Edgemode, Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Conditions and Results of Operations The following discussion and analysis by our management of our financial condition and results of operations should be read in conjunction with our unaudited condensed interim financial statements and the accompanying related notes included in this quarterly report and our audited financial statements and related notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the Securities and Exchange Commission. Cautionary Statement Regarding Forward-Looking Statements This report may contain forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act, and we intend that such forward-looking statements be subject to the safe harbors created thereby. These forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. Any such forward-looking statements would be contained principally in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Forward-looking statements include information concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, industry environment, potential growth opportunities and the effects of regulation. Forward-looking statements include all statements that are not historical facts and can be identified by terms such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “hopes,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would” or similar expressions. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our management’s beliefs and assumptions only as of the date of this report. You should read this report and the documents that we reference in this report, completely and with the understanding that our actual future results may be materially different from what we expect. Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future. Overview Unless otherwise indicated or the context otherwise requires, all references in this Form 10-Q to “we,” “us,” “our,” “our company,” “Fourth Wave” or the “Company” refer to Fourth Wave, Inc. We were incorporated in Nevada on January 21, 2011. Since our incorporation, we have attempted to become involved in a number of business ventures, all of which were unsuccessful and which we have abandoned. Fourth Wave Energy/ Spin-Off On March 16, 2020 we acquired all of the outstanding shares of Fourth Wave Energy, Inc. (“FWI”) for 6,200,000 restricted shares of our common stock. FWI has designed an energy system which is based on combining solar power and other energy efficient technologies into one fully integrated system (the "GSP System"). The GSP System is designed to significantly reduce energy consumption and associated carbon emissions in residences and commercial buildings. In connection with this acquisition, we entered into consulting agreements with certain founders of FWI. The consulting agreements required us to collectively pay $379,500 in consulting fees during the terms of the consulting agreements, all but one of which expired between May 31 and June 30, 2020. One consulting agreement was for a twelve month period and expired in March of 2021. 16 We no longer plan to pursue the GSP System. As a result, on March 10, 2021, we transferred all of the rights to the GSP System to GeoSolar Technologies, Inc. (“GST”) in exchange for 10,000,000 shares of GST's common stock. We plan to distribute ("Spin-Off") these shares to our shareholders on the basis of one share of GST's common stock for each four shares held by each of our shareholders. As a part of this transaction, the consultants referred to above agreed to release the Company from any liability for any consulting fees owed to them by the Company and return a portion of the common shares they held. During the nine months ended September 30, 2021, 4,700,000 shares of the Company's common stock were returned to the Company and cancelled. The date for determining which of our shareholders will receive shares of GST in the Spin-Off will be determined shortly. Edgemode, Inc. On August 20, 2021 the Company entered into a non-binding Letter of Intent with EdgeMode, Inc. Pursuant to the Letter of Intent, the Company will, at the closing, acquire all of the issued and outstanding shares of EdgeMode for that number of shares of the Company's common stock which, at closing, will represent 80% of the Company's outstanding shares of common stock. EdgeMode is a high performance computing infrastructure management platform. EdgeMode deploys Bitcoin mining data center containers fully-integrated into the locations of its energy asset partners. For more information regarding EdgeMode, go to www.edgemode.io. The acquisition of EdgeMode is subject to a number of conditions, including the execution of a definitive agreement between the parties. Results of Operations for the three months ended September 30, 2021, compared to three months ended September 30, 2020. During the three months ended September 30, 2021 general and administrative expenses were $190,303 compared to $212,689 in 2020. The $22,386 decrease was the result of reduced consulting, advertising and professional fees which were offset with increases in stock based compensation and travel expenses during the three months ended September 30, 2021. During the three months ended September 30, 2021 other expenses were $206,662 compared to $413,258 in 2020. The $206,596 decrease in other expenses are the result of decreases in amortization of discounts and loss on change in fair value of derivative liability which were offset with an increase in interest expense. Net loss for the three months ended September 30, 2021 and 2020, was $396,965 and $625,947, respectively. Results of Operations for the nine months ended September 30, 2021, compared to nine months ended September 30, 2020. During the nine months ended September 30, 2021 general and administrative expenses were $855,899 compared to $3,750,383 in 2020. The $2,894,484 decrease was mainly due to the decrease in stock-based compensation during the nine months ended September 30, 2021. During the nine months ended September 30, 2021 other expenses were $1,306,490 compared to $634,228 in 2020. The $672,262 increase in other expenses was the result of increased amortization of discounts, interest expense and loss on conversion of debt which were offset by a decrease in loss on change in fair value of derivative liability. Net loss for the nine months ended September 30, 2021 and 2020, was $2,162,389 and $4,384,611, respectively. 17 Liquidity and Capital Resources Our sources and (uses) of cash for the nine months ended September 30, 2021 and 2020 were: 2021 2020 Cash used in operating activities $ (532,231 ) $ (314,103 ) Cash used in investing activities $ (750,000 ) $ – Payments on notes payable $ – $ (3,000 ) Payments on convertible notes payable $ (175,000 ) $ – Proceeds from convertible notes payable $ 1,137,000 $ 214,850 Proceeds from sale of common stock $ 408,000 $ 100,000 Proceeds from notes payable $ – $ 10,000 Going Concern The unaudited financial statements accompanying the report have been prepared on a going concern basis, which assumes that we will be able to meet our obligations and continue our operations for our next fiscal year. Realization values may be substantially different from carrying values as shown and the financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should we be unable to continue as a going concern. At September 30, 2021, we have had no revenue and have not yet achieved profitable operations and expect to incur further losses in the development of our business, all of which raise substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent upon our ability to generate future profitable operations and/or to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due. Management has no formal plan in place to address this concern but considers that we will be able to obtain additional funds by equity financing and/or related party advances, however there is no assurance of additional funding being available. There is no assurance that we will be able to obtain further funds required for our continued operations. We are pursuing various financing alternatives to meet our immediate and long-term financial requirements. There can be no assurance that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to obtain the additional financing on a timely basis, we will be forced to scale down or perhaps even cease the operation of our business Critical Accounting Policies and Estimates Use of Estimates In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Fair Value of Financial Instruments The carrying value of short-term instruments, including cash, accounts payable and accrued expenses, and short-term notes approximate fair value due to the relatively short period to maturity for these instruments. 18 Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs. The Company utilizes a three-level valuation hierarchy for disclosures of fair value measurements, defined as follows: Level 1: inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets Level 2: inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liabilities, either directly or indirectly, for substantially the full term of the financial instruments. Level 3: inputs to the valuation methodology are unobservable and significant to the fair value Derivative Financial Instruments Fair value accounting requires bifurcation of embedded derivative instruments such as conversion features in convertible debt or equity instruments and measurement of their fair value for accounting purposes. In assessing the convertible debt instruments, management determines if the convertible debt host instrument is conventional convertible debt and further if there is a beneficial conversion feature requiring measurement. If the instrument is not considered conventional convertible debt under ASC 470, the Company will continue its evaluation process of these instruments as derivative financial instruments under ASC 815. The Company applies the guidance in ASC 815-40-35-12 to determine the order in which each convertible instrument would be evaluated for derivative classification. Once determined, derivative liabilities are adjusted to reflect fair value at each reporting period end, with any increase or decrease in the fair value being recorded in results of operations as an adjustment to fair value of derivatives. Item 3. Quantitative and Qualitative Disclosures about Market Risk Not required.