Edgemode, Inc. 10-K

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-3 Consolidated Statements of Operations for the years ended December 31, 2023 and 2022 F-4 Connsolidated Statements of Changes in Stockholders’ Equity (Deficit) for the years ended December 31, 2023 and 2022 F-5 Consolidated Statements of Cash Flows for years ended December 31, 2023 and 2022 F-6 Notes to Consolidated Financial Statements 10 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. F- 1 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 F- 2 Edgemode, Inc. Consolidated Balance Sheets December 31, 2023 December 31, 2022 ASSETS Current assets: Cash $ 298 $ 70 Prepaid expenses and other current assets 20,258 27,638 Prepaid hosting services – 894,355 Deferred offering costs – 264,706 Total current assets 20,556 1,186,769 Intangible assets - cryptocurrencies 32 2,630 Total assets $ 20,588 $ 1,189,399 LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities: Accounts payable and accrued expenses $ 721,780 $ 869,524 Accrued payroll 661,201 487,159 Accrued dividends – 6,190 Equipment notes payable 1,179,972 1,179,972 Notes payable 35,000 35,000 Notes payable – related parties 16,000 – Convertible notes payable 342,501 – Derivative liabilities 197,090 – Series B preferred shares liability, net – 205,226 Total current liabilities 3,153,544 2,783,071 Total liabilities 3,153,544 2,783,071 Commitments and contingencies – – Stockholders' deficit: Preferred shares, $ 0.001 par value, 4,999,000 shares authorized; zero 0 issued and outstanding December 31, 2023 and 2022 – – Common shares, $ 0.001 par value, 950,000,000 shares authorized; 390,687,459 and 390,437,459 shares issued and outstanding, December 31, 2023 and 2022, respectively 390,687 390,437 Additional paid-in capital 35,142,231 33,896,019 Accumulated deficit ( 38,665,874 ) ( 35,880,128 ) Stockholders' deficit ( 3,132,956 ) ( 1,593,672 ) Total liabilities and stockholders' deficit $ 20,588 $ 1,189,399 The accompanying notes are an integral part of these consolidated financial statements. F- 3 Edgemode, Inc. Consolidated Statements of Operations For the Year Ended December 31, 2023 December 31, 2022 Revenue $ – $ 438,042 Cost of revenue – 812,882 Gross margin – ( 374,840 ) Operating expenses: General and administrative expenses 3,123,572 27,784,864 Loss on sale of equipment and impairment – 3,075,748 Loss on cryptocurrencies 10,107 154,252 Total operating expenses 3,133,679 31,014,864 Loss from operations ( 3,133,679 ) ( 31,389,704 ) Other income (expense): Interest expense ( 346,162 ) ( 148,119 ) 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 – Other expense ( 780 ) ( 708,174 ) Total other income (expense), net 347,933 ( 856,293 ) Loss before provision for income taxes ( 2,785,746 ) ( 32,245,997 ) Provision for income taxes – – Net loss $ ( 2,785,746 ) $ ( 32,245,997 ) Loss per common share - basic and diluted $ ( 0.01 ) $ ( 0.09 ) Weighted average shares outstanding - basic and diluted 390,626,500 377,574,305 The accompanying notes are an integral part of these consolidated financial statements. F- 4 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) 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 Recapitalization of reverse merger – – 69,257,668 69,258 2,600,694 – 2,669,952 Common shares issued in exchange for cash – – 1,617,756 1,617 564,398 – 566,015 Common shares issued in exchange for cryptocurrency – – 78,638 79 49,921 – 50,000 Common shares issued in exchange for compensation – – 4,000,000 4,000 314,000 – 318,000 Common shares issued in exchange for deferred financing costs – – 2,521,008 2,521 262,185 – 264,706 Common shares cancelled pursuant to SEC Legal case – – ( 13,889 ) ( 14 ) 14 – – Stock-based compensation – – – – 24,264,181 – 24,264,181 Net loss – – – – – ( 32,245,997 ) ( 32,245,997 ) Balance December 31, 2022 – – 390,437,459 390,437 33,896,019 ( 35,880,128 ) ( 1,593,672 ) Common shares issued for settlement of claims – – 250,000 250 9,725 – 9,975 Stock-based compensation – – – – 1,236,487 – 1,236,487 Net loss – – – – – ( 2,785,746 ) ( 2,785,746 ) Balance December 31, 2023 – $ – 390,687,459 $ 390,687 $ 35,142,231 $ ( 38,665,874 ) $ ( 3,132,956 ) The accompanying notes are an integral part of these consolidated financial statements. F- 5 Edgemode, Inc. Consolidated Statements of Cash Flows For the Year Ended December 31, 2023 December 31, 2022 Operating Activities: Net loss $ ( 2,785,746 ) $ ( 32,245,997 ) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation – 630,670 Amortization 25,215 3,976 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 Stock-based compensation 1,236,487 24,582,181 Cryptocurrency used for compensation – 144,423 Loss on cryptocurrency transactions 10,107 154,252 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 1,166,441 151,815 