11, 2023,
the Company entered into an additional Securities Purchase Agreement effective April 20, 2023 with the above investor, pursuant to which
the Company sold the investor an unsecured promissory note in the principal amount of $56,962 (the “Convertible Note”),
bears interest at a rate of 8%, or 22% in the event of default, and matures on April 11, 2024. The Company received net proceeds
of $50,000 in consideration of issuance of the Convertible Note after original issue discount of $2,712 and legal fees of $4,250.
The aggregate debt discount of $6,962 is being amortized to interest expense over the respective term of the note. The Convertible Note
is convertible into common shares of the Company beginning on the sixth-month anniversary, at a rate of 65% of the average of the three
lowest prices for the preceding 15 trading days. In addition, upon default, the Company must repay an amount equal to 150% of the then
outstanding amount of principal and accrued interest combined. As of December 31, 2023, the balance on the notes is $136,701. The notes
are in default.
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 $60,000. The Company received net proceeds of $60,000 in consideration of issuance of the Promissory Note.
The Promissory Note shall bear interest at a rate of 10% and have a maturity date of May 26, 2023. The Promissory Note has a
prepayment percentage of 130% for the period beginning on the issuance date and ending on the maturity date. As of December 31, 2023,
the balance on the note is $60,000. The note is past due.
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 $57,502 Promissory Note. The Company received gross proceeds of
$57,502 in consideration of issuance of the Promissory Note. The Promissory Note shall bear interest at a rate of 10% and
have a maturity date of May 26, 2023. The Promissory Note has a prepayment percentage of 130% for the period beginning on the
issuance date and ending on the maturity date. As of December 31, 2023, the balance on the note is
$57,502. The note is past due.
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. 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.
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 $71,450 (the “August Promissory Note”).
The Company received net proceeds of $60,000 in consideration of issuance of the August Promissory Note after original issue discount
of $7,200 and legal fees of $4,250. The aggregate debt discount of $11,450 is being amortized to interest expense over the respective
term of the note. The August Promissory Note shall incur a one-time interest charge of 13%, which is added to the principal balance,
has a maturity date of May 24, 2024, and requires monthly payments of $8,971 beginning on September 15, 2023. The
August Promissory Note is convertible into common shares of the Company at any time following an event of default at a rate of 71% of
the lowest trading price of the Company’s common stock during the twenty prior trading days. In addition, upon default, the Company
must repay an amount equal to 150% of the then outstanding amount of principal and accrued interest combined. As of December 31, 2023,
the balance on the note is $99,529. The note is in default.
On October 20, 2023 the Company received notice
from 1800 Diagonal Lending LLC, the holder of the April Promissory Note, Convertible Note and August Promissory Note (collectively, the
“1800 Notes”) that such notes were in default. The holder has made demand for the immediate payment of the 1800 Notes of a
sum representing 150% of the remaining outstanding principal balances of the 1800 Notes in the aggregate of $250,008.99, together with
accrued interest and default interest as provided for in the 1800 Notes. As a result of the default, the 1800 Notes are convertible into
common stock.
Summary of cash flows
Net cash provided by (used in) operating activities $ 42,237 $ (2,169,308 )
Net cash provided by (used in) investing activities $ 34,100 $ 1,047,473
Net cash provided by (used in) financing activities $ (76,109 ) $ 1,097,963
Critical accounting policies
See Note 2 to the December 31, 2023 financial
statements included as part of this report for a discussion of our Significant Accounting Policies.
Recent Accounting Pronouncements
The Company does not believe that any recently
issued effective pronouncements, or pronouncements issued but not yet effective, if adopted, would have a material effect on the accompanying
financial statements.
Off Balance Sheet Arrangements
As of the date of this report, we do not have
any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes
in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material
to investors. The term “off-balance sheet arrangement” generally means any transaction, agreement or other contractual arrangement
to which an entity unconsolidated with us is a party, under which we have any obligation arising under a guarantee contract, derivative
instrument or variable interest or a retained or contingent interest in assets transferred to such entity or similar arrangement that
serves as credit, liquidity or market risk support for such assets.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable for a smaller reporting company.
