Edgemode, Inc 8-K, filed Feb 7, 2022
Edgemode, Inc. (EDGM)
About this 8-K
Edgemode, Inc filed this 8-K on February 7, 2022, reporting on events of January 31, 2022.
Items reported
- Item 1.01: Entered into a material agreement
- Item 2.01: Completed an acquisition or sale of assets
- Item 3.01: Delisting notice or listing transfer
- Item 3.02: Unregistered sale of equity
- Item 5.02: Director or officer change, or executive pay
- Item 5.06: Change in shell company status
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
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| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act: None
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| N/A | N/A | N/A |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
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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.
Item 1.01 Entry into a Material Definitive Agreement.
The disclosure set forth below under Item 2.01 of this Current Report on Form 8-K (“report”) is incorporated by reference into this Item 1.01.
Item 2.01 Completion of Acquisition or Disposition of Assets.
Effective January 31, 2022 (the “Effective Time”), Fourth Wave Energy, Inc., (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. Charlie Faulkner and Simon Wajcenberg, the principals of EdgeMode, were appointed as directors and executive officers as described below:
| · | Charlie Faulkner – President and Chief Executive Officer; and |
| · | Simon Wajcenberg - Chief Financial Officer, Treasurer, Secretary and Executive Chairman. |
See “Named Executive Officer” Employment Agreements beginning on page 31 for a description of the Employment Agreements and stock option grants executed by Mr. Faulkner and Mr. Wajcenberg.
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 foregoing description of the Merger Agreement and the related transactions consummated and contemplated thereby is qualified in its entirety by the full text of the Merger Agreement which is filed herewith as Exhibit 2.1.
Form 10 Information
Cautionary Note Regarding Forward-Looking Statements
This report contains forward-looking statements within in meaning of the Private Securities Litigation Reform Act of 1995, including statements concerning paying off the amounts due on our equipment, expected delivery, anticipated mining capacity available to us from our hosting partners, anticipated future results of operations, he growth of our business, our future capital needs and ability to obtain financings and liquidity. Words such as “expect,” “may,” “anticipate,” “intend,” “would,” “plan,” “believe,” “estimate,” “should,” and similar words and expressions identify forward-looking statements. These statements are based on the Company’s estimates, projections, beliefs and assumptions and are not guarantees of future performance.
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The results anticipated by any or all of these forward-looking statements might not occur. Important factors, uncertainties and risks that may cause actual results to differ materially from these forward-looking statements are discussed in the Risk Factors section of this report and include, without limitation, failure to obtain financing to pay for equipment we currently own and/or plan to purchase, decrease in the price of the cryptocurrency that we purchase, unanticipated issues which decreased mining capacity, and our need for and challenges we may face in obtaining the necessary financing to execute our business plan on favorable terms or at all. We undertake no obligation to publicly update or revise any forward-looking statements, whether as the result of new information, future events or otherwise. For more information regarding some of the ongoing risks and uncertainties of our business, see the Risk Factors section of this report.
BUSINESS
Corporate History
Prior to the closing of the Transaction, FWAV was a shell company with nominal assets and liabilities.
EdgeMode was incorporated in the State of Wyoming in March 2020. EdgeMode’s office is located at 350 North Orleans Street, Suite 9000N, Chicago, IL 60654 and its website address is www.edgemode.io. We have not incorporated by reference into this report the information that can be accessed through our website and you should not consider such information to be part of this report.
Our Company
EdgeMode is an early-stage cryptocurrency mining. Although we have historically mined Ethereum, we are now focused on expanding our operations by mining Bitcoin. We provide investors with direct exposure to cryptocurrencies, without the technical complexity or constraints of purchasing the underlying cryptocurrency. Investors avoid the need to create online wallets, wire money offshore, and safely store their cryptocurrency.
We operate through our partnerships with third party hosting firms, Bitcoin mining facilities for the sole purpose of mining Bitcoin and Ethereum. Our facilities and mining platform are operating with the primary intent of accumulating Bitcoin, although to date we have focused on Ethereum, which we may sell for fiat currency from time to time depending on market conditions and management’s determination of our cash flow needs.
We are in the research and development stage of exploring treasury management alternatives to increase earnings of the cryptocurrency we mine and hold. In that regard, we may continue to hold as well as sell Ethereum in order to fund the purchase of Bitcoin miners and other mining equipment, to pay operational expenses such as hosting company fees and for working capital and other general corporate purposes. Other than Ethereum, we have no holdings of, and have no current plans to hold, any other types of digital assets other than Bitcoin.
Digital Asset Mining
Historically, we have mined Ethereum. Moving forward, we plan to mine Bitcoin, and may choose to mine other cryptocurrencies, by acquiring miners to solve complex cryptographic algorithms to support the Bitcoin blockchain (in a process known as “solving a block”). In return for solving a block, we have received Ethereum, and when we receive our Bitcoin miners, a Bitcoin. We intend to only mine cryptocurrencies that are not securities. Our policy is to consult counsel prior to attempting to mine any cryptocurrency other than Bitcoin, in order to avoid inadvertently dealing in a cryptocurrency which may be deemed a security. We anticipate that, should we consider mining a cryptocurrency other than Bitcoin we will seek the advice of securities counsel, and the process will include research, review and analysis of the current federal securities laws and regulations regarding digital assets, including judicial interpretations and administrative guidance. However, the processes employed for determining whether particular digital assets are securities within the meaning of U.S. federal securities laws are risk based assessments and are not a legal standard or binding on the SEC or other regulators. See the risk factor titled “If we undertake to mine digital assets other than Bitcoin and Ethereum, such digital assets may be deemed to be securities by regulators, notwithstanding any assessment by us and/or our advisors to the contrary” on page 16. We recognize that whether a digital asset is a security is a complex legal issue. For that reason, we have no plan in the foreseeable future to mine anything other than Bitcoin and to a lesser extent Ethereum.
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With respect to holding and selling the cryptocurrency we mine, our policy is to hold what we mine until management determines that market conditions and circumstances deem selling cryptocurrency to be advisable in the furtherance of our capital needs and objectives. This may include, among other factors, a determination that the cryptocurrency is overvalued at a particular price at a given time, that fiat currency is required to fund our operations, or that an excessive quantity of the specific cryptocurrency has accumulated in our digital wallet resulting in a potential security risk. We hold the cryptocurrency we mine in a digital wallet using a BlockFi account, and do not have any agreements with third parties to manage or exchange the cryptocurrency we mine and store.
Miners measure their capability in terms of processing power, which is known as in the industry as “hashing” power. Hashing power is measured in terms of the number of hashing algorithms solved (or “hashes”) per second, which is the miner’s “hash rate.” Generally speaking, miners with greater hashing power and in turn a higher hash rate relative to other miners attempting to solve a block have a higher chance of solving the block and receiving a cryptocurrency award. However, although newer generations of miners advertise improved energy efficiency, increasing hash rate generally requires greater electric power, which increases the cost of solving a block and, therefore, the relative cost of mining a cryptocurrency. As additional miners competed for the limited supply of blocks, individuals found that they were working for months without finding a block and receiving any reward for their mining efforts. To address this variance, miners started organizing into pools to share mining rewards more evenly on a pro rata basis based on total hashing capacity contributed to the mining pool. As of the date of this report, we do not participate in any pools but may do so when management believes it’s in the Company’s best interests.
Our Mining Equipment
| Hardware | Quantity | Hardware Manufacturer | Location | |||
| AMD W5700 | 108 | AMD | Rouses Point NY State | |||
| NVidia 3070 | 24 | NVidia | Rouses Point NY State | |||
| AMD Vega 64 | 288 | AMD | Rouses Point NY State | |||
| Nvidia 3070 | 72 | Nvidia | Rouses Point NY State | |||
| RTX 5000 | 540 | Nvidia | Rouses Point NY State | |||
| AMD Vega 64 | 576 | AMD | Rouses Point NY State | |||
| AMD Vega 56 | 144 | AMD | Rouses Point NY State |
There is an outstanding debt of $1,555,726 on the miners which will be fully paid by end 2023.
We are currently utilizing 0.5MW of power and hosting supply at the Rouses Point facility.
We have signed a purchase order for a further 1,152 GPU servers for Ethereum mining to be installed and hosted at Rouses Point in March 2022. There is an outstanding debt of $1M on this hardware which will be settled and fully paid by March 2023. This hardware will utilize a further 0.25MW of hosting supply at Rouses Point.
We have signed a purchase order with Katena Computing for the supply of 10 Exahash of Bitcoin Mining hardware. We will receive the first delivery on this order in September 2022 with 5 Exahash being delivered by December 2022 the balance of 2.5 Exahash in Q1 2023 and 2.5 Exahash in Q2 2023. This hardware will be hosted by Compute North at their facility in North Carolina and will require a total 250 MW of hosting capacity. See the risk factor at the end of page 7.
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Hosting Agreements
Our K10 Miners will be located in North Carolina and maintained by Compute North, LLC (“Compute North”) a well-known miner hosting company in North America. Under a Master Agreement, Compute North is providing the Company with colocation, managerial and other services at its data center facilities, including rack space, electrical power, ambient air cooling, internet connectivity and physical security for the Company’s miners. The initial hosting capacity with Compute North is 20 MW. The purchaser order with Compute anticipates an additional 230 MW of hosting capacity available to the Company. The Master Agreement is terminable by Compute North for cause. The Company granted Compute North with a security interest in the miners and other equipment installed at the facility to secure the Company’s obligations under the master agreement. The Company is responsible for a minimum monthly service fee and other fees. See the Master Agreement with Compute North and Purchase Order attached as Exhibit 10.5 to this report. The terms of such agreements are incorporated herein by reference.
