UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM
For the quarterly period ended
For the transition period _____________to______________
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Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) had been subject to such filing requirements for the past 90 days.
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of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check One):
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check
mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the Registrant is a shell company (as
defined in Exchange Act Rule 12b-2 of the Exchange Act). Yes ☐
State the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: shares of $0.001 par value common stock outstanding as of November 12, 2021.
TABLE OF CONTENTS
| Page | ||
| Part I – FINANCIAL INFORMATION | ||
| Item 1. | Financial Statements | 3 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 16 |
| Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 19 |
| Item 4. | Controls and Procedures | 19 |
| Part II – OTHER INFORMATION | ||
| Item 1. | Legal Proceedings | 20 |
| Item 1A. | Risk Factors | 20 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 20 |
| Item 3. | Defaults Upon Senior Securities | 20 |
| Item 4. | Mine Safety Disclosure | 20 |
| Item 5. | Other Information | 20 |
| Item 6. | Exhibits | 21 |
| Signatures | 22 | |
| 2 |
PART I
FINANCIAL INFORMATION
| Item 1. | Financial Statements |
Fourth Wave Energy, Inc.
Balance Sheets
(Unaudited)
| September 30, 2021 | December 31, 2020 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Prepaid assets | ||||||||
| Note receivable | ||||||||
| Total current assets | ||||||||
| Deferred offering cost | ||||||||
| Deposits | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Accounts payable - related party | ||||||||
| Notes payable | ||||||||
| Convertible notes, net of unamortized discount of $ | ||||||||
| Derivative liability | ||||||||
| Total current liabilities | ||||||||
| Total liabilities | ||||||||
| STOCKHOLDERS' DEFICIT | ||||||||
| Preferred stock, $ par value, shares authorized, Series A Preferred stock, $0.001 par value, 1,000 shares authorized shares issued and outstanding | ||||||||
| Common stock, $ par value, shares authorized, and shares issued and outstanding, respectively | ||||||||
| Additional paid in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders' deficit | ( | ) | ( | ) | ||||
| Total liabilities and stockholders' deficit | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited financial statements.
| 3 |
Fourth Wave Energy, Inc.
Statements of Operations
For the three and nine months ended September 30, 2021 and 2020
(Unaudited)
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| September 30, 2021 | September 30, 2020 | September 30, 2021 | September 30, 2020 | |||||||||||||
| Operating expenses: | ||||||||||||||||
| General and administrative | $ | $ | $ | $ | ||||||||||||
| Total operating expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense) | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss on settlement of debt | ( | ) | ||||||||||||||
| Change in fair value of derivative liability | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total other expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss per common share: | ||||||||||||||||
| Basic | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average common shares outstanding: | ||||||||||||||||
| Basic | ||||||||||||||||
| Diluted | ||||||||||||||||
The accompanying notes are an integral part of these unaudited financial statements.
| 4 |
Fourth Wave Energy, Inc.
Statements of Changes in Stockholders’ Deficit
For the three and nine months ended September 30, 2021 and 2020
(Unaudited)
| Series A Preferred | Common Stock | Additional paid-in | Accumulated | |||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | capital | Deficit | Total | ||||||||||||||||||||||
| Balance, December 31, 2020 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Stock based compensation | – | |||||||||||||||||||||||||||
| Common shares issued for settlement of convertible note payable | – | |||||||||||||||||||||||||||
| Common shares issued for settlement of note payable and accrued interest | – | |||||||||||||||||||||||||||
| Common shares issued for cash | – | |||||||||||||||||||||||||||
| Returned common shares and liability extinguishment related to GeoSolar | – | ( | ) | ( | ) | |||||||||||||||||||||||
| Extinguishment of derivative liability due to conversion | – | – | ||||||||||||||||||||||||||
| Net loss | – | – | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, March 31, 2021 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Common shares issued for cash | – | |||||||||||||||||||||||||||
| Common stock issued for deferred offering costs | – | |||||||||||||||||||||||||||
| Common shares issued for settlement of convertible notes payable | – | |||||||||||||||||||||||||||
| Common shares issued for settlement of note payable | – | |||||||||||||||||||||||||||
| Extinguishment of derivative liability due to conversion | – | – | ||||||||||||||||||||||||||
| Net loss | – | – | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, June 30, 2021 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Stock based compensation | – | |||||||||||||||||||||||||||
| Common shares issued with convertible notes payable | – | |||||||||||||||||||||||||||
| Net loss | – | – | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, September 30, 2021 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Balance, December 31, 2019 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Stock based compensation | ||||||||||||||||||||||||||||
| Net loss | – | – | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, March 31, 2020 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Sale of common stock | – | |||||||||||||||||||||||||||
| Common share issued for conversion of debt and accrued interest | – | |||||||||||||||||||||||||||
| Extinguishment of derivative liability due to conversion | – | – | ||||||||||||||||||||||||||
| Net loss | – | – | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, June 30, 2020 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Sale of common stock | – | |||||||||||||||||||||||||||
| Common share issued for conversion of debt | – | |||||||||||||||||||||||||||
| Extinguishment of derivative liability due to conversion | – | – | ||||||||||||||||||||||||||
| Net loss | – | – | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, September 30, 2020 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
The accompanying notes are an integral part of these unaudited financial statements.