Item 8. Financial Statements and Supplementary Data.
F-1 Report of Independent Registered Public Accounting Firm
F-2 Consolidated Balance Sheets as of December 31, 2023 and 2022
F-6 Notes to Consolidated Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
To the Board of Directors and
Stockholders of Edgemode, Inc.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated
balance sheets of Edgemode, Inc. (the Company) as of December 31, 2023 and 2022, and the related consolidated statements of operations,
changes in stockholders’ equity (deficit), and cash flows for each of the years in the two-year period ended December 31, 2023,
and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated
financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022,
and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2023 in conformity
with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying consolidated financial statements
have been prepared assuming the Company will continue as a going concern. As discussed in Note 3 to the consolidated financial statements,
the company has incurred recurring losses from operations and had not yet achieved profitable operations as of December 31, 2023 which
raises substantial doubt about its ability to continue as a going concern. Management’s plans regarding these matters are also described
in Note 3. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the
responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial
statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United
States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and
the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the
standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we
engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding
of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess
the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide
a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matter communicated below is
a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated
to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and
(2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter
in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit
matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.
Derivatives Arising from Convertible Notes
The valuation of derivative liabilities arising
from convertible notes payable represents a significant aspect of the audit due to its materiality and the complexity involved in its
assessment. These liabilities are recognized based on the fair value of embedded conversion features associated with convertible notes.
The determination of fair value necessitates intricate valuation models, incorporating various assumptions, which are inherently subjective
and involve substantial management judgment.
To form our overall opinion on the financial
statements, our audit procedures included assessing the reasonableness of key inputs used in the company’s valuation models, evaluating
the appropriateness of management's valuation methodologies and assumptions, and assessing the impact of changes in these inputs on the
fair value measurement. We also performed sensitivity analyses to inspect the potential effects of variations in key assumptions on the
reported fair value of the derivative liabilities.
Given the significance of these liabilities
to the financial statements and the complexity inherent in their valuation, our audit required significant auditor judgment and involved
challenging evaluations of subjective inputs.
/s/ M&K CPAS, PLLC
PCAOB ID 2738
We have served as the Company’s auditor since 2021.
The Woodlands, TX
April 26, 2024
Edgemode, Inc.
Consolidated Balance Sheets
ASSETS
Current assets:
Prepaid expenses and other current assets 20,258 27,638
Prepaid hosting services – 894,355
Deferred offering costs – 264,706
Intangible assets - cryptocurrencies 32 2,630
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accrued dividends – 6,190
Notes payable – related parties 16,000 –
Convertible notes payable 342,501 –
Derivative liabilities 197,090 –
Series B preferred shares liability, net – 205,226
Commitments and contingencies – –
Stockholders' deficit:
Total liabilities and stockholders' deficit $ 20,588 $ 1,189,399
The accompanying notes are an integral part of
these consolidated financial statements.
Edgemode, Inc.
Consolidated Statements of Operations
For the Year Ended
Operating expenses:
Loss on sale of equipment and impairment – 3,075,748
Other income (expense):
Penalty on prepayment of Preferred B shares (51,859 ) –
Refund of equipment deposit 700,000 –
Change in fair value of derivatives 6,709 –
Loss on settlement (9,975 ) –
Gain on settlement of liabilities 50,000 –
Provision for income taxes – –
Loss per common share - basic and diluted $ (0.01 ) $ (0.09 )
The accompanying notes are an integral part of
these consolidated financial statements.
Edgemode, Inc.
Consolidated Statements of Changes in Stockholders’
Equity (Deficit)
For the years ended December 31, 2023 and 2022
Mezzanine Equity Total
Preferred Common Additional Stockholders’
Preferred Stock Common Stock Paid-In Accumulated Equity
Shares Amount Shares Amount Capital Deficit (Deficit)
Common shares cancelled pursuant to SEC Legal case – – (13,889 ) (14 ) 14 – –
The accompanying notes are an integral part of
these consolidated financial statements.
Edgemode, Inc.
