Edgemode, Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS. Edgemode, Inc. (Formerly Fourth Wave Energy, Inc.) Consolidated Balance Sheets (Unaudited) June 30, 2022 December 31, 2021 ASSETS Current assets: Cash $ 3,772 $ 23,942 Subscription receivable – 158,850 Prepaid expenses and other current assets 152,183 22,373 Prepaid expenses and other current assets - related party 135,000 – Prepaid hosting services 1,586,297 1,586,297 Total current assets 1,877,252 1,791,462 Intangible assets - cryptocurrencies 28,739 303,199 Equipment, net 2,586,612 3,520,443 Total assets $ 4,492,603 $ 5,615,104 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses $ 650,579 $ 145,855 Accrued payroll 134,513 – Accrued dividends – 42,843 Equipment notes payable 1,068,567 932,273 Notes payable 35,000 1,657,580 Total current liabilities 1,888,659 2,778,551 Equipment notes payable, net of current 15,479 359,925 Total liabilities 1,904,138 3,138,476 Commitments and contingencies – – Preferred shares of EdgeMode – 341,730 Stockholders' equity: Preferred shares, $ 0.001 par value, 4,999,000 and 5,000,000 shares authorized June 30, 2022 and December 31, 2021, respectively; zero 0 issued and outstanding June 30, 2022 and December 31, 2021 – – Common shares, 950,000,000 and 500,000,000 shares authorized, June 30, 2022 and December 31, 2021; Par value $ 0.001 ; 383,858,340 and 292,179,345 shares issued and outstanding, June 30, 2022 and December 31, 2021, respectively 383,858 292,179 Additional paid-in capital 33,283,891 5,476,850 Accumulated deficit ( 31,079,284 ) ( 3,634,131 ) Stockholders' equity 2,588,465 2,134,898 Total liabilities and stockholders' equity $ 4,492,603 $ 5,615,104 The accompanying notes are an integral part of these unaudited financial statements. 3 Edgemode, Inc. (Formerly Fourth Wave Energy, Inc.) Statements of Operations (Unaudited) For the three months ended For the six months ended June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021 Revenue $ 165,118 $ 500,692 $ 436,237 $ 569,068 Cost of revenue 382,908 401,629 806,678 479,110 Gross margin ( 217,790 ) 99,063 ( 370,441 ) 89,958 Operating expenses: General and administrative expenses 2,874,473 218,942 26,219,936 304,944 Loss on sale of equipment and impairment 617,036 – 617,036 – Total operating expenses 3,491,509 218,942 26,836,972 304,944 Loss from operations ( 3,709,299 ) ( 119,879 ) ( 27,207,413 ) ( 214,986 ) Other expense: Interest expense ( 34,987 ) ( 46,154 ) ( 79,827 ) ( 64,353 ) Gain (loss) on cryptocurrencies ( 74,376 ) ( 101,911 ) ( 157,913 ) ( 96,343 ) Other expense – – – – Total other expense, net ( 109,363 ) ( 148,065 ) ( 237,740 ) ( 160,696 ) Loss before provision for income taxes ( 3,818,662 ) ( 267,944 ) ( 27,445,153 ) ( 375,682 ) Provision for income taxes – – – – Net loss ( 3,818,662 ) ( 267,944 ) ( 27,445,153 ) ( 375,682 ) Preferred Dividends – ( 11,646 ) – ( 19,296 ) Net loss to common shareholders $ ( 3,818,662 ) $ ( 279,590 ) $ ( 27,445,153 ) $ ( 394,978 ) Loss per common share - basic and diluted $ ( 0.01 ) $ ( 0.00 ) $ ( 0.07 ) $ ( 0.00 ) Weighted average shares outstanding - basic and diluted 383,839,659 219,792,053 366,092,454 206,181,429 The accompanying notes are an integral part of these unaudited financial statements. 4 Fourth Wave Energy, Inc. Statements of Changes in Stockholders’ Deficit For the three and six months ended June 30, 2022 and 2021 (Unaudited) Mezzanine Equity Preferred Common Additional Total Preferred Stock Common Stock Paid-In Accumulated Stockholders' Shares Amount Shares Amount Capital Deficit Equity Balance December 31, 2021 127,207 $ 341,730 292,179,345 $ 292,179 $ 5,476,850 $ ( 3,634,131 ) $ 2,134,898 Conversion of preferred shares into common ( 127,207 ) ( 341,730 ) 20,796,933 20,797 363,776 – 384,573 Common shares issued in exchange for cash – – 1,495,756 1,495 503,519 – 505,014 Common shares issued in exchange for cryptocurrency – – 78,638 79 49,921 – 50,000 Recapitalization of reverse merger – – 69,257,668 69,258 2,600,694 – 2,669,952 Stock-based compensation – – – – 22,385,917 – 22,385,917 Net loss – – – – – ( 23,626,491 ) ( 23,626,491 ) Balance March 31, 2022 – – 383,808,340 383,808 31,380,677 ( 27,260,622 ) 4,503,863 Common shares issued in exchange for cash – – 50,000 50 24,950 – 25,000 Stock-based compensation – – – – 1,878,264 – 1,878,264 Net loss – – – – – ( 3,818,662 ) ( 3,818,662 ) Balance June 30, 2022 – $ – 383,858,340 $ 383,858 $ 33,283,891 $ ( 31,079,284 ) $ 2,588,465 Balance December 31, 2020 – $ – 190,734,649 $ 190,735 $ 245,576 $ ( 75,376 ) $ 360,935 Common Shares issued in exchange for cash – – 7,536,184 7,536 258,959 – 266,495 Preferred Shares issued in exchange for cash 125,001 334,980 – – – – – Contribution of Crytocurrency from related party – – – – 29,547 – 29,547 Stock-based compensation 2,206 6,750 – – – – – Preferred dividends – – – – – ( 7,650 ) ( 7,650 ) Net loss – – – – – ( 107,738 ) ( 107,738 ) Balance March 31, 2021 127,207 341,730 198,270,833 198,271 534,082 ( 190,764 ) 541,589 Common Shares issued in exchange for cash – – 29,212,523 29,213 1,015,454 – 1,044,667 Common Shares issued in exchange for cryptocurrency – – 793,248 793 26,693 – 27,486 Common Shares issued in for conversion of options – – 11,898,395 11,898 ( 11,898 ) – – Preferred dividends – – – – – ( 11,646 ) ( 11,646 ) Net loss – – – – – ( 267,944 ) ( 267,944 ) Balance June 30, 2021 127,207 $ 341,730 240,174,999 $ 240,175 $ 1,564,331 $ ( 470,354 ) $ 1,334,152 The accompanying notes are an integral part of these unaudited financial statements. 5 Edgemode, Inc. (Formerly Fourth Wave Energy, Inc.) Consolidated Statements of Cash Flows (Unaudited) For the six months ended June 30, 2022 June 30, 2021 Operating Activities: Net loss $ ( 27,445,153 ) $ ( 375,682 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 627,770 226,410 Loss on sale of equipment and impairment 617,036 – Stock-based compensation 24,264,181 6,750 Cryptocurrency used for compensation 91,898 – Loss on cryptocurrency transactions 157,913 96,343 Changes in operating assets and liabilities: Prepaid expenses and other current assets 19,770 ( 50,945 ) Prepaid expenses and other current assets - related parties ( 135,000 ) – Cryptocurrencies - mining ( 436,237 ) ( 569,068 ) Accounts payable and accrued expenses 279,004 271,816 Accrued payroll 134,513 – Net cash used in operating activities ( 1,824,305 ) ( 394,376 ) Investing Activities: Cash acquired in acquisition 743,513 – Purchase of equipment ( 370,976 ) ( 1,009,863 ) Proceeds from sale of equipment 60,000 – Proceeds from sale of cryptocurrencies 510,886 304,284 Net cash provided by (used in) investing activities 943,423 ( 705,579 ) Financing Activities: Proceeds from issuance of common shares, net of offering costs 530,014 1,311,163 Proceeds from subscription receivable 158,850 – Proceeds from issuance of preferred shares, net of offering costs – 334,980 Payments on equipment notes payable ( 208,152 ) ( 645,746 ) Proceeds from notes payable 380,000 80,000 Net cash provided by financing activities 860,712 1,080,397 Net change in cash ( 20,170 ) ( 19,558 ) Cash - beginning of period 23,942 62,435 Cash - end of period $ 3,772 $ 42,877 Supplemental Disclosures: Interest paid $ 79,827 $ 18,199 Income taxes paid $ – $ – Supplemental Disclosures of Noncash Financing Information: Shares issued for cryptocurrency assets $ 50,000 $ 27,486 Equipment financed with notes payable $ – $ 871,519 Conversion of preferred shares into common shares $ 384,573 $ – Accrued dividends $ – $ 19,296 Cryptocurrency assets contributed by related party $ – $ 29,547 The accompanying notes are an integral part of these unaudited financial statements. 6 EdgeMode, Inc. Notes to the Consolidated Financial Statements June 30, 2022 (Unaudited) NOTE 1 – Basis of Presentation The accompanying unaudited interim financial statements of EdgeMode, Inc. (formerly known as Fourth Wave Energy, Inc.) (“we”, “our”, 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 filed with the SEC on Form 10-K and the annual financial statements of EdgeMode filed with the SEC on Form 8-K. 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 2021, as reported in the Form 10-K and Form 8-K of the Company, have been omitted. 