10-Q: Edgemode Inc. Reports Q3 2024 Results, Grapples with Debt and Explores Strategic Alternatives

Edgemode Inc.'s Q3 2024 filing reveals ongoing losses, efforts to secure financing for AI data centers, and exploration of potential mergers or acquisitions.

Summary

• Edgemode Inc. has filed its Form 10-Q for the quarterly period ended September 30, 2024.
• The company is focused on building Tier 3 AI data center infrastructure and leasing data centers, but requires significant financing.
• Edgemode has suspended daily operations pending additional funding.
• Management is exploring opportunities for mergers, acquisitions, or other business combinations.
• As of September 30, 2024, the company had approximately $5,000 of cash on hand.
• The company is seeking to raise $2 million in equity capital to commence data center colocation operations and fund operations for the next 12 months.
• The company is in default under the 1800 Notes for approximately $206,000, in default under two other notes for approximately $120,000, and owes a significant amount to its executive officers for accrued salary.
• Operating expenses for the three months ended September 30, 2024, were $380,738, compared to $647,078 for the same period in 2023.
• The net loss for the three months ended September 30, 2024, was $1,398,272, compared to a net loss of $667,401 for the same period in 2023.
• Operating expenses for the nine months ended September 30, 2024, were $1,102,756, compared to $3,006,483 for the same period in 2023.
• The net loss for the nine months ended September 30, 2024, was $2,164,954, compared to a net loss of $2,611,807 for the same period in 2023.
• Subsequent to September 30, 2024, the Company received a debt waiver from the vendor of the equipment notes payable in which the vendor agreed to waive the debt completely with no additional amount owed.
• On February 20, 2025, the Company issued 256,660,163 shares of restricted common stock to each of Charles Faulkner and Simon Wajcenberg at a conversion price of $0.003 per share in full satisfaction of $769,989 of accrued salary for each of them.
• On February 27, 2025 the board of directors of the Company adopted a resolution to amend the Companys Articles of Incorporation for the Charter Amendment to increase the number of authorized shares of common stock to 7 billion.

Sentiment

Score: 3

Explanation: The document presents a concerning financial situation for Edgemode, with ongoing losses, debt defaults, and a need for significant financing. While there are some positive aspects, such as decreased operating expenses, the overall outlook is negative.

Positives

• Operating expenses have decreased significantly in both the three and nine-month periods ending September 30, 2024.
• The company received a refund of equipment deposits totaling $275,000 for the three months ended September 30, 2024 and $425,000 for the nine months ended September 30, 2024.
• Subsequent to September 30, 2024, the Company received a debt waiver from the vendor of the equipment notes payable in which the vendor agreed to waive the debt completely with no additional amount owed.
• The company entered into a Master Services Agreement with Cudo Ventures Ltd, a cloud computing company, on January 21, 2025.

Negatives

• The company has a very limited cash position of approximately $5,000 as of September 30, 2024.
• Edgemode is in default on several notes payable, totaling over $326,000.
• The company owes a significant amount of money to its executive officers for accrued salary.
• The company incurred a significant loss on the change in fair value of derivative liabilities.
• The company has suspended daily operations pending additional funding, indicating financial distress.
• The company's auditors have identified material weaknesses in internal controls.

Risks

• The company's ability to continue as a going concern is dependent on obtaining financing or generating profitable operations.
• Failure to secure financing will require the company to abandon its plan of operations.
• The company is subject to risks related to regulatory issues affecting its business model.
• The company is considered a blank check or shell company, which carries inherent risks.
• The company's disclosure controls and procedures were not effective due to material weaknesses in internal control over financial reporting.
• There are no assurances that the Company will complete a transaction with SG.
• As of the date of filing, the shares owed to each of Mr. Faulkner and Mr. Wajcenberg have not been issued by the Company until the Company increases its authorized shares of common stock as described below.

Future Outlook

The company intends to build Tier 3 AI data center infrastructure and lease data centers, subject to financing. Management is also exploring possible opportunities for mergers, acquisitions, or other business combination transactions.

Management Comments

• We now intend to build Tier 3 AI data center infrastructure and lease our data centers to tenants who require custom built high performance computing facilities, subject to financing.
• We have suspended our daily operations subject to receiving additional funding.
• Our management has also begun exploring possible opportunities for the Company involving mergers, acquisitions or other business combination transactions in an effort to diversify our business.

Industry Context

The company's shift towards AI data centers reflects a broader trend in the technology industry towards high-performance computing and artificial intelligence. However, the company's financial difficulties and need for financing highlight the challenges faced by smaller players in entering this competitive market.

Comparison to Industry Standards

• It is difficult to compare Edgemode's results to industry standards due to its unique situation as a company transitioning from cryptocurrency mining to AI data centers.
• Companies like Equinix and Digital Realty Trust are established players in the data center industry, with significant resources and infrastructure.
• Edgemode's ability to compete will depend on its ability to secure financing and execute its business plan effectively.

Legal Proceedings

• The Company was notified of a potential lawsuit related to the termination of our Advisory Panel Membership agreement with Taylor Black Wealth, Ltd.

Related Party Transactions

• As of September 30, 2024, the Company owed the executive officers of the Company $ 1,314,539 in accrued payroll for services performed.
• During the nine months ended September 30, 2024, the executive officers of the Company advanced $ 16,725 to the Company for working capital needs.
• On February 20, 2025, the Company issued 256,660,163 shares of restricted common stock to each of Charles Faulkner and Simon Wajcenberg at a conversion price of $0.003 per share in full satisfaction of $769,989 of accrued salary for each of them.

Stakeholder Impact

• Shareholders face significant risk due to the company's financial instability and need for financing.
• Employees are impacted by the suspension of daily operations and the company's inability to pay accrued salaries.
• Customers and suppliers are affected by the company's uncertain future and potential for business disruption.
• Creditors face the risk of non-payment due to the company's debt defaults.

Next Steps

• The company needs to secure financing to build AI data centers.
• The company needs to address its debt obligations and accrued salary.
• The company needs to improve its internal controls.
• The company needs to file a Certificate of Amendment to the Companys Articles of Incorporation with the office of the Secretary of State of the State of Nevada.

Key Dates