Prepaid expenses and other current assets – related parties – ( 7,500 ) Cryptocurrencies - mining – ( 438,042 ) Accounts payable and accrued expenses ( 93,739 ) 504,139 Accrued payroll 185,930 487,159 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 Proceeds from sale of cryptocurrencies 34,100 489,936 Net cash provided by investing activities 34,100 1,047,473 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 notes payable 220,000 380,000 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 Net change in cash 228 ( 23,872 ) Cash - beginning of period 70 23,942 Cash - end of period $ 298 $ 70 Supplemental Disclosures: Interest paid $ 4,388 $ 89,993 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. F- 6 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. F- 7 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): · 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. F- 8 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 anticipate any adjustments that would result in a material change to its financial position. 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. F- 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 Full-Pay-Per-Share payout of Bitcoin based on a contractual formula, which primarily calculates the hash rate provided by us to the mining pool as a percentage of total network hash rate, and other inputs. We are entitled to consideration even if a block is not successfully placed by the mining pool operator. The terms of the agreement provides that neither party can dispute settlement terms after thirty-five days following settlement. The Company’s Full-Pay-Per-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 amount of consideration recognized is constrained to the amount of consideration received, at which time revenue is recognized. There is no significant financing component in these transactions. Fair value of the cryptocurrency award received is determined using the quoted price of the related cryptocurrency at the time of receipt. Under current GAAP, crypto assets held by the Company are accounted for as indefinite-lived intangible assets. Those assets are tested for impairment annually and more frequently if events or circumstances indicate that it is more likely than not that an asset is impaired. If the carrying amount of the asset exceeds its fair value, an entity is required to recognize an impairment loss and reduce the carrying amount of the asset to its fair value. See further discussion under Recently Accounting Pronouncements. Stock-Based Compensation The Company accounts for equity instruments issued to employees in accordance with the provisions of ASC 718 Stock Compensation (ASC 718) and Equity-Based Payments to Non-employees pursuant to ASC 2018-07 (ASC 2018-07). All transactions in which the consideration provided in exchange for the purchase of goods or services consists of the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date of the fair value of the equity instrument issued is the earlier of the date on which the counterparty’s performance is complete or the date at which a commitment for performance by the counterparty to earn the equity instruments is reached because of sufficiently large disincentives for nonperformance. Advertising The Company expenses advertising costs as they are incurred. Deferred Offering Costs The Company had capitalized qualified direct costs related to its efforts to raise capital through a sale of its common stock in a private offering as of December 31, 2022. Deferred offering costs will be deferred until the completion of the private offering, at which time they will be reclassified to additional paid-in capital as a reduction of the offering proceeds. Due to the delays in the financing, during the year ended December 31, 2023, $ 264,706 of deferred offering costs were expensed, which included in general and administrative expenses in the accompanying statement of operations. F- 10 Recent Accounting Pronouncements In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity). ASU 2020-06 reduces the number of accounting models for convertible debt instruments and convertible preferred stock, which results in fewer embedded conversion features being separately recognized from the host contract as compared with current GAAP. Additionally, ASU 2020-06 affects the diluted earnings per share calculation for instruments that may be settled in cash or shares and for convertible instruments and requires enhanced disclosures about the terms of convertible instruments and contracts in an entity’s own equity. ASU 2020-06 allows entities to use a modified or full retrospective transition method and is effective for smaller reporting companies for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, with early adoption permitted. The Company has elected to early adopt the provision of the ASU as of January 1, 2023 and has applied the guidance to the accounting of the convertible debt and treatment of derivative liabilities. In addition, there was no retrospective impact upon adoption. In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280) : Improvements to Reportable Segment Disclosures, which requires disclosure of incremental segment information on an annual and interim basis. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024 on a retrospective basis. The Company is currently evaluating the effect of this pronouncement on its disclosures. In December 2023, the FASB issued ASU 2023-08, Intangibles—Goodwill and Other—Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets (“ASU 2023-08”). This ASU is intended to improve the accounting for certain crypto assets by requiring an entity to measure those crypto assets at fair value each reporting period with changes in fair value recognized in net income. The amendments also improve the information provided to investors about an entity’s crypto asset holdings by requiring disclosure about significant holdings, contractual sale restrictions, and changes during the reporting period. ASU 2023-08 requires a cumulative-effect adjustment to the opening balance of retained earning as of the beginning of the annual reporting period in which the entity adopts the amendment and is effective for all reporting companies for fiscal years beginning after December 15, 2024, including interim periods within those fiscal years, with early adoption permitted. The Company is evaluating the impact that this ASU may have on its consolidated financial statements. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) : Improvements to Income Tax Disclosures, which expands the disclosures required for income taxes. This ASU is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The amendment should be applied on a prospective basis while retrospective application is permitted. The Company is currently evaluating the effect of this pronouncement on its disclosures. F- 11 Note 3. Going Concern These financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which assumes that the Company will be able to meet its obligations and continue its operations for its next fiscal year. Realization values may be substantially different from carrying values as shown and these financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going concern. At December 31, 2023 the Company had not yet achieved profitable operations and expects to incur further losses in the development of its business, all of which raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management has no formal plan in place to address this concern but considers that the Company 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. 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 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 F- 12 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 were expensed during the year ended December 31, 2022. During the year ended December 31, 2023, the Company and Mr. Isaacs, entered into a settlement and release agreement whereby Mr. Isaacs agreed to a reduction in the compensation to a total of $55,000, subject to the Company making payments on or before May 14, 2023 and June 14, 2023. During the year ended, December 31, 2023, the Company made total payments in the aggregate of $ 65,000 in accordance with the terms of the settlement agreement. No additional amounts are owed to Mr. Isaacs as of December 31, 2023. On January 31, 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. On January 25, 2023, the Company amended stock option grants dated January 31, 2022 to each of Charlie Faulkner and Simon Wajcenberg, the Chief Executive Officer and Chief Financial Officer of the Company, respectively. The amendment reduces the exercise price of the options from $0.40 per share to $ 0.06 per share. On September 12, 2022, the Company granted options to the officers of the Company to purchase up to 153,239,206 shares of the Company’s stock, which vest upon the Company listing its shares on the NASDAQ Global Market, New York Stock Exchange, or another equivalent market, at an exercise price of $ 0.10 per share. On March 3, 2023, the Company amended stock option grants dated September 12, 2022 to each of Charlie Faulkner and Simon Wajcenberg, the Chief Executive Officer and Chief Financial Officer of the Company, respectively. The amendment provides for the vesting to be only upon the closing of the purchase of at least $15 million of crypto mining equipment, rather than conditioned on an uplisting of the Company’s shares on the NASDAQ Global Market, New York Stock Exchange, or another equivalent market. On March 3, 2023, the Company