| 5 |
Fourth Wave Energy, Inc.
Statements of Cash Flows
For the nine months ended September 30, 2021 and 2020
(Unaudited)
| September 30, 2021 | September 30, 2020 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustment to reconcile net loss to cash used in operating activities: | ||||||||
| Stock based compensation | ||||||||
| Amortization of debt discount | ||||||||
| Loss on change in derivative liability | ||||||||
| Loss on settlement of liabilities | ||||||||
| Net change in: | ||||||||
| Prepaid assets | ||||||||
| Accounts payable and accrued expenses | ||||||||
| Accounts payable - related party | ( | ) | ( | ) | ||||
| CASH FLOWS USED IN OPERATING ACTIVITIES | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Issuance of note receivable | ( | ) | ||||||
| CASH FLOWS USED IN INVESTING ACTIVITIES | ( | ) | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from sale of common stock | ||||||||
| Proceeds from convertible notes | ||||||||
| Payments on convertible notes | ( | ) | ||||||
| Proceeds from notes payable | ||||||||
| Payments on notes payable | ( | ) | ||||||
| CASH FLOWS PROVIDED BY FINANCING ACTIVITIES | ||||||||
| NET CHANGE IN CASH | ||||||||
| Cash, beginning of period | ||||||||
| Cash, end of period | $ | $ | ||||||
| SUPPLEMENTAL CASH FLOW INFORMATION | ||||||||
| Cash paid on interest expenses | $ | $ | ||||||
| Cash paid for income taxes | $ | $ | ||||||
| NON-CASH TRANSACTIONS | ||||||||
| Debt discount created by derivative liability | $ | $ | ||||||
| Common shares issued for settlement of convertible notes payable and accrued interest | $ | $ | ||||||
| Common shares issued for settlement of notes payable and accrued interest | $ | $ | ||||||
| Common stock issued for deferred offering costs | $ | $ | ||||||
| Deferred offering costs offset against additional paid in capital | $ | $ | ||||||
| Extinguishment of liability related to Geosolar | $ | $ | ||||||
| Extinguishment of derivative liability due to conversion | $ | $ | ||||||
| Prepaid expenses financed with convertible notes payable | $ | $ | ||||||
| Common stock issued with convertible debt | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited financial statements.
| 6 |
Fourth Wave Energy, Inc.
Notes to the Financial Statements
September 30, 2021
(Unaudited)
Note 1. Basis of Presentation
The accompanying unaudited interim financial statements of Fourth Wave Energy, Inc. (“we”, “our”, “Fourth Wave” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s Annual Report filed with the SEC on Form 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for our interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements that would substantially duplicate the disclosure contained in the audited financial statements for fiscal 2020, as reported in the Form 10-K of the Company, have been omitted.
On March 20, 2020, shareholders owning a majority of the Company's outstanding shares of common stock amended the Company's Articles of Incorporation to change the name of the Company from Pierre Corp. to Fourth Wave Energy, Inc.
In connection with the acquisition
of Fourth Wave, Inc. (“FWAV”) in March 2020, the Company entered into consulting agreements with certain founders of FWAV.
The consulting agreements require the Company to collectively pay $
In March 2020 the Director General of the World Health Organization declared COVID-19 a pandemic. The extent to which the COVID-19 pandemic and global efforts to contain its spread will impact our operations will depend on future developments, which are highly uncertain and cannot be predicted at this time, and include the duration, severity and scope of the pandemic and the actions taken to contain or treat the COVID-19 pandemic.