We have a signed hosting agreement with Trinity Mining Technologies, LLC. This agreement provides for up to 300MW of hosting facilities in Texas beginning in October 2022. See the Master Agreement with Trinity Mining Technologies, LLC attached as Exhibit 10.6 to this report. The terms of such agreements are incorporated herein by reference.
Our currently owned miners are primarily located in New York with 2CRSI. See above for MW utilized and total capacity available if required. The Company pays 2CRSI hosting fees of $0.08 per KWH plus a monthly hosting charge of $50 per MWH. See the 2CRSI orders attached as Exhibit 10.7 to this report. The terms of such orders are incorporated herein by reference.
Competition
In Bitcoin mining, companies, individuals and groups generate units of cryptocurrency through mining. Miners can range from individual enthusiasts to professional mining operations with dedicated data centers. Miners may organize themselves in mining pools. The Company competes or may in the future compete with other companies that focus all or a portion of their activities on owning or operating Bitcoin exchanges, developing programming for the blockchain, and mining activities. At present, the information concerning the activities of these enterprises is not readily available as the vast majority of the participants in this sector do not publish information publicly or the information may be unreliable. Published sources of information include “bitcoin.org” and “blockchain.info”; however, the reliability of that information and its continued availability cannot be assured.
Several public companies (traded in the U.S. and internationally), may be considered to compete with us. Such competitors include Overstock.com Inc; Bitcoin Investment Trust; Blockchain Industries, Inc; (formerly Omni Global Technologies, Inc.); Bitfarms Technologies Ltd. (formerly Blockchain Mining Ltd); DMG Blockchain Solutions Inc; Hive Blockchain Technologies Inc; Hut 8 Mining Corp; HashChain Technology, Inc; MGT Capital Investments, Inc; DPW Holdings, Inc; Layer1 Technologies, LLC; Northern Data AG; Riot Blockchain, Inc; Marathon Digital Holdings. The Bitcoin industry is a highly competitive and rapidly changing industry and new competitors and/or emerging technologies could enter the market and affect our competitiveness in the future. For more information regarding those risk factors known to us, see the section entitled “Risk Factors” herein.
Employees
We have two full-time employees and no part-time employees. None of our employees are parties to any collective bargaining arrangement. We believe our relationships with our employees are good.
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Property
Our corporate headquarters are located in Chicago, Illinois, consisting of approximately 1,000 square feet of office space under a monthly rental agreement. We believe that our existing facilities are suitable and adequate and that we have sufficient capacity to meet our current anticipated needs.
Regulation
After a period of regulatory uncertainty, we believe that the SEC will not claim that Bitcoin and Ethereum are securities and therefore will not be subject to their regulation. The SEC has been active in pursuing its regulation of other cryptocurrencies by filing lawsuits and, more recently, administratively against a cryptocurrency that tried to register under the Securities Exchange Act of 1934 (“Exchange Act”). Further, its new Chairman has given several speeches seeking regulatory authority over other cryptocurrencies. Whether Congress will enact new legislation in this area is uncertain. However, enhanced regulation may adversely affect our future mining and other cryptocurrency activities.
Blockchain and Bitcoin are increasingly becoming subject to governmental regulation, both in the U.S. and internationally. State and local regulations also may apply to our activities and other activities in which we may participate in the future. Other governmental or semi-governmental regulatory bodies have shown an interest in regulating or investigating companies engaged in the blockchain or cryptocurrency business. For instance, the Cyber-Digital Task Force of the U.S. Department of Justice (the “DOJ”) published a report entitled “Cryptocurrency: An Enforcement Framework” in October 2020. This report provides a comprehensive overview of the possible threats and enforcement challenges the DOJ views as associated with the use and prevalence of cryptocurrency, as well as the regulatory and investigatory means the DOJ has at its disposal to deal with these possible threats and challenges.
Presently, we do not believe any U.S. or state regulatory body has taken any action or position adverse to our main cryptocurrency, Bitcoin, with respect to its production, sale, and use as a medium of exchange; however, future changes to existing regulations or entirely new regulations may affect our business in ways it is not presently possible for us to predict with any reasonable degree of reliability.
The recent action taken in China was the final step in that country’s evolving regulatory crackdown. As the regulatory and legal environment evolves, we may become subject to new laws, such as further regulation by the SEC and other agencies, which may affect our mining and other activities. For additional discussion regarding our belief about the potential risks existing and future regulation pose to our business, see “Risk Factors.”
RISK FACTORS
Summary Risk Factors
Our business and an investment in our common stock are subject to numerous risks and uncertainties that investors should consider before investing in our common stock. Set forth below is a summary of the principal risks we face:
| · | We have a history of operating losses, have limited sources of revenue as an early-stage cryptocurrency mining company and may not be able to achieve or sustain profitability. |
| · | We recently commenced operations as a cryptocurrency mining company, and there is limited information available on which to evaluate our prospects. |
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| · | We will need significant additional capital to execute our business plan, including to make the substantial purchase price payments for Bitcoin mining equipment totaling $270,000,000 which are payable in installments through September 2022, and any failure to raise such capital as and when intended or at all will materially harm our business and prospects. |
| · | We may be unable to raise the capital needed to continue and grow our operations, and if we do raise the capital sought the securities that we issue may have a dilutive effect on our stockholders, a depressive effect on our stock price and/or a restrictive effect on our ability to execute our business plan and growth strategy. |
| · | Our auditors have expressed substantial doubt about our ability to continue as a going concern. |
| · | We will need to incur significant costs to transition to and maintain and operate Bitcoin mining equipment to replace our current equipment which is designed to mine Ethereum, including sourcing sufficient electricity on reasonable terms which we may be unable to do now or in the future. |
| · | Our mining operating costs, including the costs to operate, maintain, repair and replace our mining equipment, have historically outpaced our mining revenues, which has and could continue to put a strain on our business or increase our losses. |
| · | The cryptocurrency mining industry is highly competitive, with many of our competitors having better access to capital and may buy mining equipment at scale. The competition has intensified as the price of Bitcoin has appreciated in recent years, which could have a material adverse effect on our results of operations if we are unable to keep up. |
| · | Cryptocurrencies and related activities are characterized by numerous other risks and uncertainties, including the possibility for adverse regulatory developments such as bans or restrictions, hacking or malicious coding, price volatility, inaccurate mining pool calculations, the potential for one cryptocurrency to branch into two, the periodic reduction by half of the Bitcoin rewards from mining a block on the blockchain, adverse changes to the blockchain algorithm, and other external forces beyond our control described more fully below. |
| · | The future development and growth of cryptocurrencies such as Bitcoin is subject to a variety of factors that are difficult to predict and evaluate, and if the market for Bitcoin does not grow as we expect, or the price of Bitcoin declines, our business, operating results, and financial condition could be adversely affected. |
| · | The market prices of cryptocurrencies such as Bitcoin are to some extent dependent upon the possibility for broad market acceptance of these digital assets as a means of exchange which has not and may never occur, in which case the price of Bitcoin, the cryptocurrency markets in general and our prospects could materially diminish. |
| · | Our operations and the results thereof are subject to risks arising from Internet disruptions or delays, cybersecurity threats, incorrect digital recording of transactions, and other contingencies resulting from holding and transacting in digital assets. Further, due to current lack of regulation, we may be unable to seek or obtain recourse if such contingencies were to occur |
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| · | The ongoing supply chain delays may create the possibility of delays in delivery and launch and/or expansion of our mining facilities and equipment, which could stunt our growth, diminish our prospects, result in lost opportunity or revenue and increase our costs, particularly given the volatile nature of the cryptocurrencies we intend to mine. |
| · | Our operating results have and will significantly fluctuate due to the highly volatile nature of cryptocurrencies such as Bitcoin, and if the price of Bitcoin declines, including potentially due to political, economic, or other forces beyond our control, it would materially adversely affect our business. |
| · | Our reliance on third party “mining pools,” which enable us to cooperate with other Bitcoin mining enterprises to receive Bitcoin with less variance in probability of reward by sharing Bitcoin earned pro rata based on contribution to a block solved, subjects us to risks of inaccurate sharing of rewards and the loss of other at-will participants in the pool. |
| · | We may become subject to an uncertain and rapidly evolving regulatory landscape and any adverse changes to, or our failure to comply with, any laws and regulations, including those imposing restrictions or bans on Bitcoin mining due to concerns about high electrical power usage, could adversely affect our business. |
| · | Banks and financial institutions may not provide banking services, or may cut off services or access to capital, to businesses that engage in cryptocurrency-related activities. |
| · | Our stock price is subject to significant volatility due to a variety of factors, many of which are beyond our control, including its status as a “penny stock,” the fact that it is not listed on a national securities exchange, and its potential connection to the price of Bitcoin or other cryptocurrencies, which could adversely affect investors. |
| · | Because we were a shell company until January 31, 2022, stockholders cannot rely on the provisions of Rule 144 for the resale of their shares until certain conditions are met. |
| · | We have not paid cash dividends to our stockholders and do not intend to do so in the foreseeable future. |
| · | We will be subject to expensive compliance requirements as a public company which is required to file reports with the SEC and adhere to enhanced internal control requirements. |
There are numerous and varied risks, known and unknown, that may prevent us from achieving our goals. If any of these risks actually occur, our business, financial condition or results of operation may be materially adversely affected. In such case, the trading price of our common stock could decline and investors could lose all or part of their investment.
