8-K: Edgemode Secures Up to $1.15M Via Convertible Note

Edgemode, Inc. has entered into a Securities Purchase Agreement to issue a convertible promissory note of up to $1,150,000, receiving net proceeds of up to $1,000,000, alongside 200,000,000 restricted shares.

Summary

• Edgemode, Inc. has entered into a Securities Purchase Agreement with an accredited investor.
• The agreement involves the sale of an original issue discount convertible promissory note with a principal amount of up to $1,150,000.
• The company expects to receive net proceeds of up to $1,000,000 from this transaction.
• As of August 17, 2026, the company has received $625,000 in net proceeds.
• These proceeds were used to satisfy existing promissory notes totaling approximately $328,000 and pay $225,000 to Blackberry AIF related to a Joint Venture Agreement.
• In addition to the note, Edgemode will issue 200,000,000 restricted shares of its common stock to the investor as consideration.
• The Promissory Note carries a 12% interest rate and matures on December 31, 2027.
• The note is convertible into common stock at 70% of the lowest trading price during the 10 trading days prior to conversion, after a 180-day lock-up period or upon an event of default.
• Conversion is capped to prevent the investor from owning more than 9.99% of outstanding shares.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this as a negative development due to the dilutive nature of the convertible note and the issuance of a significant number of shares as consideration, which could negatively impact existing shareholders.

Positives

• Secures up to $1,000,000 in net proceeds to address existing financial obligations.
• Utilizes proceeds to satisfy outstanding promissory notes and a joint venture-related payment.
• The convertible note provides a potential pathway for future equity conversion, subject to certain conditions.

Negatives

• The issuance of 200,000,000 restricted shares as consideration is highly dilutive to existing shareholders.
• The convertible note has a significant original issue discount (up to $150,000) and a 12% interest rate.
• The conversion price is set at 70% of the lowest trading price, which could lead to substantial dilution if the stock price is low.
• The note can be converted after 180 days or upon an event of default, potentially leading to early dilution.
• The company has a history as a former 'shell company', which may be a concern for investors.

Risks

• Potential for significant dilution of existing shareholders' equity due to the conversion of the promissory note and the issuance of commitment shares.
• The company's reliance on private placements and convertible debt may indicate ongoing financial challenges.
• Events of default, as defined in the note, could trigger immediate conversion and further dilution.
• The conversion price being tied to a percentage of the lowest trading price creates a risk of significant share issuance if the stock price declines.

Future Outlook

The company has secured financing through a convertible note, which provides capital for immediate needs. The terms of the note, including its conversion price and the issuance of a large number of shares, suggest a potential for significant future dilution, impacting the company's capital structure and per-share metrics.

Management Comments

• The company has used proceeds to satisfy certain promissory notes and amounts payable to Blackberry AIF.
• The issuance of restricted shares is described as consideration for the purchase of the Promissory Note.

Industry Context

StockSavvy.ai notes that the use of convertible notes, especially with significant discounts and share issuances, is a common, albeit often dilutive, financing method for companies in challenging financial situations or those seeking to fund operations without immediate equity dilution. The terms suggest Edgemode may be facing liquidity constraints or seeking growth capital under specific market conditions.

Comparison to Industry Standards

• Convertible notes with original issue discounts are standard in venture debt and bridge financing, but the magnitude of the discount (up to $150,000 on a $1,150,000 note) and the substantial share issuance (200,000,000 shares) are aggressive and indicate a higher risk profile.
• The conversion price being 70% of the lowest trading price over 10 days is a common feature in such agreements, designed to protect the investor against price volatility while potentially causing significant dilution for existing shareholders.
• Companies like Atherton Bridge Capital or other specialized lenders often engage in similar financing, but the specific terms here, particularly the large share component, are notable.
• The 9.99% ownership cap upon conversion is a standard protective clause for investors in convertible instruments to manage their stake and avoid triggering certain regulatory thresholds.

Stakeholder Impact

• Shareholders: Significant dilution is expected due to the issuance of 200,000,000 restricted shares and the potential conversion of the promissory note at a discounted price.
• Creditors: The use of proceeds to satisfy existing promissory notes may provide some relief to those specific creditors.
• Suppliers/Vendors: The payment of $225,000 to Blackberry AIF addresses a specific obligation, potentially stabilizing that relationship.

Next Steps

• The company will use the proceeds to satisfy certain existing promissory notes and amounts payable to Blackberry AIF.
• The convertible note is due on December 31, 2027, and can be converted into common stock under specified conditions.
• The company must maintain its listing on the OTC Markets or an equivalent exchange as per the Purchase Agreement.

Key Dates

Recommendation

The significant dilution from the issuance of 200 million restricted shares and the terms of the convertible note (12% interest, conversion at 70% of lowest trading price) indicate potential financial distress and a high likelihood of further share price depreciation. This structure is generally unfavorable for existing shareholders.

Keywords

convertible note, securities purchase agreement, private placement, dilution, restricted shares, accredited investor, debt financing, capital raise