Significant Accounting Policies
Fair Value of Financial Instruments
The carrying value of short-term instruments, including cash, accounts payable and short-term notes approximate fair value due to the relatively short period to maturity for these instruments.
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs. The Company utilizes a three-level valuation hierarchy for disclosures of fair value measurements, defined as follows:
Level 1: inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets
Level 2: inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liabilities, either directly or indirectly, for substantially the full term of the financial instruments.
| 7 |
Level 3: inputs to the valuation methodology are unobservable and significant to the fair value
Fair Value Measurements
The Company’s assets and liabilities recorded at fair value have been categorized based upon a fair value hierarchy.
The following table presents information about the Company’s liabilities measured at fair value on a recurring basis and the Company’s estimated level within the fair value hierarchy of those assets and liabilities as of September 30, 2021 and December 31, 2020:
| Fair value measured at September 30, 2021 | ||||||||||||||||
Total carrying value at September 30, 2021 | Quoted prices in active markets (Level 1) | Significant other observable inputs (Level 2) | Significant Unobservable inputs (Level 3) | |||||||||||||
| Liabilities: | ||||||||||||||||
| Derivative liabilities | $ | $ | $ | $ | ||||||||||||
| Fair value measured at December 31, 2020 | ||||||||||||||||
Total carrying value at December 31, 2020 | Quoted prices in active markets (Level 1) | Significant other observable inputs (Level 2) | Significant Unobservable inputs (Level 3) | |||||||||||||
| Liabilities: | ||||||||||||||||
| Derivative liabilities | $ | $ | $ | $ | ||||||||||||
There were no transfers between Level 1, 2 or 3 during the period.
The table below presents the change in the fair value of the derivative liability during the nine months ended September 30, 2021:
| Fair value as of December 31, 2020 | $ | |||
| Fair value on the date of issuance recorded as a debt discount | ||||
| Extinguishment of liability to equity due to conversions | ( | ) | ||
| Loss on change in fair value of derivatives | ||||
| Fair value as of September 30, 2021 | $ |
Convertible debt
The Company records a beneficial conversion feature related to the issuance of convertible notes that have conversion features at fixed or adjustable rates. The beneficial conversion feature for the convertible instruments is recognized and measured by allocating a portion of the proceeds as an increase in additional paid-in capital and as a reduction to the carrying amount of the convertible instrument equal to the intrinsic value of the conversion features. The beneficial conversion feature will be accreted by recording additional noncash interest expense over the expected life of the convertible notes.
| 8 |
Beneficial Conversion Features
If the conversion feature of conventional convertible debt provides for a rate of conversion that is below market value, this feature is characterized as a beneficial conversion feature (“BCF”). A BCF is recorded by the Company as a debt discount pursuant to ASC Topic 470-20 “Debt with Conversion and Other Options.” In those circumstances, the convertible debt is recorded net of the discount related to the BCF and the Company amortizes the discount to interest expense over the life of the debt using the effective interest method.
Derivative Financial Instruments
Fair value accounting requires bifurcation of embedded derivative instruments such as conversion features in convertible debt or equity instruments and measurement of their fair value for accounting purposes. In assessing the convertible debt instruments, management determines if the convertible debt host instrument is conventional convertible debt and further if there is a beneficial conversion feature requiring measurement. If the instrument is not considered conventional convertible debt under ASC 470, the Company will continue its evaluation process of these instruments as derivative financial instruments under ASC 815. The Company applies the guidance in ASC 815-40-35-12 to determine the order in which each convertible instrument would be evaluated for derivative classification.
Once determined, derivative liabilities are adjusted to reflect fair value at each reporting period end, with any increase or decrease in the fair value being recorded in results of operations as an adjustment to fair value of derivatives.
Recent Accounting Pronouncements
The Company does not believe that any recently issued effective pronouncements, or pronouncements issued but not yet effective, if adopted, would have a material effect on its financial statements.