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. In connection with the acquisition of FWI in March 2020, the Company entered into consulting agreements with certain founders of FWI. The consulting agreements require the Company to collectively pay $379,850 in consulting fees during the terms of the consulting agreements. In March 2021 the Company agreed to sell the FWI technologies and its business plan to GeoSolar Technologies, Inc. a Colorado corporation (“GST”) in exchange for 10,000,000 shares of GST common stock (the “GST Shares”), such GST Shares distributable to the Company’s shareholders. As a part of this transaction, the consultants agreed to release the Company from any liability for any consulting fees owed to them by the Company and return a portion of the Company’s common stock held by such consultants. During the year ended December 31, 2021, 4,700,000 shares of the Company's common stock were returned to the Company and cancelled. The technology granted to GST was carried on our balance sheet at zero value and the shares received were also recorded at no value. FWI was voluntarily dissolved on December 8, 2021. The ex-dividend date, record date and distribution date for the registered distribution of the GST Shares to the Company's shareholders, subject to FINRA clearance, is the following: Ex-Dividend Date: 12/06/2021 Record Date: 12/07/2021 Distribution Date: 12/14/2021 7 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 Wyoming”) closed an 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 Wyoming (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 Wyoming 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 owed by Joe Isaacs to perform services for total value of $240,000. Charlie Faulkner and Simon Wajcenberg, the principals of EdgeMode Wyoming, 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 Wyoming. The merger was accounted for as a reverse merger, whereby EdgeMode Wyoming 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 Wyoming 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 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. 8 Principals of Consolidation The accompanying consolidated financial statements include the accounts of Fourth Wave Energy, Inc. and the accounts of its 100% owned subsidiary, EdgeMode. 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 Company has no assets or liabilities valued using level 1, level 2, or level 3 inputs as of June 30, 2022. 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. 9 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 closing price of the related cryptocurrency on the day 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. 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. NOTE 3 – Going Concern These financial statements are prepared on a going concern basis. The Company began operations in 2020 and incurred a cumulative loss since inception. The Company’s ability to continue is dependent upon management’s plan to raise additional funds and achieve profitable operations. These matters raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary if the Company is not able to continue as a going concern. 10 NOTE 4 – Reverse Merger Transaction Pursuant to the terms of the Merger Agreement, and in exchange for all 100% of the issued and outstanding shares of EdgeMode Wyoming, the shareholders of EdgeMode received an aggregate of 313,950,672 shares of common stock, par value $.001 per share, of the Company. Prior to the Merger, EdgeMode Wyoming was authorized to issue 300,000 shares of preferred stock with no par value per share, of which 261,438 were designated as Series Seed Preferred Stock (“Series Seed Preferred”). Immediately prior to the Merger, the holders of the Series Seed Preferred stock converted the shares into 261,438 shares of EdgeMode Wyoming common stock. As a result of the Reverse Merger, the Company has acquired the following assets and liabilities which were recorded at the pre-combination carrying basis. The assets acquired and liabilities assumed are as follows: Schedule of assets acquired and liabilities January 31, 2022 Cash $ 743,513 Prepaids 149,580 Note receivable - EdgeMode 2,040,447 Accounts payable ( 7,774 ) Other accrued Expenses ( 196,500 ) Accrued interest ( 24,314 ) Notes payable ( 35,000 ) Total identified net assets $ 2,669,952 NOTE 5 – Related Party Transactions 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 owed by Joe Isaacs to perform services for total value of $240,000, which was paid in advance. As of June 30, 2022, $ 135,000 amount of services are left to be performed. During the six months ended June 30, 2022, the Company granted options to the officers and a consultant of the Company to purchase up to 65,920,895 shares of the Company’s stock, vesting immediately, at an exercise price of $0.40 per share. As of June 30, 2022 the Company owed the executive officers of the Company $ 134,513 in accrued payroll for services performed. NOTE 6 – Prepaid Hosting Services Prepaid hosting services are amounts paid to secure the use of data hosting services at a future date or continuously over one or more future periods. When the prepaid hosting services are eventually consumed, they are charged to expense. As of June 30, 2022 the company has prepaid a total of $ 1,586,297 which the company expects to begin using during the third quarter of 2022. 