granted to each of Charlie Faulkner and Simon Wajcenberg, the Chief Executive Officer and Chief Financial Officer of the Company, respectively, options to purchase up to 77,000,000 shares of the Company’s common stock at an exercise price of $0.04 per share, exercisable for five years (the “Stock Options”). The Stock Options shall each be a non-qualified option and shall become vested and exercisable upon the Company closing on the purchase of at least $15 million of crypto mining equipment. As of December 31, 2023 and 2022 the Company owed the executive officers of the Company $ 661,201 and $ 487,159 in accrued payroll for services performed, respectively. During the year ended December 31, 2023, the executive officers of the Company advanced 16,000 to the Company for working capital needs. The advances are non-interest bearing and are due on demand. 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 December 31, 2022 the company had prepaid a total of $ 1,586,297 . In January 2023, the Company was notified of the Chapter 11 bankruptcy filing of the hosting company and in January 2023 the Company received $ 894,355 in return of the initial deposit and the remainder of the deposit is subject to bankruptcy claims. As a result, the Company has expensed $ 691,942 during the year ended December 31, 2022, the remaining amount of the claim, due to the uncertainty of collectability through the bankruptcy claim. As of December 31, 2023, the Company has $0 of amounts recorded related to the remaining claims due to the uncertainty of collectability. F- 13 Note 7. Fixed Assets Total depreciation expense for the year ended December 31, 2023 and 2022, was $ 0 and $ 630,670 respectively. During the year ended December 31, 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 . The remaining equipment not placed in service as of December 31, 2022 has been delayed and it is unknown when or if it will be delivered to the Company. As a result of the delays and uncertainties, the Company recorded an impairment expense of $ 1,138,687 related to undelivered equipment. During the year ended December 31, 2023, the Company received refunds totaling $ 700,000 as a result of these delays, which were recorded as other income in the accompanying statement of operations. During the year ended December 31, 2022 the Company recorded an impairment to cryptomining equipment in the amount of $ 1,937,061 as a result of the Company terminating the financing agreements with the equipment manufactures. Of the total impairment, $ 131,232 relates to assets the company disposed of due to the switch away from Etherium mining, and the other $ 1,545,829 was related to mining equipment purchased with the Equipment Notes Payable discussed below in Note 9. 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 year ended December 31, 2022. Note 8. Equity 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. Series A 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 1,000 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. F- 14 Series B On July 19, 2022, the Company designated 1,000,000 shares of its original 5,000,000 authorized shares of Preferred Stock as Series B Preferred Stock (“Series B”) with a $ 0.001 par value and a stated value of $1.00 per share. The Series B Convertible Preferred Stock ranks senior to the common stock with respect to dividends and right of liquidation and has no voting rights. The Series B Convertible Preferred Stock has a 8 % cumulative annual dividend. In the event of default, the dividend rate increases to 22%. The Company may not, with consent of a majority of the holders of Series B Convertible Preferred Stock, alter or changes the rights of the Series B Convertible Preferred Stock, amend the articles of incorporation, create any other class of stock ranking senior to the Series B Convertible Preferred Stock, increase the authorized shares of Series B Convertible Preferred Stock, or liquidate or dissolve the Company. Beginning 180 days from issuance, the Series B Convertible Preferred Stock may be converted into common stock at a price based on 65 % of the average of the two lowest trading prices during the 15 days prior to conversion. The Company may redeem the Series B Convertible Preferred Stock during the first 180 days from issuance, subject to early redemption penalties of up to 25 %. The Series B Convertible Preferred Stock must be redeemed by the Company 12 months following issuance if not previously redeemed or converted. Based on the terms of the Series B Convertible Preferred Stock, the Company determined that the preferred stock is mandatorily redeemable and will be accounted for as a liability under ASC 480. During the year ended December 31, 2022, the Company entered into purchase agreements for the sale of 212,500 shares