10-K/A: Edgemode Inc. Restates 2023 and 2022 Financials Due to Stock Option Error; Going Concern Doubts Remain

Sentiment:

Form 10-K/A (Amendment No. 2) 21 February 2025 5:07 PM

Edgemode, Inc. has restated its 2023 and 2022 financial statements due to an error in accounting for stock options granted to a consultant, while also expressing substantial doubt about its ability to continue as a going concern.

Delay expectedThe company experienced delays in the delivery of mining equipment.

Capital raiseThe company is seeking to raise $45 million in debt to recommence mining operations.The company has convertible notes payable that are in default.

Worse than expectedThe company's financial results are worse than expected due to the restatement of financial statements, lack of revenue, and going concern doubts.

Summary

Edgemode, Inc. is filing an amendment to its Form 10-K for the fiscal years ended December 31, 2023 and 2022 to restate its audited financial statements.
The restatement is due to the omission of 5,000,000 stock options granted to a consultant during the three months ended March 31, 2023, which resulted in an understatement of operating expenses.
The company had no revenues for 2023 compared to $438,042 in 2022 due to ceasing Ethereum mining operations.
Operating expenses for 2023 were $3,362,714 compared to $31,014,864 in 2022, primarily due to decreased stock-based compensation expense.
As of April 26, 2024, the company had approximately $3,500 of cash and is seeking to raise $45 million in debt to recommence mining operations.
The company has suspended its operations and may be required to abandon its plan of operations if it fails to secure funding.
The company's independent auditor has expressed substantial doubt about its ability to continue as a going concern.
The company has convertible notes payable that are in default, with the holder demanding immediate payment of 150% of the outstanding principal balances.
The company's management has concluded that its internal control over financial reporting was not effective as of December 31, 2023, due to material weaknesses.
The company is evaluating the impact of new accounting pronouncements on its consolidated financial statements.

Sentiment

Score: 2

Explanation: The document presents a highly negative outlook due to the restatement of financials, lack of revenue, going concern doubts, debt defaults, and material weaknesses in internal controls.

Positives

Operating expenses decreased significantly from $31,014,864 in 2022 to $3,362,714 in 2023.
The company received a $700,000 refund of an equipment deposit.

Negatives

The company had no revenues in 2023 after ceasing Ethereum mining in September 2022.
As of April 26, 2024, the company had only $3,500 in cash.
The company's auditor has raised substantial doubt about its ability to continue as a going concern.
The company's convertible notes payable are in default, with the holder demanding 150% of the outstanding principal balances.
The company identified material weaknesses in its internal control over financial reporting.
The company has suspended its operations and may be required to abandon its plan of operations if it fails to secure funding.

Risks

The company's ability to continue as a going concern is dependent on securing additional financing.
Failure to secure financing may require the company to abandon its plan of operations.
The company's convertible notes are in default, potentially leading to further financial strain.
Material weaknesses in internal control over financial reporting increase the risk of future restatements.
The company's business plan is to seek a business combination, which is a complex and uncertain process.

Future Outlook

The company expects operating expenses to increase as it attempts to develop new mining operations and pursue new business opportunities, contingent on raising significant additional working capital, which is uncertain.

Management Comments

The Company currently has no sources of revenue and absent significant financing to fund Bitcoin mining operations, has no specific business plan or purpose.
The Companys business plan is to seek a business combination.

Industry Context

The company's shift from Ethereum to Bitcoin mining reflects the broader industry trend of adapting to changes in cryptocurrency protocols and market conditions. The company's challenges in securing financing and maintaining operations highlight the competitive and volatile nature of the cryptocurrency mining industry.

Comparison to Industry Standards

It is difficult to compare Edgemode's results to industry standards due to its current state of suspended operations and lack of revenue.
Other cryptocurrency mining companies, such as Marathon Digital Holdings and Riot Platforms, are actively engaged in mining operations and generating revenue, unlike Edgemode.
Edgemode's financial situation and going concern doubts are significantly different from those of more established and financially stable companies in the cryptocurrency mining sector.

Legal Proceedings

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.

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 Companys common stock, vesting in 90 days, 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.
On September 12, 2022, the Company granted options to the officers of the Company to purchase up to 153,239,206 shares of the Companys 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.
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 Companys common stock at an exercise price of $0.04 per share, exercisable for five years (the Stock Options).
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.

Stakeholder Impact

Shareholders face significant risk due to the company's financial instability and potential inability to continue as a going concern.
Employees may be impacted by potential layoffs or restructuring if the company fails to secure financing.
Creditors face the risk of non-payment due to the company's default on convertible notes.
Suppliers may be affected by the company's suspended operations and potential inability to fulfill contractual obligations.

Next Steps

The company is seeking to raise $45 million in debt to recommence mining operations.
The company intends to seek a business combination.
The company will need to expand its accounting resources to remediate material weaknesses in internal control over financial reporting.

Key Dates

Date	Description
2011-01-21	Edgemode, Inc. was incorporated in Nevada.
2020-03-16	The Company acquired all of the outstanding shares of Fourth Wave Energy, Inc.
2021-12-02	Date of the Agreement and Plan of Merger and Reorganization.
2022-01-31	Effective Time of the Merger.
2022-03-30	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.
2022-06-03	The Company changed its name from Fourth Wave Energy Inc. to Edgemode, Inc.
2022-09-17	Date the Company concluded that the Prior Financial Statements should no longer be relied upon due to errors.
2022-09-19	The Company entered into a Common Stock Purchase Agreement with Alumni Capital LP.
2023-03-30	The Company entered into a settlement agreement with a previous note holder.
2023-04-11	The Company entered into Securities Purchase Agreements with 1800 Diagonal Lending LLC.
2023-04-20	Effective date of Securities Purchase Agreements with 1800 Diagonal Lending LLC.
2023-04-25	The Company entered into a Securities Purchase Agreement with an accredited investor.
2023-04-26	The Company entered into a Promissory Note Purchase Agreement with another investor.
2023-08-04	The Company entered into a Securities Purchase Agreement with 1800 Diagonal Lending LLC.
2023-10-20	The Company received notice from 1800 Diagonal Lending LLC that the 1800 Notes were in default.
2024-04-26	Date of the report, with approximately $3,500 of cash on hand.
2025-02-21	Date of signatures on the report.

Keywords

restatement, financial statements, going concern, convertible notes, internal control, mining operations, Edgemode, debt, financing, cryptocurrency

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