Consolidated Statements of Cash Flows
For the Year Ended
Operating Activities:
Interest expense on principal default 88,618 95,926
Interest expense charge for day one derivative loss 203,799 –
Prepayment on penalty of Preferred B shares 51,859 –
Change in fair value of derivative liabilities (6,709 ) –
Loss on sale of equipment and impairment – 3,075,748
Cryptocurrency used for compensation – 144,423
Loss on settlement 9,975 –
Gain on settlement of liabilities (50,000 ) –
Loss on prepaid hosting termination – 691,942
Changes in operating assets and liabilities:
Prepaid expenses and other current assets – related parties – (7,500 )
Cryptocurrencies - mining – (438,042 )
Lease liabilities – –
Net cash provided by (used in) operating activities 42,237 (2,169,308 )
Investing Activities:
Cash acquired in acquisition – 743,513
Purchase of equipment – (245,976 )
Proceeds from sale of equipment – 60,000
Financing Activities:
Proceeds from issuance of common shares, net of offering costs – 566,015
Proceeds from subscription receivable – 158,850
Proceeds from issuance of preferred shares, net of offering costs – 201,250
Payments on equipment notes payable – (208,152 )
Proceeds from related party advances 16,000 –
Payments of convertible notes (41,560 ) –
Payments on notes payable (270,549 ) –
Net cash provided by (used in) financing activities (76,109 ) 1,097,963
Cash - beginning of period 70 23,942
Cash - end of period $ 298 $ 70
Supplemental Disclosures:
Income taxes paid $ – $ –
Supplemental Disclosures of Noncash Financing Information:
Shares issued for deferred financing costs $ – $ 264,706
Shares issued for cryptocurrency assets $ – $ 50,000
Conversion of preferred shares into common shares $ – $ 384,573
Common shares cancelled pursuant to SEC legal case $ – $ 14
Convertible notes issued in exchange for cryptocurrency $ 57,502 $ –
Note payable issued in exchange for cryptocurrency $ 50,142 $ –
Repayment of note payable using cryptocurrency $ 50,142 $ –
Cryptocurrency used to pay accrued salaries $ 11,888 $ –
Cryptocurrency used to pay accounts payable $ 4,005 $ –
The accompanying notes are an integral part of
these consolidated financial statements.
Edgemode, Inc.
Notes to the Consolidated Financial Statements
Note 1. Basis of Presentation
Edgemode, Inc. (“we”, “our”,
the “Company”) was incorporated in Nevada on January 21, 2011. Since its incorporation, the Company has attempted to become
involved in a number of prior business ventures, all of which were unsuccessful and which it has abandoned. After the merger described
below, the Company became a cryptocurrency mining company and is currently in the process of purchasing cryptocurrency mining equipment
to restart its mining operations.
On March 16, 2020 we acquired all of the outstanding
shares of Fourth Wave Energy, Inc., a Colorado corporation (“FWI”), for 6,200,000 restricted shares of our common stock. On
March 20, 2020, shareholders owning a majority of the Company’s outstanding shares of common stock amended the Company’s Articles
of Incorporation to change the name of the Company from Pierre Corp. to Fourth Wave Energy, Inc.
Effective January 31, 2022 (the “Effective
Time”), the Company, FWAV Acquisition Corp., a Wyoming corporation and wholly owned subsidiary of the Company (the “Acquisition
Subsidiary”) and EdgeMode, a Wyoming corporation (“EdgeMode”) closed on the previously disclosed Agreement and Plan
of Merger and Reorganization dated December 2, 2021 (the “Merger Agreement”). In accordance with the Merger Agreement, Acquisition
Subsidiary merged with and into EdgeMode (the “Merger” or “Transaction”), with EdgeMode remaining as the surviving
entity after the Merger and becoming a wholly owned subsidiary of the Company. In the Merger, the shares of common stock, no par value
per share, of EdgeMode issued and outstanding immediately prior to the Effective Time, represent 80% of the Company’s outstanding
common stock on a fully diluted basis (or 313,950,672 shares of common stock). Furthermore, pursuant to the terms of the Merger the Company’s
sole shareholder of the Company’s preferred stock converted such shares into 1,000 shares of common stock.