of Series B Convertible Preferred Stock with 1800 Diagonal Lending, LLC, with $ 11,250 of proceeds being kept by the lender for legal fees, resulting in cash proceeds of $ 201,250 . As of December 31, 2022, the Company owes $ 6,190 in accrued dividends, reflected as interest expense, and the carrying value of the Series B Preferred stock was $ 205,226 , net of unamortized discount of $ 7,274 . On January 25, 2023, the Company redeemed the Preferred B shares and paid to the holder a total of $ 270,549 which included the stated value of $ 212,500 , $ 6,190 in accrued dividends and the early redemption premium of $ 51,859 . Common shares The Company has authorized 950,000,000 shares of common stock, par value of $ 0.001 , and as of December 31, 2022 has issued 390,437,459 shares of common stock. All of the common shares have the same voting rights and liquidation preferences. On March 30, 2022 the Company increased its authorized common shares from 500,000,000 to 950,000,000 . During the year ended December 31, 2022, the Company issued 1,696,394 common shares for cash and cryptocurrency proceeds of $ 616,015 . In connection with the stock purchases, the company issued warrants to purchase 300,000 shares of common stock with an exercise price of $0.50, which expire five years from the date of grant. During the year ended December 31, 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 December 31, 2022, $ 0 of unrecognized expense remains to be amortized. During the year ended December 31, 2022, the Company issued 4,000,000 common shares as compensation to a third party for advisory services with a fair value of $ 318,000 which was expensed in the current period. In addition, the Company was to pay $50,000 in cash compensation each quarter for ongoing advisory services. As of December 31, 2022 the Company had accrued the first $50,000 that was owed. During the year ended December 31, 2023, no additional services were provided and the Company and the advisor agreed to settle the first $50,000 in exchange for the Company removing the Rule 144 restrictive legend. As a result, the Company recorded a gain on settlement in the amount of $ 50,000 . During the year ended December 31, 2022, the Company had 13,889 of its common stock cancelled and returned to treasury as a result of the settlement of a legal case. F- 15 On September 19, 2022, the Company entered into a Common Stock Purchase Agreement (the “Purchase Agreement”) with Alumni Capital LP, a Delaware limited partnership (“Alumni Capital”), pursuant to which the Company agreed to sell, and Alumni Capital agreed to purchase, upon request of the Company in one or more transactions, a number of shares of the Company’s common stock, par value $0.01 per share (the “Common Stock”) providing aggregate gross proceeds to the Company of up to $ 15,000,000 (the “Maximum”). The Purchase Agreement expires upon the earlier of the aggregate gross proceeds from the sale of shares meeting the Maximum or December 31, 2023. Among other limitations, unless otherwise agreed upon by Alumni Capital, each sale of shares will be limited to 50,000 shares and further limited to no more than the number of shares that would result in the beneficial ownership by Alumni Capital and its affiliates, at any single point in time, of more than 9.99% of the then-outstanding shares of Common Stock. Alumni Capital will purchase the shares of Common Stock under the Agreement at a discount 20% of the lowest traded price of the Common Stock in the five business days preceding the Company delivering notice of the required purchase of shares to Alumni Capital. In exchange for Alumni Capital entering into the Purchase Agreement, the Company issued 2,521,008 shares of Common Stock to Alumni Capital upon execution of the Purchase Agreement (the “Initial Commitment Shares”). Alumni Capital represented to the Company, among other things, that it was an “accredited investor” (as such term is defined in Rule 501(a) of Regulation D under the Securities Act of 1933, as amended (the “Securities Act”)). The Company shares of Common Stock, including the Commitment Shares, are being offered and sold under the Purchase Agreement in reliance upon an exemption from the registration requirements of the Securities Act afforded by Section 4(a)(2) of the Securities Act and Rule 506(b) of Regulation D promulgated thereunder. The securities sold may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. The Purchase Agreement provides that the Company will file a registration statement under the Securities Act covering the resale of the shares issued to Alumni Capital. Alumni Capital’s obligation to purchase shares of Common Stock under the Purchase Agreement is conditioned upon, among other things, the registration statement having been declared