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Risks Related to Our Cryptocurrency Mining Business
We will need significant additional capital to execute our business plan, which includes purchasing, installing and operating Bitcoin mining equipment to replace our current Ethereum mining operations, and any failure to raise such capital as and when intended or at all will materially harm our business and prospectus.
Our business plan envisions shifting our focus from mining Ethereum to mining Bitcoin. Because the blockchains for each of these two cryptocurrencies use different algorithms, different mining equipment is needed to mine Bitcoin rather than Ethereum. Therefore, in order to mine Bitcoin as intended, we will need to purchase and install Bitcoin mining equipment at our hosted facilities. The price of cryptocurrency mining equipment in general and Bitcoin mining equipment in particular is high, and can be volatile with sudden and dramatic changes depending on uncontrollable factors such as the price of Bitcoin and supply shortages. Additionally, the removal and installation of mining equipment, which will be necessary given our limited access to sufficient mining facilities, is also costly. We have executed a purchase agreement with a supplier to provide us with Katena K10 Bitcoin miners having a combined hash rate of 10,000,000 PH/s, however the total purchase price is $270,000,000, of which we have only paid the supplier $1,250,000. Further, we are past due on the payment of an $8,000,000 installment of the purchase price, with future periodic installments in increasing increments continuing to come due through September 2022. The miners are scheduled to be delivered in quarterly increments from September 2022 through September 2023. Because we failed to make a payment under the agreement when due, and will likely continue to be behind on future payments unless and until we can raise sufficient capital, the agreement allows the supplier to terminate the agreement, with any amounts we have paid as of such termination date being non-refundable. Further, if the agreement is terminated by the supplier for our failure to timely make one or more payments, by the agreement’s terms the supplier will no longer be obligated to deliver the equipment. If we are unable to raise these amounts for any reason, any amounts paid towards the purchase price of undelivered equipment will be lost if the purchase agreement is terminated, and we will be forced to incur additional costs to locate and obtain miners from another source, in which case our results of operation will be harmed and our future prospects will be hindered. Any delay or inability to raise and deploy the necessary capital in a timely manner, on favorable terms, or at all, will have the effect of delaying or preventing us from executing our business plan and meeting our growth objectives, which could materially harm your investment in us.
We may be unable to raise additional capital needed to grow our business.
We will likely continue to operate at a loss, at least until our business strategy is implemented, or if Bitcoin or other cryptocurrency prices decline, and we expect to need to raise additional capital to expand our operations and pursue our growth strategies, including the acquisition of new or additional miners to commence Bitcoin mining as planned, and to respond to competitive pressures or unanticipated working capital requirements. We may not be able to obtain additional debt or equity financing on favorable terms, if at all, which could impair our growth and adversely affect our existing operations. If we raise additional equity financing, our shareholders may experience significant dilution of their ownership interests, and the per share value of our common stock could decline. Furthermore, if we engage in additional debt financing, the holders of such debt would have priority over the holders of common stock on order of liquidation preference. We may be required to accept terms that restrict our ability to incur additional indebtedness or take other actions including terms that require us to maintain specified liquidity or other ratios that could otherwise not be in the interests of our shareholders.
Even if we are able to raise sufficient capital, we may encounter delays or difficulties in obtaining and deploying Bitcoin mining equipment as planned.
In order to be successful in executing our business plan, we need to efficiently replace our Ethereum mining equipment with Bitcoin mining equipment in a timely, efficient, and cost-effective manner. Assuming we are able to raise sufficient capital to do so, we may encounter a variety of potential risks or problems with respect to deploying the funds towards our new mining focus. There has been shortages of cryptocurrency mining equipment due to limited materials such as computer chips. Further, to obtain Bitcoin mining equipment, we will be reliant on one or more manufacturers and/or suppliers to provide us with the miners, who may require us to agree to excessive prices or fees, or may fail to deliver the purchased equipment on schedule. Additionally, we will need skilled labor to remove the Ethereum mining equipment we currently operate and replace it with Bitcoin mining equipment. Also, because Bitcoin mining uses a proof of work method which generally requirements more energy than the proof of stake system employed by Ethereum’s blockchain, our hosts’ current electricity supply may be inadequate to launch our Bitcoin mining as envisioned without added costs to us, if at all. Any unexpected delays or heightened costs will adversely effect our results of operation both by extending the period of time in which we are not mining cryptocurrencies at our maximum potential capacity and increasing the costs of operating. Further, because of the volatile nature of the cryptocurrency markets, including the prices of Bitcoin and Ethereum, any such delay could prevent us from mining and selling Bitcoin at higher prices. For example, in early 2022 the price of Bitcoin declined by over $12,000 in a matter of weeks. If we are unable to purchase, deploy and operate Bitcoin mining equipment in sufficient quantities, at reasonable prices or on the delivery schedules that meet our business needs, or at all, it could have a material adverse effect on our business, results of operations and future prospects.
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We are at an early stage of development of our cryptocurrency mining business and currently have limited sources of revenue and may never become profitable.
Until February 2021, we had no operations. Although we began generating revenue in 2021 from our cryptocurrency mining activities, we are subject to the risks and uncertainties of a new business, including the risk that we may never develop, complete development or market any of our proposed services or be able to liquidate our cryptocurrencies. Accordingly, we have only a limited history upon which an evaluation of our prospects and future performance can be made. If we are unable to increase our generation of revenue, we will not become profitable, and we may be unable to continue our operations. Furthermore, our proposed operations are subject to all business risks associated with new enterprises. In order to expand our operations, we will need to enter into new agreements and strategic relationships which will expose us to additional financial obligations and contingencies, including the possibility of contractual disputes and reliance on third parties which are beyond our control. The likelihood of our success must be considered in light of the problems, expenses, difficulties, complications, and delays frequently encountered in connection with the expansion of a business, operation in a competitive industry, and the continued development of advertising, promotions and a corresponding customer base. There can be no assurances that we will operate profitably.
We have a history of operating losses, and we may not be able to achieve or sustain profitability.
To date, we have mainly mined Ethereum. Moving forward, our primary focus is on mining Bitcoin, and those operations are expected to be located in North Carolina. Our current strategy will continue to expose us to the numerous risks and volatility associated within the cryptocurrency sector, including due to the high costs of purchasing miners and sourcing power for them, while monitoring the price of Bitcoin, which has historically been volatile. Further, we have experienced recurring losses and negative cash flows from operations. To date, we have relied on debt or equity financings to fund our operations, and if the price of our cryptocurrencies are not sufficiently high to enable us to sell the cryptocurrencies we mine at prices above our cost to mine it, then we are likely to continue to be unable to fund our operations without raising additional capital. Further, even if prices are sufficiently high for our mining activities, we are likely to need to raise additional capital to fund the acquisition of new miners to repair or replace our existing miners and expand our number of miners to be competitive. We expect to incur additional net losses over the next several years as we seek to expand operations. The amount of future losses and when, if ever, we will achieve profitability are uncertain. If we are unsuccessful at executing on our business plan, our business, prospects, and results of operations may be materially adversely affected.
Our auditors have issued a “going concern” audit opinion.
Our independent auditors have indicated in their report on our December 31, 2020 financial statements that there is substantial doubt about our ability to continue as a going concern. A “going concern” opinion indicates that the financial statements have been prepared assuming that we will continue as a going concern for one year from the date the financial statements are issued and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets, or the amounts and classification of liabilities that may result if we do not continue as a going concern. Therefore, you should not rely on our balance sheet as an indication of the amount of proceeds that would be available to satisfy claims of creditors, and potentially be available for distribution to shareholders, in the event of liquidation.
Our mining operating costs have historically outpaced our mining revenues, which has and could continue to put a strain on our business or increase our losses.
Our mining operations are costly and our expenses may increase in the future, including as we transition to mining Bitcoin which will involve purchasing new mining equipment and potentially deploying a greater amount of electricity to the mining process. This expense increase may not be offset by a corresponding increase in revenue. Our expenses may be greater than we anticipate, and our investments to make our business more efficient may not succeed and may outpace monetization efforts. Increases in our costs without a corresponding increase in our revenue would increase our losses and could seriously harm our business and financial performance.
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The cost of obtaining new and replacement miners and parts is highly capital intensive and may have a material and adverse effect on our business and results of operations.
Our mining operations can only be successful and ultimately profitable if the costs, including hardware and electricity costs, associated with mining Bitcoin, Ethereum and other cryptocurrencies are lower than the price for which we mine when we sell them. Our miners are subject to ordinary wear and tear from operation and may also face more significant malfunctions caused by factors which may be beyond our control. For example, approximately 10% of our miners have experienced glitches and defects and as a result have seen either limitations on mining capabilities or outright inability to mine, such that they had to be or will have to be replaced or repaired. The result of this development has not only been increased costs to us, but also a reduced ability to generate revenue while these miners were not operating, whether because they were under repair and/or failing to operate at their optimal hash rate. Circumstances such as these, or a general need to replace outdated miners in the future, are highly cost intensive and can be a serious hindrance on our mining operations and ability to generate revenue or obtain profitability.
Additionally, as the mining technology, our business strategy and/or the cryptocurrency industry evolves, we may need to acquire newer models of miners to remain competitive in the market. For example, as discussed above we will need to obtain new miners in order to mine Bitcoin as planned. We intend to purchase and install Katena K10 miners, although we have encountered and expect to continue to face challenges in paying purchase price installments for these miners under our purchase agreement. Certain models of Bitcoin miners such as the Bitmain S17 model have been subject to defects diminishing our even eliminating their mining efficacy. Further, over time, we may replace those miners which are no longer functional or efficient or powerful enough with new miners purchased from third-party manufacturers, the cost of which may be higher than what we spent on prior models and/or such that we will need to raise more capital to do so. For instance, the price of Bitcoin miners has historically been somewhat correlated to the price of Bitcoin, which has appreciated in recent years. Depending on the price of new miners and our operational needs at the time we decide to replace miners in the future, we may have to do so at higher costs than we could have previously, which would add to our losses. Alternatively, even absent defects or reductions in computing power, mining machine models are upgraded frequently, and we are and will continue to be subject to either higher competitive pressure as a result, or will be forced to expend large amounts of capital to remain competitive and maintain optimal hash rates.