11 NOTE 7 – Fixed Assets Fixed assets are stated at cost and depreciated using the straight-line method over their estimated useful lives. When retired or otherwise disposed, the carrying value and accumulated depreciation of the fixed asset is removed from its respective accounts and the net difference less any amount realized from disposition, is reflected in earnings. Expenditures for maintenance and repairs which do not extend the useful lives of the related assets are expensed as incurred. As of June 30, 2022 and 2021 fixed assets were made up of the following: Schedule of fixed assets Estimated Useful Life June 30, December 31, (years) 2022 2021 Cryptomining equipment 2 - 5 years $ 2,436,707 $ 2,615,721 Cryptomining equipment - not in service 1,610,139 1,737,186 4,046,846 4,352,907 Accumulated depreciation ( 1,460,234 ) ( 832,464 ) Net book value $ 2,586,612 $ 3,520,443 Total depreciation expense for the six months ended June 30, 2022 and 2021, was $ 627,770 and $ 226,410 respectively. As of June 30, 2022 the Company had $ 1,610,139 of equipment that is not yet in service. Subsequent to June 30, 2022, the Company terminated all future purchase orders related to Ethereum mining equipment and related hosting services, as the Company will focus on Bitcoin mining, and returned equipment not yet placed in service and investing in new Bitcoin mining equipment . During the six months ended June 30, 2022 the Company recorded an impairment cryptomining equipment in the amount of $ 617,036 as a result of the Company determining the future cash flows were less than the carrying value of the assets. Of the total impairment $357,036 was related to mining equipment purchased with the Equipment Notes Payable discussed below in Note 9. The company is currently in negotiations with the manufacturer of the equipment to settle the remainder of the notes by returning the equipment, and offsetting the down payments of the future equipment against the remaining outstanding payable balances. As such the company has impaired the value of the assets down to the salvage value, which was determined to be the remaining principal payments owed. The remaining $260,000 of impairment was related to the equipment acquired in 2020. A portion of this equipment was sold for $60,000 during the six months ended June 30, 2022. NOTE 8 – Equity The Company has authorized 950,000,000 shares of common stock, par value of $ 0.001 , and as of June 30, 2022 has issued 383,858,340 shares of common stock. All of the common shares have the same voting rights and liquidation preferences. 12 Preferred Shares We are authorized to issue 4,999,000 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. On March 26, 2020, the Company designated 1,000 shares of its original 5,000,000 authorized shares of Preferred Stock as Series A Preferred Stock (“Series A”) with a $0.001 par value. Each Series A Preferred share entitles the holder to vote on all matters submitted to a vote of the Company’s shareholders or with respect to actions that may be taken by written consent. The 1,000 shares of Series A shares have the voting power of 250% of the outstanding common shares at the time of any vote. The holders of the Series A shares are entitled to receive, when, as and if declared by the Board of Directors out of funds legally available, annual dividends payable in cash on the 31st day of December in each year, commencing on December 31, 2020 at the rate of $0.10 per share per year. As part of the recapitalization, the 1,000 shares were converted into common shares. On March 30, 2022, the Company reduced its authorized preferred shares from 5,000,000 to 4,999,000 shares and removed the 1,000 shares of Series A from the designation. Common Shares On March 30, 2022 the Company increased its authorized common shares from 500,000,000 to 950,000,000 . During the six months ended June 30, 2022, the Company issued 1,624,394 common shares for cash and cryptocurrency proceeds of $ 580,014 . In connection with the stock purchases, the company issued warrants to purchase 1,230,000 