Note 2. 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 September 30, 2021 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 3. Note Receivable
On August 20, 2021 the Company entered into a Letter of Intent with
EdgeMode, Inc. (“EdgeMode”). Pursuant to the Letter of Intent, the Company will, at the closing, acquire all of the issued
and outstanding shares of EdgeMode for that number of shares of the Company's common stock which, at closing, will represent 80% of the
Company's outstanding shares of common stock. The Letter of Intent with EdgeMode is non-binding and may be terminated
by either party. EdgeMode is a high performance computing infrastructure management platform. EdgeMode deploys
Bitcoin mining data center containers fully-integrated into the locations of its energy asset partners. The acquisition of EdgeMode is
subject to a number of conditions, including the execution of a definitive agreement between the parties. On September 30, 2021, the Company
loaned EdgeMode $
| 9 |
Note 4. Related Party Transactions
Effective April 30, 2019, the Company agreed to
increase the compensation to the President of the Company to $
Fees earned during the period are as follows:
| Nine months ended September 30, 2021 | Nine months ended September 30, 2020 | |||||||
| Prior period balance | $ | $ | ||||||
| Management fees | ||||||||
| Cash advances | ||||||||
| Expenses paid on behalf of Company | ||||||||
| Repayments | ( | ) | ( | ) | ||||
| End of period balance | $ | $ | ||||||
On April 1, 2021, the Company entered into a services
agreement with Axiom Group, which is owned by the President of the Company. The services agreement includes investor relation services
for a term of eighteen months for compensation of $90,000. During the nine months ended September 30, 2021, the Company prepaid the $
Note 5. Notes Payable
On January 15, 2020, the Company converted $
Note 6. Convertible Notes Payable and Derivative Liability
On June 4, 2019, the Company borrowed $
| 10 |
On September 9, 2019, the Company borrowed $
On November 14, 2019, the Company entered into
a debt agreement to borrow $
On January 23, 2020, the Company entered into
an agreement for up to $
In 2020, the Company issued convertible notes
in the principal amount of $
| 11 |
On August 6, 2020, the Company issued a note in
the principal amount of $
On November 17, 2020, the Company entered into
a debt agreement to borrow $
On June 25, 2021, the Company entered into a
debt agreement to borrow $
On July 21, 2021, the Company entered into a debt
agreement to borrow $
On September 17, 2021, the Company entered
into a debt agreement to borrow $
On September 21, 2021, the Company entered
into a debt agreement to borrow $
| 12 |
On September 28, 2021, the Company entered
into a debt agreement to borrow $
On September 28, 2021, the Company entered
into a debt agreement to borrow $
During the nine months ended September 30,
2021, the Company issued other convertible notes in the principal amount of $
As of September 30, 2021, the total derivative
liability on the above notes was adjusted to a fair value of $
Note 7. Equity
Common Stock
On January 28, 2021, the Company entered into a purchase agreement
with an investor, Tysadco Partners LLC, (the “Investor”) providing for the purchase of up to $
| 13 |
On July 24, 2021, the Company entered into a six month consulting agreement for investor relation services. Upon signing the agreement, the Company agreed to pay the consultant 300,000 shares of common stock. On August 13, 2021, 300,000 shares of common stock were issued for services. The shares were valued at $0.18, the closing price of the Company’s stock on date of issuance. During the nine months ended September 30, 2021, the Company recognized $18,200 of expense and will recognize the remaining expense over the service period of the consulting agreement.
On December 1, 2020, the Company entered into a three month consulting agreement for investor relation services. Upon signing the agreement, the Company agreed to pay the consultant a monthly fee of $10,000 plus 400,000 shares of common stock. In December 2020, 400,000 shares of common stock were issued for services. The shares were valued at $0.23, the closing price of the Company’s stock on December 1, 2020. During the nine months ended September 30, 2021, the Company issued the remaining 800,000 shares related to the agreement and recognized $182,000 of expense.
On September 30, 2021, the Company issued shares of common stock with a convertible note payable. See Note 6.
During the nine months ended
September 30, 2021, the Company issued shares of common stock, upon settlement of convertible notes in the principal amount of
$
During the nine months ended September 30, 2021, the Company settled
notes payable of $
During the nine months ended September 30, 2021, shares of the Company's common stock were returned to the Company and cancelled. See Note 1.
Preferred Stock
On March 26, 2020, the Company designated
shares of its original authorized shares of Preferred Stock as Series A Preferred Stock (“Series A”) with a $
par value.