Inevitably, our older models will need to be repaired or replaced as a product of ordinary wear and tear and depreciation and/or competitive forces in the marketplace or other factors rendering our current miners obsolete. Any upgrading we may need or chose to undertake will require substantial capital investment, and we may face challenges in locating the requisite capital in a timely manner and/or on terms favorable to us or not highly dilutive to our investors. If we are unable to obtain adequate numbers of new and replacement miners in sufficient quantities or without delay, we may be unable to compete in our highly competitive and continuously developing industry. If this happens, we may not be able to mine Bitcoin or other cryptocurrency as efficiently or in sufficient amounts relative to our competition or at all and, as a result, our business and financial results could suffer which could, in turn, have a material adverse effect on the trading price of our common stock.
Because there are several competitors in our industry that are purchasing mining equipment at scale and due to supply chain disruptions, we may encounter delays or difficulty in us obtaining new miners, which could materially and adversely affect our business and results of operations.
We will need new mining equipment to further our operations, both to implement our short-term business plan of shifting to Bitcoin mining and to address potential issues such as ordinary wear and tear and defects which may arise in the future. Many of the competitors in our industry have also been purchasing mining equipment at scale, which has caused a world-wide shortage of mining equipment and components used to produce them, as well as delayed delivery schedules for new miner purchases. There can be no assurances the mining equipment manufacturers on which we will rely will be able to keep pace with the surge in demand for mining equipment when we obtain, upgrade and/or expand upon our current miners. The supply chain disruptions we are facing may adversely affect us including the shortages of transformers needed to power our miners. Additionally, the supply of the materials used to produce miners, such as the application-specific integrated circuit (“ASIC”) computer chips that are the primary feature in their computing power, may become subject to shortages, which could also either increase the cost beyond what we can reasonably afford or reduce their availability without unreasonable delay or at all. It is uncertain how manufacturers will respond to these trends and whether they can deliver on the schedules promised to any or all of their customers in the future. In the event manufacturers of mining equipment or component parts or materials are not able to keep pace with demand or avoid supply shortages, we may not be able to purchase such products in sufficient quantities, at reasonable prices or on the delivery schedules that meet our business needs, which could have a material adverse effect on our business and results of operations.
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To the extent that the profit margins of Bitcoin mining operations are not high, Bitcoin mining companies or other participants in the Bitcoin industry are more likely to immediately sell Bitcoins in the market, thereby constraining growth of the price of Bitcoin that could adversely impact us.
Over the years, Bitcoin mining operations have shifted from individual users mining with computer processors, graphics processing units and first-generation ASIC servers to larger enterprises with newer, more “professionalized” sources of processing power which has been predominantly added by “professionalized” mining operations and resulting demand for more professionalized and powerful miners having faster hash rates. These professionalized mining operations may use proprietary hardware or sophisticated ASIC machines acquired from ASIC manufacturers. Acquiring this specialized hardware at scale requires the investment of significant up-front capital, and mine operators incur significant expenses related to the operation of this hardware at scale, such as the leasing of operating space, which is often done in data centers or warehousing facilities, obtaining and paying for an electricity supply to run the miners and employing technicians to operate the mining facilities.
As a result, these professionalized mining operations are of a greater scale than prior miners and have more defined and regular expenses and liabilities. Because these regular expenses and liabilities require professionalized mining operations to maintain profit margins on the sale of Bitcoin, to the extent the price of Bitcoin declines and such profit margin is constrained, such mining companies are incentivized to sell Bitcoin earned from mining operations more rapidly than individual mining companies who in past years were more likely to hold newly mined Bitcoin for longer periods. The immediate selling of newly mined Bitcoin greatly increases the trading volume of Bitcoin, creating downward pressure on the market price of Bitcoin rewards.
The extent to which the value of Bitcoin mined by a professionalized mining operation exceeds the allocable capital and operating costs determines the profit margin of such an operation. A professionalized mining operation may be more likely to sell a higher percentage of its newly mined Bitcoin rapidly if it is operating at a low profit margin and it may partially or completely cease operations if its profit margin is negative. In a low profit margin environment, a higher percentage could be sold more rapidly, thereby potentially depressing Bitcoin prices. Lower Bitcoin prices could result in further tightening of profit margins for professionalized mining operations creating a network effect that may further reduce the price of Bitcoin until mining operations with higher operating costs become unprofitable forcing them to reduce mining power or cease mining operations temporarily.
Because the new miners we plan to obtain will be designed specifically to mine Bitcoin, our future success will depend in large part upon the value of Bitcoin, and any sustained decline in its value could adversely affect our business and results of operations.
Our operating results will depend in large part upon the value of Bitcoin because it is the primary cryptocurrency we intend to mine moving forward, assuming we can raise the necessary capital to obtain and install the Bitcoin mining equipment. Specifically, our revenues from our Bitcoin mining operations will be based upon two factors: (1) the number of Bitcoin rewards we successfully mine and (2) the value and liquidity of Bitcoin. This means that our operating results will be subject to swings based upon increases or decreases in the value of Bitcoin. Furthermore, our business strategy focuses solely on producing Bitcoin (as opposed to other cryptocurrencies). Previously, we focused solely on mining Ethereum as that was the only mining equipment available to us. If other cryptocurrencies overtake Bitcoin in terms of acceptance, the value of Bitcoin could decline. Further, if Bitcoin were to switch its proof of work algorithm from SHA-256 to another algorithm for which our miners (which we have contracts to acquire) would not be suited or if the value of Bitcoin were to decline for other reasons, particularly if such decline were significant or over an extended period of time, we would likely incur very significant costs in retooling or replacing our existing miners with miners better suited for this new protocols and our operating results could be adversely affected. This could result in a material adverse effect on our ability to continue as a going concern or to pursue our business strategy at all, which could have a material adverse effect on our business, prospects or operations, and thus harm investors.
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Bitcoin is subject to halving, meaning that the Bitcoin rewarded for solving a block will be reduced in the future and its value may not commensurately adjust to compensate us for such reductions, and the overall supply of Bitcoin is finite.
Bitcoin is subject to “halving,” which is the process by which the Bitcoin reward for solving a block is reduced by 50% every 210,000 blocks that are solved. This means that the amount of Bitcoin we (or any other miner) are rewarded for solving a block in the blockchain is permanently cut in half. For example, the latest halving having occurred in May 2020, with a revised payout of 6.25 Bitcoin per block solved, down from the previous reward rate of 12.5 Bitcoin per block solved. There can be no assurance that the price of Bitcoin will sufficiently increase to justify the increasingly high costs of mining for Bitcoin given the halving feature. If a corresponding and proportionate increase in the trading price of these cryptocurrencies does not follow these anticipated halving events, the revenue we earn from our mining operations would see a corresponding decrease, which would have a material adverse effect on our business and operations. To illustrate, even if the price of Bitcoin remains at its price as of today, all other factors being equal (including the same number of miners and a stable hash rate) our revenue would decrease substantially upon the next halving (which is anticipated to occur in 2024).
Further, due to the halving process, unless the underlying code of the Bitcoin blockchain is altered (which may be unlikely or difficult given its decentralized nature), the supply of Bitcoin is finite. Once 21 million Bitcoin have been generated by virtue of solving blocks in the blockchain, the network will stop producing more. Currently, there are approximately 19 million Bitcoin in circulation representing about 90% of the total supply of Bitcoin under the current source code. For the foregoing reasons, the halving feature exposes us to inherent uncertainty and reliance upon the historically volatile price of Bitcoin, rendering an investment in us particularly speculative, especially in the long-term. If the price of Bitcoin does not significantly increase in value, your investment could become worthless.
Interruptions to internet access could disrupt our operations, which could adversely affect our business and results of operations.
Our cryptocurrency mining operations require access to high-speed internet to be successful. If we lose internet access for a prolonged period, we may be required to reduce our operations or cease them altogether. A disruption of the Internet may affect the use of cryptocurrencies and subsequently the value of our securities. Generally, cryptocurrencies and our business of mining cryptocurrencies is dependent upon the Internet. A significant disruption in Internet connectivity could disrupt a currency’s network operations until the disruption is resolved and have an adverse effect on the price of Bitcoin and our ability to mine Bitcoin. If this occurs, our business and results of operations may suffer, and our investors may be materially and adversely effected.
Bitcoin has forked multiple times and additional forks may occur in the future which may affect the value of Bitcoin held or mined by the Company.