Joseph Isaacs, the Company’s sole officer
and director resigned as an executive officer and director. Pursuant to the terms of the Merger Mr. Isaacs will provide services to the
Company in a consultancy capacity at a fee of $11,500 per month and has been issued a stock option grant to purchase up to 19,987,095
shares of the Company’s common stock, vesting in 90 days, at an exercise price of $0.40 per share. The consulting agreement may
be terminated by the Company without cause after three months. In addition, Mr. Isaacs received a $250,000 cash bonus and the Company
entered into a contract with a company owned by Joe Isaacs to perform services for total value of $240,000. Charlie Faulkner and Simon
Wajcenberg, the principals of EdgeMode, were appointed as directors and executive officers.
Simultaneously with the Merger, approximately
$4,574,132 of principal and interest of outstanding notes previously issued by the Company automatically converted into an aggregate of
18,296,528 shares of the Company’s common stock issued to 31 former noteholders. In addition, the Company has repaid approximately
$988,000 of principal amount of notes. At the Effective Time the Company has nominal liabilities, excluding the debt and liabilities of
EdgeMode.
The merger was accounted for as a reverse merger,
whereby EdgeMode was considered the accounting acquirer and became our wholly-owned subsidiary. In accordance with the accounting treatment
for a “reverse merger”, the Company’s historical financial statements prior to the reverse merger has been replaced
with the historical financial statements of EdgeMode prior to the reverse merger. The financial statements after completion of the reverse
merger include the assets, liabilities, and results of operations of the combined company from and after the closing date of the reverse
merger, with only certain aspects of pre-consummation stockholders’ equity remaining in the consolidated financial statements.
On June 3, 2022 the Company changed its name from
Fourth Wave Energy Inc. to Edgemode, Inc.
Note 2. Summary of Significant Accounting
Policies
Basis of Presentation
The accounting and reporting policies of the Company
conform to accounting principles generally accepted in the United States of America (“US GAAP”). The accompanying financial
statements include all the information and notes required by GAAP for complete financial statements. In the opinion of management, all
adjustments considered necessary for the fair presentation of the financial statements for the years presented have been included.
Principles 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.
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.
Risks and Uncertainties
The Company's business and operations are sensitive
to general business and economic conditions in the United States and other countries that the Company operates in. A host of factors beyond
the Company's control could cause fluctuations in these conditions. Adverse conditions may include recession, downturn or otherwise, local
competition or changes in consumer taste. These adverse conditions could affect the Company's financial condition and the results of its
operations.
Cash and Cash Equivalents
The Company considers short-term, highly liquid
investment with original maturities of three months or less at the time of purchase to be cash equivalents. Cash consists of funds held
in the Company’s checking account.
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):
The following fair value hierarchy table presents
information about the Company’s liabilities measured at fair value on a recurring basis:
Schedule of liabilities measured at fair value on recurring basis
Fair Value Measurements at December 31, 2023
Level 1 Level 2 Level 3
Liabilities:
Derivative liabilities $ – $ – $ 197,090
The Company had no assets valued using level 1,
level 2, or level 3 inputs as of December 31, 2023.
The Company had no assets or liabilities valued
using level 1, level 2, or level 3 inputs as of December 31, 2022.
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.
Income Taxes
Income taxes are provided for the tax effects
of transactions reporting in the financial statements and consist of taxes currently due plus deferred taxes related primarily to differences
between the basis of receivables, inventory, property and equipment, intangible assets, and accrued expenses for financial and income
tax reporting. The deferred tax assets and liabilities represent the future tax return consequences of those differences, which will either
be taxable or deductible when the assets and liabilities are recovered or settled. Deferred tax assets are reduced by a valuation allowance
when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.
Any deferred tax items of the Company have been fully valued based on the determination of the Company that the utilization of any deferred
tax assets is uncertain.
The Company complies with FASB ASC 740 for accounting
for uncertainty in income taxes recognized in a company’s financial statements, which prescribes a recognition threshold and measurement
process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those
benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. FASB ASC
740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.
Based on the Company’s evaluation, it has been concluded that there are no significant uncertain tax positions requiring recognition
in the Company’s financial statements. The Company believes that its income tax positions would be sustained on audit and does not