effective by the Securities and Exchange Commission. As of December 31, 2023, no shares have been sold or issued to Alumni Capital pursuant to the Purchase Agreement other than the 2,521,008 Commitment Shares. The Commitment shares were valued $ 0.105 per share for total value of $ 264,706 which were recorded as deferred offering costs and expensed due to the delays in the financing. On March 30, 2023, the Company entered into a settlement agreement with a previous note holder for settlement of outstanding claims of a note payable that had been paid in full previously. Per the terms of the settlement agreement, the Company issued 250,000 shares of common stock, and as a result the Company recorded a loss on settlement of $ 9,975 . Stock Options During the year ended December 31, 2023, the Company granted to each of Charlie Faulkner and Simon Wajcenberg, the Chief Executive Officer and Chief Financial Officer of the Company, respectively, options to purchase up to 77,000,000 shares of the Company’s common stock at an exercise price of $0.04 per share, exercisable for five years (the “Stock Options”). The Stock Options shall each be a non-qualified option and shall become vested and exercisable upon the Company closing on the purchase of at least $15 million of crypto mining equipment. The Company used the black-scholes option pricing model to value the options and determined a fair value of $ 4,814,035 . As of December 31, 2023, the Company had not met the contingent vesting requirements, and as such no amounts have been expensed related to these options. F- 16 During the year ended December 31, 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 year ended December 31, 2022. During the year ended December 31, 2023, the Company amended stock option grants dated January 31, 2022 to each of Charlie Faulkner and Simon Wajcenberg, the Chief Executive Officer and Chief Financial Officer of the Company, respectively. The amendment reduces the exercise price of the options from $0.40 per share to $0.06 per share. As a result of the amendment, the Company recorded an additional $ 1,236,487 of stock-based compensation expense based on the incremental fair value resulting from the change in exercise price. During the year ended December 31, 2022, the Company issued a stock option grant to purchase up to 153,239,206 shares of the Company’s common stock, which vest upon the Company listing its shares on the NASDAQ Global Market, New York Stock Exchange, or another equivalent market, at an exercise price of $0.10 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. On March 3, 2023, the Company amended stock option grants dated September 12, 2022 to each of Charlie Faulkner and Simon Wajcenberg, the Chief Executive Officer and Chief Financial Officer of the Company, respectively. The amendment provides for the vesting to be only upon the closing of the purchase of at least $15 million of crypto mining equipment, rather than conditioned on an uplisting of the Company’s shares on the NASDAQ Global Market, New York Stock Exchange, or another equivalent market. The amendment resulted in no additional incremental fair value being recorded. As of December 31, 2023, the Company has $ 22,529,707 of value remaining to be expensed based upon completions of milestones, of which $ 21,679,711 is contingently subject to expense recognition based on the timing of when the Company is able to close on a purchase of at least $15 million of crypto mining equipment as describe above, and $ 0 of remaining amortization to expensed pursuant to the vesting terms. The following table summarizes the stock option activity for the years ended December 31, 2023 and 2022: Schedule of stock option activity Options Weighted-Average Exercise Price Per Share Outstanding, December 31, 2021 137,473 $ 0.00 Granted 239,147,196 0.21 Exercised – – Forfeited – – Expired – – Outstanding, December 31, 2022 239,284,669 $ 0.21 Granted 154,000,000 0.04 Exercised – – Forfeited – – Expired – – Outstanding, December 31, 2023 393,284,669 $ 0.09 As of December 31, 2023, 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 3.75 years as of December 31, 2023. 