To the extent that a significant majority of users and mining companies on a cryptocurrency network install software that changes the cryptocurrency network or properties of a cryptocurrency, including the irreversibility of transactions and limitations on the mining of new cryptocurrency, the cryptocurrency network would be subject to new protocols and software. However, if less than a significant majority of users and mining companies on the cryptocurrency network consent to the proposed modification, and the modification is not compatible with the software prior to its modification, the consequence would be what is known as a “fork” of the network, with one prong running the pre-modified software and the other running the modified software. The effect of such a fork would be the existence of two versions of the cryptocurrency running in parallel yet lacking interchangeability and necessitating exchange-type transaction to convert currencies between the two forks. Additionally, it may be unclear following a fork which fork represents the original cryptocurrency and which is the new cryptocurrency. Different metrics adopted by industry participants to determine which is the original asset include: referring to the wishes of the core developers of a cryptocurrency, blockchains with the greatest amount of hashing power contributed by miners or validators; or blockchains with the longest chain. A fork in the network of a particular cryptocurrency could adversely affect an investment in our securities or our ability to operate. Since August 1, 2017, Bitcoin’s blockchain was forked multiple times creating alternative versions of the cryptocurrency such as Bitcoin Cash, Bitcoin Gold and Bitcoin SV. The forks resulted in a new blockchain being created with a shared history, and a new path forward. The value of the newly created versions including Bitcoin Cash, Bitcoin Gold and Bitcoin SV may or may not have value in the long run and may affect the price of Bitcoin if interest is shifted away from Bitcoin to the newly created cryptocurrencies. The value of Bitcoin after the creation of a fork is subject to many factors including the value of the fork product, market reaction to the creation of the fork product, and the occurrence of forks in the future. As such, the value of Bitcoin could be materially reduced if existing and future forks have a negative effect on Bitcoin’s value.
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Our reliance primarily on a single model of miner may subject our operations to increased risk of mine failure.
The performance and reliability of our miners and our technology is critical to our operations. Because we currently plan on using Katena, Bitmain and Whatsminer models for mining Bitcoin models for mining Bitcoin, if there are issues with those machines, such as a design flaw in the ASIC chips they employ, our entire system could be affected. This would result in both lost revenue from inhibited mining operations and increased costs to repair and replace our mining infrastructure. Therefore, any disruption in our ability to continue mining, even with a portion of our total miners, could result in a material reduction to Bitcoin reward yields which would harm our business. Any weakness, flaw, or error which arises with our miners such similar to or more severe and widespread than the problems we experienced with our miners may affect all or a large portion of our miners; therefore, if a defect or other flaw exists, our entire mine could go offline simultaneously. Any such interruption, delay or inability to continue operations could result in financial losses, a decrease in the trading price of our common stock and reputational harm, in which case you could lose some or all of your investment.
Because of the reliance on third-party mining pool service providers for our mining, its operations may have a negative impact on the Company’s results of operations.
The third party hosting company will arrange our cryptocurrency mining operations using a mining pool, in which multiple cryptocurrency mining operators agree to join together and if any of them are rewarded Bitcoin for mining a block on the blockchain, the pool participants receive a portion of such reward based on the computing power contributed to mining that block. Under this arrangement, we would receive Bitcoin mining rewards from our mining activity through a third-party mining pool operator. Mining pools allow miners to combine their processing power, increasing their chances of solving a block and getting paid by the network. Should the pool operator’s system suffer downtime due to a cyber-attack, software malfunction or other similar issues, it will negatively impact our ability to mine and receive revenue. Furthermore, we are dependent on the accuracy of the mining pool operator’s record keeping to accurately record the total processing power provided to the pool for a given Bitcoin mining application in order to assess the proportion of that total processing power we provided. We would have limited means of recourse against the mining pool operator if we determine the proportion of the reward paid out to us by the mining pool operator is incorrect, other than leaving the pool. If we are unable to consistently obtain accurate proportionate rewards from our mining pool operators, we may experience reduced reward for our efforts, which would have an adverse effect on our business and operations.
There is a possibility of cryptocurrency mining algorithms transitioning to proof of stake validation and other mining related risks, which could make us less competitive and ultimately adversely affect our business and the value of our stock.
As previously mentioned, we are winding down our Ethereum mining operations and solely focusing on Bitcoin. There is a high possibility of Ethereum mining algorithms transitioning to proof of stake validation in the near future. Proof of stake is an alternative method in validating cryptocurrency transactions that is less dependent on the consumption of electricity. Should the algorithm, whether it relates to Bitcoin or Ethereum, or other cryptocurrencies we mine shift from a proof of work validation method to a proof of stake method, mining would likely require less energy, which may render any company that maintains advantages in the current climate (for example, from lower priced electricity, processing, real estate, or hosting) less competitive. We, as a result of our efforts to optimize and improve the efficiency of our mining operations, may be exposed to the risk in the future of losing the relative competitive advantage we may have over some of our competitors as a result, and may be negatively impacted if a switch to proof of stake validation were to occur. This is because we are investing heavily in equipment based on the mining algorithms method of validation. Such events could have a material adverse effect on our ability to continue as a going concern, which could have a material adverse effect on our business, prospects or results of operations, the value of Bitcoin, Ethereum or other cryptocurrencies we mine or otherwise acquire and your investment in us.
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We may be accused of infringing intellectual property rights of third parties.
We may be subject to legal claims of alleged infringement of the intellectual property rights of third parties. Due to the open-source and constantly evolving nature of our business, we may not always be able to determine that we are using or accessing protected information or software. For example, there could be issued patents of which we are not aware that our activities or the equipment or software we use may infringe. The ready availability of damages, royalties and the potential for injunctive relief has increased the defense litigation costs of patent infringement claims, especially those asserted by third parties whose sole or primary business is to assert such claims. Such claims, even if not meritorious, may result in significant expenditure of financial and managerial resources, and the payment of damages or settlement amounts. Additionally, we may become subject to injunctions prohibiting us from using software or business processes we currently use or may need to use in the future or requiring us to obtain licenses from third parties when such licenses may not be available on financially feasible terms or terms acceptable to us or at all. In addition, we may not be able to obtain on favorable terms, or at all, licenses or other rights with respect to intellectual property we do not own in providing ecommerce services to other businesses and individuals under commercial agreements.
Risks Related to Our Dependence on Bitcoin
Because of our focus on Bitcoin mining, the trading price of shares of our common stock may increase or decrease with the trading price of Bitcoin, which subjects investors to pricing risks, including “bubble” type risks, and volatility.
Because of our dependence on Bitcoin, the trading prices of our common stock may at times be tied to the trading prices of Bitcoin. Specifically, we may experience adverse effects on our stock price when the value of Bitcoin drops. Furthermore, if the market for Bitcoin mine operators’ stocks or the stock market in general experiences a loss of investor confidence, the trading price of our stock could decline for reasons unrelated to our business, operating results or financial condition. The trading price of our common stock could be subject to arbitrary pricing factors that are not necessarily associated with traditional factors that influence stock prices or the value of non-cryptocurrency assets such as revenue, cash flows, profitability, growth prospects or business activity since the value and price, as determined by the investing public, may be influenced by uncertain contingencies such as future anticipated adoption or appreciation in value of cryptocurrencies or blockchains generally, and other factors over which we have little or no influence or control.
Bitcoin and other cryptocurrency market prices, which have historically been volatile and are impacted by a variety of factors (including those discussed below), are determined primarily using data from various exchanges, over-the-counter markets and derivative platforms. Furthermore, such prices may be subject to factors such as those that impact commodities, more so than business activities, which could be subjected to additional influence from fraudulent or illegitimate actors, real or perceived scarcity, and political, economic, regulatory or other conditions. Pricing may be the result of, and may continue to result in, speculation regarding future appreciation in the value of cryptocurrencies, or our share price, making their market prices more volatile or creating “bubble” type risks for the trading price of Bitcoin.
During the year ended December 31, 2020, the trading price of Bitcoin appreciated significantly, from a low closing value of approximately $5,000 per Bitcoin in March 2020, to a high closing value of approximately $29,400 per Bitcoin in December 2020. During 2021 the trading price of Bitcoin has been volatile with a high of approximately $66,999 on October 19, 2021 and lows of $33,077 on July 12, 2021 and $35,513 on February 2, 2021. On November 19, 2021 the price was as low as $55,936, down from as high as $66,125 earlier in the week before recovering slightly. This volatility was reflected on September 24, 2021, when at 1:30 pm Eastern Time, the price of Bitcoin was approximately $41,151, down almost $4,000 from earlier in the day following news of China’s blanket ban on cryptocurrencies and again in late 2021 and early 2022 when it declined from $66,938 on November 9, 2021 to as low as $33,113.50 on January 24, 2022. In 2017, the trading price of Bitcoin increased to nearly $20,000 per Bitcoin (then an all-time high), only to decline significantly and sharply to a low of approximately $3,400 per Bitcoin in December 2018. There can be no assurances that similar fluctuations in the trading price of Bitcoin will not occur in the future. Accordingly, since our revenue will depend on the price of Bitcoin, and the trading price of our securities may therefore at times be connected to the trading price of Bitcoin, if the trading price of Bitcoin again experiences a significant decline, we could experience a similar decline in revenue and/or in the trading price for shares of our common stock. If this occurs, you may lose some or all of your investment.
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The markets for Bitcoin, Ethereum and other cryptocurrencies we mine and the existing markets may be under regulated and, as a result, the market price of our cryptocurrency may be subject to significant volatility or manipulation, which could decrease consumer confidence in cryptocurrencies and have a materially adverse effect on our business and results of operations.
Cryptocurrencies that are represented and trade on a ledger-based platform and those who hold them may not enjoy the same benefits as traditional securities available on trading markets and their investors. Stock exchanges have listing requirements and vet issuers, requiring them to be subjected to rigorous listing standards and rules, and monitor investors transacting on such platforms for fraud and other improprieties. These conditions may not necessarily be replicated on a distributed ledger platform, depending on the platform’s controls and other policies. The more lax a distributed ledger platform is about vetting issuers of cryptocurrency assets or users that transact on the platform, the higher the potential risk for fraud or the manipulation of the ledger due to a control event.