shares of common stock with an exercise price of $0.50, which expire five years from the date of grant. During the six months ended June 30, 2022, the Company amortized $ 44,875 of stock compensation expense related to shares issued for services pursuant to a consulting agreement entered into during 2021. As of June 30, 2022, $ 0 of unrecognized expense remains to be amortized. Stock Options During the six months ended June 30, 2022, the Company issued a stock option grant to purchase up to 85,907,990 shares of the Company’s common stock, vesting immediately and in 90 days, at an exercise price of $0.40 per share. The expected term was estimated using the simplified method for employee stock options since the Company does not have adequate historical exercise data to estimate the expected term. The Company used the black-scholes option pricing model to value the options and expensed $ 24,219,306 during the six months ended June 30, 2022. As of June 30, 2022, the Company has $ 849,996 of value remaining to be expensed based upon completions of milestones and $ 0 of remaining amortization to expensed pursuant to the vesting terms. 13 The following table summarizes the stock option activity for the six months ended June 30, 2022: Schedule of option activity Options Weighted-Average Exercise Price Per Share Outstanding, December 31, 2021 137,473 $ 0.00 Granted 85,907,990 0.40 Exercised – – Forfeited – – Expired – – Outstanding, June 30, 2022 86,045,463 $ 0.40 As of June 30, 2022, the Company had 85,907,990 stock options that were exercisable and 137,473 that are in dispute. The weighted average remaining life of all outstanding stock options was 4.58 years as of June 30, 2022. 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 June 30, 2022, the intrinsic value for the options vested and outstanding was $ 0 and $ 12,373 , respectively. Stock Warrants The following table summarizes the stock warrant activity for the six months ended June 30, 2022: Schedule of warrant activity Warrants Weighted-Average Exercise Price Per Share Outstanding, December 31, 2021 9,442,857 $ 0.44 Granted 1,230,000 0.50 Exercised – – Forfeited – – Expired – – Outstanding, June 30, 2022 10,672,857 $ 0.45 NOTE 9 – Notes Payable Notes Payable Pursuant to the merger agreement, the Company acquire outstanding note payables in the amount of $ 35,000 . These loans were advanced as due on demand and no communication has been received from the original lenders. 14 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. The conversion and issuance of shares of the Company’s common stock is presented as part of the recapitalization on the equity statement Equipment Notes Payable In February 2021, the Company entered into a financing agreement whereby the company agreed to purchase assets related to its crypto mining operations. The financing agreement required a down payment of $ 199,800 and 24 equal monthly payments of $ 32,760 . The Company used a 15% discount rate to determine the net present value of the loan value of $ 871,519 . The balance of the loan as June 30, 2022 is $ 336,266 . The Company is currently in negotiations with the lender to terminate the remainder of the agreement and return the equipment In May 2021, the Company entered into a financing agreement whereby the Company agreed to purchase assets related to its crypto mining operations. The financing agreement required a down payment of $ 299,808 , the first month payment of $79,056 and 23 equal monthly payments of $ 39,528 . The Company used a 15% discount rate to determine the net present value of the loan value of $ 1,148,237 . The balance of the loan as of June 30, 2022 is $ 507,663 . The Company is currently in negotiations with the lender to terminate the remainder of the agreement and return the equipment In July 2021, the Company entered into a financing agreement whereby the company agreed to purchase assets related to its crypto mining operations. The financing agreement required a down payment of $ 100,800 and 24 equal monthly payments of $ 15,660 . The Company used a 15% discount rate to determine the net present value of the loan value of $ 421,835 . The balance of the loan as of June 30, 2022 is $ 240,117 . The Company is currently in negotiations with the lender to terminate the remainder of the agreement and return the equipment The following table presents the future maturities and principal payments of all