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 December 31, 2023, the intrinsic value for the options vested and outstanding was $ 0 and $ 302 , respectively. F- 17 Stock Warrants Pursuant to the reverse merger transaction, the 11,515,714 issued and outstanding warrants of the Company prior to the merger transaction remain outstanding and are shown as granted as part of the recapitalization as described in Note 4. Of the total recapitalized, 1,142,857 are presented as reclassified in the year ended 2022 as they were not previously shown as outstanding in the pre-merger Edgemode, Inc. December 31, 2021 10-K. These warrants were subsequently forfeited as discussed below and as such have no material impact on the financial statements. During the year ended December 31, 2022, the Company had 2,285,714 warrants to purchase shares of common stock forfeited as a result of the settlement of a SEC legal case. The following table summarizes the stock warrant activity for the year ended December 31, 2023 and 2022: Schedule of stock warrant activity Warrants Weighted-Average Exercise Price Per Share Outstanding, December 31, 2021 300,000 $ 0.63 Granted 10,372,857 0.45 Exercised 1,142,857 0.04 Forfeited ( 2,285,714 ) 0.04 Expired – – Outstanding, December 31, 2022 9,530,000 $ 0.50 Granted – – Recapitalization – – Exercised – – Forfeited – – Expired – – Outstanding, December 31, 2023 9,530,000 $ 0.50 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. 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. F- 18 In April 2023, the Company utilized an existing marginal lending facility with SFOX, a digital assets broker. The marginal lending facility allows the Company to borrow funds up to a maximum aggregate amount of $ 50,000 to finance its investment activities in digital assets. The terms of the marginal lending facility include an interest rate on the borrowed funds of 11 % and the maximum borrowing period under the facility is 28 days, the facility can be rolled over provided there is sufficient collateral. The facility is secured by a pledged collateral of digital assets. The Company is required to maintain a collateral balance equal to 110% of the outstanding principal balance with the lender. As of December 31, 2023, the collateral balance was returned and the loan balance has been settled in full. Equipment Notes Payable In 2021, the Company entered into multiple financing agreements whereby the company agreed to purchase assets related to its crypto mining operations. The financing agreements required a down payments in the aggregate of $ 600,408 and 24 equal monthly payments. The Company used a 15% discount rate to determine the net present value of the loan value in the aggregate of $ 2,441,591 . During the year ended December 31, 2022 the company made payments of $ 248,184 , of which $ 40,032 was recorded as interest expense. On July 11, 2022, the Company terminated its agreements with the vendor for the financed equipment described above. As of December, 31, 2023, and through the date of this filing, no agreement or communication from the vendor has been received confirming the terms of the termination, and therefore the Company has maintained these balances in equipment notes payable on the Company's balance sheet. In addition the Company has recorded the remaining $ 95,926 of interest amounts owed under the agreements as of December 31, 2022 as the Company is in technical default due to lack of payments. The balance of the loans as of December 31, 2023 is $ 1,179,972 . 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 2023 $ 1,179,972 2024 – 2025 – 2026 – 2027 – Remaining – Total $ 1,179,972 F- 19 Convertible notes payable 1800 Diagonal Lending Notes On April 11, 2023, the Company entered into a Securities Purchase Agreement effective April 20, 2023 with 1800 Diagonal Lending LLC, an accredited investor, pursuant to which the Company sold the investor an unsecured promissory note in the principal amount of $ 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 December 31, 2023, the balance on the note is $ 42,262 , with a remaining unamortized discount of $ 2,280 . 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% average of the three of the 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 note is $ 94,439 , with a remaining unamortized discount of $ 1,940 . 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 , with a remaining unamortized discount of $ 5,647 . 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 became convertible into common stock and an additional $ 88,618 of principal was added to the note balance. In addition, as a result of the default the notes became convertible at a variable rate resulting in derivative liability accounting under ASC 815. The fair value of the derivative on the date of default was charged directly to interest expense, as the notes are passed due. See further discussion under Note 10. F- 20 Other Convertible Promissory Notes On April 25, 2023, the Company entered into a Securities Purchase Agreement with an accredited investor, pursuant to which the Company sold the investor an unsecured promissory note in the principal amount of $ 60,000 . The Company received 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. On the 180-day anniversary date the resulting conversion price is equal to $0.01 Furthermore, the Promissory Notes contain a “most favored nation” provision that allows each investor