Cryptocurrency market prices have historically been volatile, are impacted by a variety of factors, and are determined primarily using data from various exchanges, over-the-counter markets and derivative platforms. Furthermore, such prices may be subject to factors such as those that impact commodities, more so than business activities, which could be subjected to additional influence from fraudulent or illegitimate actors, real or perceived scarcity, and political, economic, regulatory or other conditions. Pricing may be the result of, and may continue to result in, speculation regarding future appreciation in the value of cryptocurrencies, or our share price, making their market prices more volatile or creating “bubble” type risks for both our cryptocurrencies and shares of our common stock.
These factors may inhibit consumer trust in and market acceptance of cryptocurrencies as a means of exchange which could have a material adverse effect on our business, prospects, or operations and potentially the value of any Bitcoin or other cryptocurrencies we mine or otherwise acquire.
If we undertake to mine digital assets other than Bitcoin and Ethereum, such digital assets may be deemed to be securities by regulators, notwithstanding any assessment by us and/or our advisors to the contrary.
While we plan to mine only Bitcoin and, to a much lesser extent, Ethereum for the foreseeable future, we may choose to mine other cryptocurrencies. We intend to only mine cryptocurrencies that are not securities, and to consult counsel prior to attempting to mine any cryptocurrency other than Bitcoin and Ethereum in order to avoid inadvertently dealing in a cryptocurrency which may be deemed a security. However, the processes employed for determining whether particular digital assets are securities within the meaning of U.S. federal securities laws involve complex legal questions, are risk based assessments and are not a legal standard or binding on the SEC or other regulators. Because of these and other characteristics, the analysis of whether a digital asset is a security is subject to substantial uncertainty. Therefore, if we begin mining digital assets other than Bitcoin or Ethereum in the future and, notwithstanding advice form securities counsel to the contrary, those digital assets are found by regulators to be securities, we could face significant legal costs in defending our position and any enforcement or civil claims which may result. Additionally, if our assessment with respect to the digital asset in question is incorrect, we could be found to have acted in violation of federal or state securities laws, and could as a result become subject to fines, sanctions, civil damages, or criminal penalties, any of which may have a material adverse effect on our business, financial condition and results of operations.
The development and acceptance of cryptographic and algorithmic protocols governing the issuance of and transactions in cryptocurrencies is subject to a variety of factors that are difficult to evaluate.
The use of cryptocurrencies, including Bitcoin, to, among other things, buy and sell goods and services and complete transactions, is part of a new and rapidly evolving industry that employs cryptocurrency assets based upon a computer-generated mathematical and/or cryptographic protocol. Large-scale acceptance of cryptocurrencies as a means of payment has not, and may never, occur. The growth of this industry in general, and the use of Bitcoin in particular, is subject to a high degree of uncertainty, and the slowing or stopping of the development or acceptance of developing protocols may occur unpredictably. The factors include, but are not limited to:
| ● | the progress of worldwide growth in the adoption and use of Bitcoin and other cryptocurrencies as a medium of exchange; | |
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governmental and organizational regulation of Bitcoin and other cryptocurrencies and their use, or restrictions on or regulation of access to and operation of the network or similar cryptocurrency systems; |
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changes in consumer demographics and public tastes and preferences, including as may result from coverage of Bitcoin or other cryptocurrencies by journalists and other sources of information and media; | |
| ● | the maintenance and development of the open-source software protocol of the network; |
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the increased consolidation of contributors to the Bitcoin blockchain through mining pools and scaling of mining equipment by well-capitalized market participants; | |
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the availability and popularity of other forms or methods of buying and selling goods and services, including new means of using fiat currencies; | |
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the use of the networks supporting Bitcoin or other cryptocurrencies for developing smart contracts and distributed applications; | |
| ● | general economic conditions and the regulatory environment relating to Bitcoin and other cryptocurrencies; and | |
| ● | the impact of regulators focusing on cryptocurrencies and the costs associated with such regulatory oversight. |
A decline in the popularity or acceptance of the Bitcoin network could adversely affect an investment in us.
The outcome of these factors could have negative effects on our ability to continue as a going concern or to pursue our business strategy at all, which could have a material adverse effect on our business, prospects or operations as well as potentially negative effects on the value of any Bitcoin or other cryptocurrencies we mine or otherwise acquire, which would harm investors in our securities.
Currently, there is relatively small use of Bitcoins in the retail and commercial marketplace in comparison to relatively large use by speculators, thus contributing to price volatility that could adversely affect an investment in us.
As relatively new products and technologies, Bitcoins and the Bitcoin network have only recently become widely accepted as a means of payment for goods and services by many major retail and commercial outlets, and use of Bitcoins by consumers to pay such retail and commercial outlets remains limited. Conversely, a significant portion of Bitcoin demand is generated by speculators and investors seeking to profit from the short- or long-term holding of Bitcoins. A lack of expansion by Bitcoins into retail and commercial markets, or a contraction of such use, may result in increased volatility or a reduction in the price of Bitcoin, either of which could adversely impact an investment in us. If Bitcoin or other cryptocurrencies we mine do not gain widespread market acceptance or accrete in value over time, our prospects and your investment in us would diminish.
Banks and financial institutions may not provide banking services, or may cut off services, to businesses that engage in cryptocurrency-related activities.
A number of companies that engage in Bitcoin and/or other cryptocurrency-related activities have been unable to find banks or financial institutions that are willing to provide them with bank accounts and other services. Similarly, a number of companies and individuals or businesses associated with cryptocurrencies may have had and may continue to have their existing bank accounts closed or services discontinued with financial institutions in response to government action, particularly in China, where regulatory response to cryptocurrencies has been to initially exclude their use for ordinary consumer transactions within China and later to deem all cryptocurrency-related transactions illegal in September 2021. The difficulty that many businesses that provide Bitcoin and/or derivatives on other cryptocurrency-related activities have and may continue to have in finding banks and financial institutions willing to provide them services may be decreasing the usefulness of cryptocurrencies as a payment system and harming public perception of cryptocurrencies, and could decrease their usefulness and harm their public perception in the future.
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The usefulness of cryptocurrencies as a payment system and the public perception of cryptocurrencies could be damaged if banks or financial institutions were to close the accounts of businesses engaging in Bitcoin and/or other cryptocurrency-related activities. This could occur as a result of compliance risk, cost, government regulation or public pressure. The risk applies to securities firms, clearance and settlement firms, national stock and derivatives on commodities exchanges, the over-the-counter market, and the Depository Trust Company, which, if any of such entities adopts or implements similar policies, rules or regulations, could negatively affect our relationships with financial institutions and impede our ability to convert cryptocurrencies to fiat currencies. Such factors could have a material adverse effect on our ability to continue as a going concern or to monetize our mining efforts, which could have a material adverse effect on our business, prospects or operations and harm investors.
Political or economic crises may motivate large-scale sales of cryptocurrencies, which could result in a reduction in values of cryptocurrencies such as Bitcoin and Ethereum adversely affect an investment in us.
Geopolitical crises may motivate large-scale sales of cryptocurrencies, which could rapidly decrease the price of cryptocurrencies such as Bitcoin and Ethereum. Alternatively, as an emerging asset class with limited acceptance as a payment system or commodity, global crises and general economic downturn may discourage investment in cryptocurrencies as investors focus their investment on less volatile asset classes as a means of hedging their investment risk.
As an alternative to fiat currencies that are backed by central governments, cryptocurrencies which are relatively new, are subject to supply and demand forces based upon the desirability of an alternative, decentralized means of buying and selling goods and services, and it is unclear how such supply and demand will be impacted by geopolitical events. Nevertheless, political or economic crises may motivate large-scale acquisitions or sales of cryptocurrencies either globally or locally. Large-scale sales of cryptocurrencies would result in a reduction in digital asset values and could adversely affect an investment in us.
The decentralized nature of cryptocurrency systems may lead to slow or inadequate responses to crises, which may negatively affect our business.
The decentralized nature of the governance of cryptocurrency systems may lead to ineffective decision making that slows development or prevents a network from overcoming emergent obstacles. Governance of many cryptocurrency systems is by voluntary consensus and open competition with no clear leadership structure or authority. To the extent lack of clarity in corporate governance of cryptocurrency systems leads to ineffective decision making that slows development and growth of such cryptocurrencies, the value of our common stock may be adversely affected.
It may be illegal now, or in the future, to acquire, own, hold, sell or use digital assets in one or more countries, and ownership of, holding or trading in our securities may also be considered illegal and subject to sanction.
As digital assets have grown in both popularity and market size, governments around the world have reacted differently to digital assets; certain governments have deemed them illegal, and others have allowed their use and trade without restriction, while in some jurisdictions, such as in the U.S., subject to extensive, and in some cases overlapping, unclear and evolving regulatory requirements. Ongoing and future regulatory actions may impact our ability to continue to operate, and such actions could affect our ability to continue as a going concern or to pursue our new strategy at all, which could have a material adverse effect on our business, prospects or operations.
The emergence of competing blockchain platforms or technologies may harm our business as presently conducted.
If blockchain platforms or technologies which compete with Bitcoin and its blockchain, including competing cryptocurrencies which our miners may not be able to mine, such as cryptocurrencies being developed or may be developed by popular social media platforms, online retailers, or government sponsored cryptocurrencies, consumers may use such alternative platforms or technologies. If that were to occur, we would face difficulty adapting to emergent such digital ledgers, blockchains, or alternative platforms or digital assets. This may adversely affect us by preventing us from realizing the anticipated profits from our investments and forcing us to expend additional capital in an effort to adapt. Further, to the extent we cannot adapt, be it due to our specialized miners or otherwise, we could be forced to cease operations. Such circumstances would have a material adverse effect on our business, and in turn investors’ investments in our securities.