Stock Warrants
The following table summarizes the stock warrant activity for the nine months ended September 30, 2021:
| Warrants | Weight-Average Exercise Price Per Share | |||||||
| Outstanding, December 31, 2020 | $ | |||||||
| Granted | $ | |||||||
| Exercised | ||||||||
| Forfeited | ||||||||
| Expired | ||||||||
| Outstanding, September 30, 2021 | $ | |||||||
As of September 30, 2021, the outstanding stock warrants have a weighted average remaining term of years and an intrinsic value of $.
| 14 |
Note 8. Subsequent Events
Subsequent to September 30, 2021 and through and including November 17,2021, the Company borrowed an aggregate of $1,500,000 from a number of unrelated parties. The loans are unsecured, bear interest at 8% per year, and are due and payable at various dates in October and November 2022. At the option of the lenders, the loans may be converted into shares of the Company's common stock at a conversion price of $0.25 per share. In conjunction with the issuance of such convertible notes, an aggregate of 3,000,000 warrants were issued to the lenders. The warrants have a five year term and an exercise price of $0.50 per share. Of the $1,500,000 in convertible notes, the Company has received $355,000 in cash proceeds. The remainder of the funds remain in an escrow account and will be released upon execution of a definitive merger agreement with EdgeMode, Inc. on or prior to December 31,2021.
In furtherance of the proposed merger with EdgeMode, Inc., the Company has executed or is in the process of executing waivers with each of the persons that has outstanding notes with the Company wherein they have waived or will waive any and all defaults under their respective notes if a definitive merger agreement is executed with EdgeMode, Inc. on or prior to December 31,2021 and such merger closes on or before January 31,2022. In addition, subject to the Company meeting the above deadlines, the vast majority of the noteholders have or will be executing note conversion agreements with the Company wherein they have agreed or will agree to convert the principal and interest due on their notes in conjunction with the closing of the merger. Any persons not executing a conversion agreement will have their notes prepaid by the Company in conjunction with the closing under the merger agreement.
On October 21, 2021, the Company loaned EdgeMode $100,000. The loan bears interest at 16% per annum and is due and payable on April 21, 2022.
On November 3, 2021, the Company repaid $88,750 in principal, $2,548 in accrued interest and $28,874 additional interest expense on an unsecured convertible note payable.
| 15 |
| Item 2. | Management’s Discussion and Analysis of Financial Conditions and Results of Operations |
The following discussion and analysis by our management of our financial condition and results of operations should be read in conjunction with our unaudited condensed interim financial statements and the accompanying related notes included in this quarterly report and our audited financial statements and related notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the Securities and Exchange Commission.
Cautionary Statement Regarding Forward-Looking Statements
This report may contain forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act, and we intend that such forward-looking statements be subject to the safe harbors created thereby. These forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. Any such forward-looking statements would be contained principally in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Forward-looking statements include information concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, industry environment, potential growth opportunities and the effects of regulation. Forward-looking statements include all statements that are not historical facts and can be identified by terms such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “hopes,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would” or similar expressions.
Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our management’s beliefs and assumptions only as of the date of this report. You should read this report and the documents that we reference in this report, completely and with the understanding that our actual future results may be materially different from what we expect. Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.
Overview
Unless otherwise indicated or the context otherwise requires, all references in this Form 10-Q to “we,” “us,” “our,” “our company,” “Fourth Wave” or the “Company” refer to Fourth Wave, Inc.
We were incorporated in Nevada on January 21, 2011. Since our incorporation, we have attempted to become involved in a number of business ventures, all of which were unsuccessful and which we have abandoned.
Fourth Wave Energy/ Spin-Off
On March 16, 2020 we acquired all of the outstanding shares of Fourth Wave Energy, Inc. (“FWI”) for 6,200,000 restricted shares of our common stock.
FWI has designed an energy system which is based on combining solar power and other energy efficient technologies into one fully integrated system (the "GSP System"). The GSP System is designed to significantly reduce energy consumption and associated carbon emissions in residences and commercial buildings.
In connection with this acquisition, we entered into consulting agreements with certain founders of FWI. The consulting agreements required us to collectively pay $379,500 in consulting fees during the terms of the consulting agreements, all but one of which expired between May 31 and June 30, 2020. One consulting agreement was for a twelve month period and expired in March of 2021.
| 16 |
We no longer plan to pursue the GSP System. As a result, on March 10, 2021, we transferred all of the rights to the GSP System to GeoSolar Technologies, Inc. (“GST”) in exchange for 10,000,000 shares of GST's common stock. We plan to distribute ("Spin-Off") these shares to our shareholders on the basis of one share of GST's common stock for each four shares held by each of our shareholders.