to claim any preferable terms from any future securities, excluding certain exempt issuances. Note 10. Derivative Liabilities The fair values of the conversion option of outstanding convertible notes payable and common stock warrants were determined to be derivative liabilities under ASC 815 due to the default on convertible notes payable disclosed above, which resulted in a variable conversion price on the outstanding convertible note payable. The fair value of the derivative liabilities was estimated using a binomial model with the following assumptions: Schedule of fair value of derivative liabilities As of December 31, 2023 Conversion Option Warrants Volatility 120.13% 124.36% Dividend Yield 0% 0% Risk-free rate 4.79% 4.01% Expected term 1 year 2.5-3.25 years Stock price $0.0022 $0.0022 Exercise price $0.0014-0.01 $0.5 Derivative liability fair value $ 196,593 $ 498 Number of shares issued upon conversion, exercise, or satisfaction of required conditions as of December 31, 2023 179,123,059 9,530,000 All fair value measurements related to the derivative liabilities are considered significant unobservable inputs (Level 3) under the fair value hierarchy of ASC 820. F- 21 The table below presents the change in the fair value of the derivative liability during the year ended December 31, 2023: Schedule of change in the fair value of derivative liabilities Fair value as of December 31, 2022 $ – Fair value on the date of issuance related to principal default 203,799 Fair value on the date of issuance related to warrants issued 1,372 Change in fair value of derivatives ( 8,081 ) Fair value as of December 31, 2023 $ 197,090 The total impact of derivative liabilities recognized in the Company’s consolidated statements of operations includes the change in fair value of derivatives, with the Company recognizing a total gain of $ 8,081 during the year ended December 31, 2023. The fair value of the derivatives related to the principal default on the notes was charged directly to interest expense. In addition, as a result of the default, all other potentially dilutive instruments must also be recorded at fair value pursuant to ASC 815. The initial fair value of the outstanding warrants was charged to the change in fair value of derivatives. Note 11. 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 years ended December 31, 2023 and 2022: Schedule of cryptocurrency activities Cryptocurrency at December 31, 2021 $ 303,199 Revenue recognized from cryptocurrency mined 438,042 Additions of cryptocurrency - sale of common stock 50,000 Sale of cryptocurrencies for cash proceeds ( 489,936 ) Cryptocurrency used for officer compensation ( 144,423 ) Realized loss on sale/exchange of cryptocurrencies ( 154,252 ) Cryptocurrency at December 31, 2022 2,630 Additions of cryptocurrency – convertible notes 57,502 Additions of cryptocurrency – other notes 50,142 Cryptocurrency used for payment of accounts payable ( 4,005 ) Cryptocurrency used for payment of salaries ( 11,888 ) Cryptocurrency used for payment of other notes ( 50,142 ) Sale of cryptocurrencies for cash proceeds ( 34,100 ) Realized loss on sale/exchange of cryptocurrencies ( 10,107 ) Cryptocurrency at December 31, 2023 $ 32 F- 22 Note 12. Income Taxes The cumulative tax effect at the expected rate of 21 % of significant items comprising the Company’s net deferred tax amount is as follows: Schedule of deferred tax assets and liabilities December 31, 2023 December 31, 2022 Deferred tax asset attributable to: Net operating loss $ 1,252,700 $ 996,800 Valuation allowance ( 1,252,700 ) ( 996,800 ) Net deferred income tax assets $ – $ – A reconciliation of income tax provision to the provision that would be recognized under the statutory rates is as follows: Schedule of components of income tax expense (benefit) December 31, 2023 December 31, 2022 Benefit attributable to operating loss $ 585,000 $ 6,771,700 Non-deductible ( 286,400 ) ( 5,985,900 ) Valuation allowance ( 298,600 ) ( 785,800 ) Provisions for income taxes $ – $ – The amount taken into income as deferred tax assets must reflect that portion of the income tax loss carry forwards that is more likely-than-not to be realized from future operations. The Company has chosen to provide an allowance of 100% against all available income tax loss carry forwards, regardless of their time of expiry. No provision for income taxes has been provided in these financial statements due to the net loss. At December 31, 2023, the Company has net operating loss carry forwards totaling approximately $ 6,000,000 , which will be carried forward to future periods. Note 13. 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 , which are still shown as issued and outstanding in Note 8 above. F- 23 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure. None.