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Cryptocurrencies face significant scaling obstacles that can lead to high fees or slow transaction settlement times.
Cryptocurrencies face significant scaling obstacles that can lead to high fees or slow transaction settlement times, and attempts to increase the volume of transactions may not be effective. Therefore, scaling cryptocurrencies will be essential to the widespread acceptance of cryptocurrencies as a means of payment, which widespread acceptance is necessary to the continued growth and development of our business. Many cryptocurrency networks face significant scaling challenges, such as limitations on how many transactions can occur per second. There can be no guarantee that any of the systems in place or being considered to increasing the scale of settlement of cryptocurrency transactions will be effective, or how long they will take to become effective, which could adversely affect an investment in our securities.
The price of cryptocurrencies may be affected by the sale of such cryptocurrencies by other vehicles investing in cryptocurrencies or tracking cryptocurrency markets.
The global market for cryptocurrency is characterized by supply constraints that differ from those present in the markets for commodities or other assets such as gold and silver. The mathematical protocols under which certain cryptocurrencies are mined permit the creation of a limited, predetermined amount of digital currency, while others have no limit established on total supply. Increased numbers of miners and deployed mining power globally will likely continue to increase the available supply of Bitcoin and other cryptocurrencies, which may depress their market price. Further, large “block sales” involving significant numbers of Bitcoin following appreciation in the market price of Bitcoin may also increase the supply of Bitcoin available on the market, which, without a corresponding increase in demand, may cause its price to fall. Additionally, to the extent that other vehicles investing in cryptocurrencies or tracking cryptocurrency markets form and come to represent a significant proportion of the demand for cryptocurrencies, large redemptions of the securities of those vehicles and the subsequent sale of cryptocurrencies by such vehicles could negatively affect cryptocurrency prices and therefore affect the value of the cryptocurrency inventory we hold. Such events could have a material adverse effect on our business, prospects or operations and potentially the value of any Bitcoin or other cryptocurrencies we mine.
The Bitcoin we mine may be subject to loss, damage, theft or restriction on access.
There is a risk that some or all of the Bitcoin we mine could be lost or stolen. In general, cryptocurrencies are stored in cryptocurrency sites commonly referred to as “wallets” by holders of cryptocurrencies which may be accessed to exchange a holder’s cryptocurrency assets. Access to our Bitcoin could also be restricted by cybercrime (such as a denial of service attack). While we take steps to attempt to secure the Bitcoin we hold, there can be no assurance our efforts to protect our digital assets will be successful. Hackers or malicious actors may launch attacks to steal, compromise or secure cryptocurrencies, such as by attacking the cryptocurrency network source code, exchange miners, third-party platforms, cold and hot storage locations or software, or by other means. Any of these events may adversely affect our operations and, consequently, our ability to generate revenue and become profitable. The loss or destruction of a private key required to access our digital wallets may be irreversible and we may be denied access for all time to our Bitcoin holdings. Our loss of access to our private keys or our experience of a data loss relating to our digital wallets could adversely affect our business. Cryptocurrencies are controllable only by the possessor of both the unique public and private keys relating to the local or online digital wallet in which they are held, which wallet’s public key or address is reflected in the network’s public blockchain. We are required to publish the public key relating to digital wallets in use when we verify the receipt of transfers and disseminate such information into the network, but we will need to safeguard the private keys relating to such digital wallets. To the extent such private keys are lost, destroyed or otherwise compromised, we will be unable to access our Bitcoin rewards and such private keys may not be capable of being restored by any network. Any loss of private keys relating to digital wallets used to store our mined Bitcoin could have a material adverse effect on our results of operations and ability to continue as a going concern, which could have a material adverse effect on our business, prospects or operations and potentially the value of any Bitcoin we mine. For example, the New York Times reported in January 2021 that about 20% of existing Bitcoin appears to be “lost” due to password issues.
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Incorrect or fraudulent cryptocurrency transactions may be irreversible.
Cryptocurrency transactions are irrevocable and stolen or incorrectly transferred cryptocurrencies may be irretrievable. As a result, any incorrectly executed or fraudulent cryptocurrency transactions, such as a result of a cybersecurity breach against our Bitcoin holdings, could adversely affect our investments and assets. This is because cryptocurrency transactions are not, from an administrative perspective, reversible without the consent and active participation of the recipient of the cryptocurrencies from the transaction. Once a transaction has been verified and recorded in a block that is added to a blockchain, an incorrect transfer of a cryptocurrency or a theft thereof generally will not be reversible and we may not have sufficient recourse to recover our losses from any such transfer or theft. Further, it is possible that, through computer or human error, or through theft or criminal action, our cryptocurrency rewards could be transferred in incorrect amounts or to unauthorized third parties, or to uncontrolled accounts. If an errant or fraudulent transaction in our Bitcoin were to occur, we would have very limited means of seeking to reverse the transaction or seek recourse. To the extent that we are unable to recover our losses from such action, error or theft, such events could have a material adverse effect on our business.
We will rely on one or more third parties for depositing, storing and withdrawing the cryptocurrency we mine, which could result in loss of assets, disputes and other liabilities or risks which could adversely impact our business.
We currently use a BlockFi digital wallet to store the Bitcoin we mine, although we may change to another digital wallet provider or use multiple providers at any time. In order to own, transfer and use Bitcoin on the blockchain network, we must have a private and public key pair associated with a network address, commonly referred to as a “wallet”. Each wallet is associated with a unique “public key” and “private key” pair, each of which is a string of alphanumerical characters. To deposit Bitcoin into our digital wallet, we must “sign” a transaction that consists of the private key of the wallet from where the Bitcoin is being transferred, the public key of a wallet that BlockFi or its custodian controls and provides to us, and broadcast the deposit transaction onto the underlying blockchain network. Similarly, to withdraw Bitcoin from our account, we must provide BlockFi or its custodian with the public key of the wallet that the Bitcoin are to be transferred to, and BlockFi or its custodian then “signs” a transaction authorizing the transfer. In addition, some cryptocurrency networks require additional information to be provided in connection with any transfer of cryptocurrency such as Bitcoin. A number of errors or other adverse events can occur in the process of depositing, storing or withdrawing Bitcoin into or from BlockFi, such as typos, mistakes, or the failure to include the information required by the blockchain network. For instance, a user may incorrectly enter our wallet’s public key or the desired recipient’s public key when depositing and withdrawing Bitcoin. Additionally, our reliance on third parties such as BlockFi and the maintenance of keys to access and utilize our digital wallet will expose us to enhanced cybersecurity risks from unauthorized third parties deploying illicit activities such as hacking, phishing and social engineering, notwithstanding the security systems and safeguards employed by us and others. Cyberattacks upon systems across a variety of industries, including the cryptocurrency industry, are increasing in frequency, persistence, and sophistication, and, in many cases, are being conducted by sophisticated, well-funded, and organized groups and individuals. For example, attacks may be designed to deceive employees and service providers into releasing control of the systems on which we depend to a hacker, while others may aim to introduce computer viruses or malware into such systems with a view to stealing confidential or proprietary data. These attacks may occur on our digital wallet or the systems of our third-party service providers or partners, which could result in asset losses and other adverse consequences. Alternatively, we may inadvertently transfer Bitcoin to a wallet address that we do not own, control or hold the private keys to. In addition, a Bitcoin wallet address can only be used to send and receive Bitcoin, and if the Bitcoin is inadvertently sent to an Ethereum or other cryptocurrency wallet address, or if any of the foregoing errors occur, all of the Bitcoin will be permanently and irretrievably lost with no means of recovery. Such incidents could result in asset loss or disputes, any of which could materially adversely affect our business.
Security threats to us could result in, a loss of Company’s Bitcoin holdings.
Security breaches, computer malware and computer hacking attacks have been a prevalent concern in the Bitcoin exchange market since the launch of the Bitcoin network. Any security breach caused by hacking, which involves efforts to gain unauthorized access to information or systems, or to cause intentional malfunctions or loss or corruption of data, software, hardware or other computer equipment, and the inadvertent transmission of computer viruses, could harm our business operations or result in loss of our Bitcoin and lost revenue. Furthermore we believe that to the extent we hold greater amounts of Bitcoin, we may become a more appealing target for security threats such as hackers and malware.
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The security system and operational infrastructure may be breached due to the actions of outside parties, error or malfeasance of an employee of ours, or otherwise, and, as a result, an unauthorized party may obtain access to our, private keys, data or Bitcoins. Additionally, outside parties may attempt to fraudulently induce employees of ours to disclose sensitive information in order to gain access to our infrastructure. As the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently, or may be designed to remain dormant until a predetermined event and often are not recognized until launched against a target, we may be unable to anticipate these techniques or implement adequate preventative measures. If an actual or perceived breach of our security system occurs, the market perception of the effectiveness of our security system could be harmed, which could adversely affect an investment in us. In the event of a security breach, we may be forced to cease operations, or suffer a reduction in our digital assets, the occurrence of each of which could adversely affect an investment in us.
If a malicious actor or botnet obtains control of more than 50% of the processing power on a cryptocurrency network, such actor or botnet could manipulate blockchains to adversely affect us, which would adversely affect an investment in us or our ability to operate.