As a part of this transaction, the consultants referred to above agreed to release the Company from any liability for any consulting fees owed to them by the Company and return a portion of the common shares they held. During the nine months ended September 30, 2021, 4,700,000 shares of the Company's common stock were returned to the Company and cancelled.
The date for determining which of our shareholders will receive shares of GST in the Spin-Off will be determined shortly.
Edgemode, Inc.
On August 20, 2021 the Company entered into a non-binding Letter of Intent with EdgeMode, Inc. Pursuant to the Letter of Intent, the Company will, at the closing, acquire all of the issued and outstanding shares of EdgeMode for that number of shares of the Company's common stock which, at closing, will represent 80% of the Company's outstanding shares of common stock.
EdgeMode is a high performance computing infrastructure management platform. EdgeMode deploys Bitcoin mining data center containers fully-integrated into the locations of its energy asset partners. For more information regarding EdgeMode, go to www.edgemode.io.
The acquisition of EdgeMode is subject to a number of conditions, including the execution of a definitive agreement between the parties.
Results of Operations for the three months ended September 30, 2021, compared to three months ended September 30, 2020.
During the three months ended September 30, 2021 general and administrative expenses were $190,303 compared to $212,689 in 2020. The $22,386 decrease was the result of reduced consulting, advertising and professional fees which were offset with increases in stock based compensation and travel expenses during the three months ended September 30, 2021.
During the three months ended September 30, 2021 other expenses were $206,662 compared to $413,258 in 2020. The $206,596 decrease in other expenses are the result of decreases in amortization of discounts and loss on change in fair value of derivative liability which were offset with an increase in interest expense.
Net loss for the three months ended September 30, 2021 and 2020, was $396,965 and $625,947, respectively.
Results of Operations for the nine months ended September 30, 2021, compared to nine months ended September 30, 2020.
During the nine months ended September 30, 2021 general and administrative expenses were $855,899 compared to $3,750,383 in 2020. The $2,894,484 decrease was mainly due to the decrease in stock-based compensation during the nine months ended September 30, 2021.
During the nine months ended September 30, 2021 other expenses were $1,306,490 compared to $634,228 in 2020. The $672,262 increase in other expenses was the result of increased amortization of discounts, interest expense and loss on conversion of debt which were offset by a decrease in loss on change in fair value of derivative liability.
Net loss for the nine months ended September 30, 2021 and 2020, was $2,162,389 and $4,384,611, respectively.
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Liquidity and Capital Resources
Our sources and (uses) of cash for the nine months ended September 30, 2021 and 2020 were:
| 2021 | 2020 | |||||||
| Cash used in operating activities | $ | (532,231 | ) | $ | (314,103 | ) | ||
| Cash used in investing activities | $ | (750,000 | ) | $ | – | |||
| Payments on notes payable | $ | – | $ | (3,000 | ) | |||
| Payments on convertible notes payable | $ | (175,000 | ) | $ | – | |||
| Proceeds from convertible notes payable | $ | 1,137,000 | $ | 214,850 | ||||
| Proceeds from sale of common stock | $ | 408,000 | $ | 100,000 | ||||
| Proceeds from notes payable | $ | – | $ | 10,000 | ||||
Going Concern
The unaudited financial statements accompanying the report have been prepared on a going concern basis, which assumes that we will be able to meet our obligations and continue our operations for our next fiscal year. Realization values may be substantially different from carrying values as shown and the financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should we be unable to continue as a going concern. At September 30, 2021, we have had no revenue and have not yet achieved profitable operations and expect to incur further losses in the development of our business, all of which raise substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent upon our ability to generate future profitable operations and/or to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due. Management has no formal plan in place to address this concern but considers that we 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.
There is no assurance that we will be able to obtain further funds required for our continued operations. We are pursuing various financing alternatives to meet our immediate and long-term financial requirements. There can be no assurance that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to obtain the additional financing on a timely basis, we will be forced to scale down or perhaps even cease the operation of our business
Critical Accounting Policies and Estimates
Use of Estimates
In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
Fair Value of Financial Instruments
The carrying value of short-term instruments, including cash, accounts payable and accrued expenses, and short-term notes approximate fair value due to the relatively short period to maturity for these instruments.