notes payable listed above for the next five years and thereafter are as follows: Schedule of future maturities and principal payments Year Principal Amount 2022 $ 724,122 2023 359,924 2024 – 2025 – 2026 – Remaining – Total $ 1,084,046 15 NOTE 10 – Cryptocurrency Assets The Company began cryptocurrency mining activities during the year ended December 31, 2021. In addition to mining activities, the Company conducts other business activities using its cryptocurrency assets as compensation. The below table represents the cryptocurrency activities during the six months ended June 30, 2022: Schedule of cryptocurrency activities Cryptocurrency at December 31, 2021 $ 303,199 Revenue recognized from cryptocurrency mined 436,237 Additions of cryptocurrency - sale of common stock 50,000 Proceeds from sale of cryptocurrencies ( 510,886 ) Cryptocurrency used for officer compensation ( 91,898 ) Realized loss on sale/exchange of cryptocurrencies ( 157,913 ) Cryptocurrency at June 30, 2022 $ 28,739 NOTE 11 – 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 137,473 . NOTE 12 – Subsequent Events Subsequent to June 30, 2022, the Company terminated all future purchase orders related to Ethereum mining equipment and related hosting services, as the Company will focus on Bitcoin mining. In addition, the Company has signed approximately $66M in purchase orders for additional Bitcoin mining equipment that it expects to be delivered in the second half of the year. Effective July 1, 2022, the Company terminated the agreements with the lender for the cryptomining equipment. On July 14, 2022, the Company sold 72,000 common shares for cash proceeds of $36,000. 16 On July 20, 2022, the Company entered into a Series B Preferred Stock Purchase Agreement (the “Purchase Agreement”) dated July 18, 2022 with 1800 Diagonal Lending LLC, a Virginia limited liability company pursuant to which the Company issued and sold 78,750 shares of Series B Preferred Stock for a purchase price of $78,750. The proceeds from the sale of the Series B Preferred Stock shall be used for working capital. In addition, the Company paid $3,750 to the Investor and its counsel for legal and due diligence fees. Pursuant to the Purchase Agreement, the Investor may convert all or a portion of the outstanding Series B Preferred Stock into shares of the Company’s Common Stock beginning on the date which is 180 days after the issuance date of the Series B Preferred Stock into Common Stock; provided, however, that the Investor may not convert the Series B Preferred Stock to the extent that such conversion would result in beneficial ownership by the Investor and its affiliates of more than 4.99% of the Company’s issued and outstanding Common Stock. The Company will have the right, at the Company’s sole option, provided that an event of default has not occurred, to redeem all or any portion of the shares of Series B Preferred Stock, exercisable on not more than 3 Trading Days prior written notice to the holders of the Series B Preferred Stock, in full. If the Company redeems the shares of Series B Preferred Stock within 90 days of its issuance, the Company must pay all of the principal at a cash redemption premium of 120%; if such prepayment is made between the 91st day and the 180th day after the issuance of the Series B Preferred Stock, then such redemption premium is 125%. After the 180th day following the issuance date, there shall be no further right of optional redemption. On the date which is the earlier of: (i) twelve (12) months following the issuance date; or (ii) at the option of the Investor, upon the occurrence of an Event of Default as defined under the Certificate of Designation (the “Mandatory Redemption Date”), the Company shall redeem all of the shares of Series B Preferred Stock of the Investor (which have not been previously redeemed or converted). With five (5) days of the Mandatory Redemption Date, the Company shall make payment to the Investor of an amount in cash equal to the total number of shares of Series B Preferred Stock held by such Investor multiplied by the then current Stated Value as adjusted pursuant to the terms hereof (including but not limited to the addition of any accrued unpaid dividends and any default adjustments. An Event of Default includes the Company’s failure to pay a mandatory redemption amount, comply with its SEC reporting obligations and any bankruptcy or liquidation. 17