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Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs. The Company utilizes a three-level valuation hierarchy for disclosures of fair value measurements, defined as follows:
Level 1: inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets
Level 2: inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liabilities, either directly or indirectly, for substantially the full term of the financial instruments.
Level 3: inputs to the valuation methodology are unobservable and significant to the fair value
Derivative Financial Instruments
Fair value accounting requires bifurcation of embedded derivative instruments such as conversion features in convertible debt or equity instruments and measurement of their fair value for accounting purposes. In assessing the convertible debt instruments, management determines if the convertible debt host instrument is conventional convertible debt and further if there is a beneficial conversion feature requiring measurement. If the instrument is not considered conventional convertible debt under ASC 470, the Company will continue its evaluation process of these instruments as derivative financial instruments under ASC 815. The Company applies the guidance in ASC 815-40-35-12 to determine the order in which each convertible instrument would be evaluated for derivative classification.
Once determined, derivative liabilities are adjusted to reflect fair value at each reporting period end, with any increase or decrease in the fair value being recorded in results of operations as an adjustment to fair value of derivatives.
| Item 3. | Quantitative and Qualitative Disclosures about Market Risk |
Not required.
| Item 4. | Controls and Procedures |
Evaluation of Disclosure Controls and Procedures
Under the direction and with the participation of the Company’s management, including the Company’s Chief Executive and Chief Financial Officer, the Company has conducted an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures as of September 30, 2021. The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in its periodic reports with the Securities and Exchange Commission is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and regulations, and that such information is accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. The Company’s disclosure controls and procedures are designed to provide a reasonable level of assurance of reaching its desired disclosure control objectives. Based on the evaluation, the Chief Executive and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were not effective as of September 30, 2021. Our disclosure controls and procedures are ineffective due to a lack of segregation of duties and the lack of formal documentation of our control environment.
In light of the material weakness described above, we continue to perform additional analysis and other post-closing procedures to ensure our financial statements are prepared in accordance with GAAP. Accordingly, we believe that the financial statements included in this report fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented. Additional experienced personnel will be hired in the accounting and finance department, appropriate consultants will be retained, and our accounting system will be upgraded as soon as it becomes economically feasible and sustainable.
Changes in Internal Control over Financial Reporting
There was no change in the Company’s internal control over financial reporting that occurred during the nine months ended September 30, 2021 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
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PART II
OTHER INFORMATION
| Item 1. | Legal Proceedings |
From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our Company threatened against or affecting our company, our common stock, or our officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.
| Item 1A. | Risk Factors |
There are no changes to our risk factors that constitute material changes from the risk factors previously disclosed in our registration statement on Form S-1, filed with the SEC on April 9, 2021.
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
On July 24, 2021, the Company entered into a six month consulting agreement for investor relation services. Upon signing the agreement, the Company agreed to pay the consultant 300,000 shares of common stock. On August 13, 2021, 300,000 shares of common stock were issued for services. The shares were valued at $0.18, the closing price of the Company’s stock on date of issuance.
On September 17, 2021, the Company issued 300,000 common stock warrants to a note holder with a fair value of $7,378. The warrants have an exercise price of $0.50 and expire five years following issuance. As of September 30, 2021, the balance on the loan, net of unamortized discount of $52,279, was $97,721.
On September 21, 2021, the Company issued 220,000 common stock warrants to a note holder with a fair value of $6,391. The warrants have an exercise price of $0.50 and expire five years following issuance. As of September 30, 2021, the balance on the loan, net of unamortized discount of $56,207, was $53,793.
On September 30, 2021, the Company issued 250,000 shares of common stock with a convertible note payable.
| Item 3. | Defaults Upon Senior Securities |
None
| Item 4. | Mine Safety Disclosure |
Not Applicable.
| Item 5. | Other Information |
There is no other information required to be disclosed under this item which was not previously disclosed.
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| Item 6. | Exhibits |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| DATED: November 22, 2021 | FOURTH WAVE ENERGY, INC. | |
| By: | /s/ J. Jacob Isaacs | |
| J. Jacob Isaacs, Principal Executive, Financial and Accounting Officer | ||
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