If a malicious actor or botnet (a volunteer or hacked collection of computers controlled by networked software coordinating the actions of the computers) obtains a majority of the processing power dedicated to mining a cryptocurrency, it may be able to alter blockchains on which transactions of cryptocurrency reside and rely by constructing fraudulent blocks or preventing certain transactions from completing in a timely manner, or at all. The malicious actor or botnet could control, exclude or modify the ordering of transactions, though it could not generate new units or transactions using such control. The malicious actor could “double-spend” its own cryptocurrency (i.e., spend the same Bitcoin in more than one transaction) and prevent the confirmation of other users’ transactions for as long as it maintained control. To the extent that such malicious actor or botnet does not yield its control of the processing power on the network or the cryptocurrency community does not reject the fraudulent blocks as malicious, reversing any changes made to blockchains may not be possible. The foregoing description is not the only means by which the entirety of blockchains or cryptocurrencies may be compromised but is only an example.
Although there are no known reports of malicious activity or control of blockchains achieved through controlling over 50% of the processing power on the network, it is believed that certain mining pools may have exceeded the 50% threshold in Bitcoin. The possible crossing of the 50% threshold indicates a greater risk that a single mining pool could exert authority over the validation of Bitcoin transactions. To the extent that the Bitcoin community, and the administrators of mining pools, do not act to ensure greater decentralization of Bitcoin mining processing power, the feasibility of a botnet or malicious actor obtaining control of the blockchain’s processing power will increase, because such botnet or malicious actor could more readily infiltrate and seize control over the blockchain by compromising a single mining pool, if the mining pool compromises more than 50% of the mining power on the blockchain, than it could if the mining pool had a smaller share of the blockchain’s total hashing power. Conversely, if the blockchain remains decentralized it is inherently more difficult for the botnet or malicious actor to aggregate enough processing power to gain control of the blockchain. If this were to occur, the public may lose confidence in the Bitcoin blockchain, and blockchain technology more generally. This would likely have a material and adverse effect on the price of Bitcoin, which could have a material adverse effect on our business, financial results and operations, and harm investors.
If the Bitcoin rewards for solving blocks are not sufficiently high, miners may not have adequate incentive to continue mining and may cease mining operations, which may make the blockchains they support with their mining activity less stable.
As the number of cryptocurrency rewards awarded for solving a block in a blockchain decreases, the relative cost of producing a single cryptocurrency will also increase, unless there is a corresponding increase in demand for that cryptocurrency. Even relatively stable demand may not be sufficient to support the costs of mining, because as new miners begin working to solve blocks, the relative amount of energy expended to obtain a cryptocurrency award will tend to increase. This increased energy directly relates to an increased cost of mining, which means an increased cost of obtaining a cryptocurrency award. This increased cost, if not met with a corresponding increase in the market price for the cryptocurrency resulting from increased scarcity and demand, may lead miners, such as us, to conclude they do not have an adequate incentive to continue mining and, therefore, may cease their mining operations. This could in turn reduce the sustainability of the Bitcoin blockchain, which is dependent upon continued mining to solve the block’s algorithms and process transactions in Bitcoin. If this were to occur, your investment in us could become worthless.
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Cryptocurrencies, including those maintained by or for us, may be exposed to cybersecurity threats and hacks.
As with any computer code generally, flaws in cryptocurrency codes may be exposed by malicious actors. Several errors and defects have been found previously, including those that disabled some functionality for users and exposed users’ information. Exploitations of flaws in the source code that allow malicious actors to take or create money have previously occurred. Despite our efforts and processes to prevent breaches, our devices, as well as our miners, computer systems and those of third parties that we use in our operations, are vulnerable to cyber security risks, including cyber-attacks such as viruses and worms, phishing attacks, denial-of-service attacks, physical or electronic break-ins, employee theft or misuse, and similar disruptions from unauthorized tampering with our miners and computer systems or those of third parties that we use in our operations. Such events could have a material adverse effect on our business, prospects or operations and potentially the value of any Bitcoin or other cryptocurrencies we mine.
We have an evolving business model which is subject to various uncertainties.
As cryptocurrency assets and blockchain technologies become more widely available, we expect the services and products associated with them to evolve. In order to stay current with the industry, our business model may need to evolve as well. From time to time, we may modify aspects of our business model relating to our strategy. We cannot offer any assurance that these or any other modifications will be successful or will not result in harm to our business. We may not be able to manage growth effectively, which could damage our reputation, limit our growth and negatively affect our operating results. Further, we cannot provide any assurance that we will successfully identify all emerging trends and growth opportunities in this business sector and we may lose out on those opportunities. Such circumstances could have a material adverse effect on our business, prospects or operations.
Risks Related to Governmental Regulation and Enforcement
Regulatory changes or other actions may alter the nature of an investment in us or restrict the use of cryptocurrencies in a manner that adversely affects our business, prospects or operations.
As cryptocurrencies have grown in both popularity and market size, governments around the world have reacted differently to cryptocurrencies; certain governments have deemed them illegal, and others have allowed their use and trade with no or minimal restriction, while in some jurisdictions, such as in the U.S., cryptocurrencies are subject to extensive, and in some cases overlapping, unclear and evolving regulatory requirements. Further, additional laws, regulations and rules from are expected to arise in the future from legislative bodies, agencies and self-regulatory organizations, some of which may adversely affect us, either directly by impacting our operations or those of third parties on which we rely or indirectly by affecting the cryptocurrency market generally or otherwise. Ongoing and future regulatory actions could have a material adverse effect on our business, prospects or operations.
Current interpretations require the regulation of Bitcoin under the CEA by the CFTC, and we may be required to register and comply with such regulations. Any disruption of our operations in response to the changed regulatory circumstances may be at a time that is disadvantageous to investors.
Current and future legislation, the Commodity Futures Trading Commission (the “CFTC”) and other regulatory developments, including interpretations released by a regulatory authority, may impact the manner in which Bitcoin and other cryptocurrencies are treated for classification and clearing purposes. In particular, derivatives on these assets are not excluded from the definition of “commodity future” by the CFTC. We cannot be certain as to how future regulatory developments will impact the treatment of Bitcoin and other cryptocurrencies under the law.
Bitcoins have been deemed to fall within the definition of a commodity and, we may be required to register and comply with additional regulation under the Commodity Exchange Act (“CEA”), including additional periodic report and disclosure standards and requirements. Moreover, we may be required to register as a commodity pool operator and to register us as a commodity pool with the CFTC through the National Futures Association. Such additional registrations may result in extraordinary, non-recurring expenses, thereby materially and adversely impacting an investment in us. If we determine not to comply with such additional regulatory and registration requirements, we may seek to cease certain of our operations. Any such action may adversely affect an investment in us.
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Our interactions with a blockchain may expose us to SDN or blocked persons or cause us to violate provisions of law that did not contemplate distribute ledger technology.
The Office of Financial Assets Control (“OFAC”) of the U.S. Department of Treasury requires us to comply with its sanction program and not conduct business with persons named on its specially designated nationals (“SDN”) list. However, because of the pseudonymous nature of blockchain transactions we may inadvertently and without our knowledge engage in transactions with persons named on OFAC’s SDN list. Our Company’s policy prohibits any transactions with such SDN individuals, but we may not be adequately capable of determining the ultimate identity of the individual with whom we transact with respect to selling cryptocurrency assets. Moreover, federal law prohibits any U.S. person from knowingly or unknowingly possessing any visual depiction commonly known as child pornography. Recent media reports have suggested that persons have imbedded such depictions on one or more blockchains. Because our business requires us to download and retain one or more blockchains to effectuate our ongoing business, it is possible that such digital ledgers contain prohibited depictions without our knowledge or consent. To the extent government enforcement authorities literally enforce these and other laws and regulations that are impacted by decentralized distributed ledger technology, we may be subject to investigation, administrative or court proceedings, and civil or criminal monetary fines and penalties, all of which could harm our reputation and affect the value of our common stock.
Governmental action against the blockchain and Bitcoin mining may have a materially adverse effect on the industry, and could affect us if widely adopted.
We could become subject to regulations aimed at preventing what are perceived as some of the negative attributes of Bitcoin and Bitcoin mining. For example, China has already made transacting in cryptocurrencies illegal for Chinese citizens in mainland China, and additional restrictions may follow. Further, on March 2, 2021, governmental authorities of the Chinese province of Inner Mongolia, began to take action to impose an outright ban on Bitcoin mining in the province due to the industry’s high electrical consumption demands and negative environmental impacts. This could demonstrate the beginning of a regulatory trend in response to concerns of overconsumption as it relates to environmental impact and energy conservation, and similar action in a jurisdiction in which we operate could have devastating effects to our operations. If further regulation follows, it is possible that our industry may not be able to adjust to a sudden and dramatic overhaul to our ability to deploy energy towards the operation of mining equipment.
Because we are unable to influence or predict future regulatory actions taken by governments, we may face difficulty monitoring and responding to rapid regulatory developments affecting Bitcoin mining, which may have a materially adverse effect on our industry and, therefore, our business and results of operations. If further regulatory action is taken by governments in the United States or elsewhere, our business may be materially harmed and you could lose some or all of your investment.
We are subject to the information and reporting requirements of the Securities Exchange Act of 1934, and other federal securities laws, including compliance with the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”).
The costs of preparing and filing annual and quarterly reports and other information with the SEC and furnishing audited reports to shareholders will cause our expenses to be higher than they would have been if we were privately held. It may be time consuming, difficult and costly for us to develop, implement and maintain the internal controls and reporting procedures required by the Sarbanes-Oxley Act. We may need to hire additional financial reporting, internal controls and other finance personnel in order to develop and implement appropriate internal controls and reporting procedures.
Public company compliance may make it more difficult to attract and retain officers and directors.
The Sarbanes-Oxley Act and rules implemented by the SEC have required changes in corporate governance practices of public companies. As a public company, we expect these rules and regulations to increase our compliance costs and make certain activities more time consuming and costly. The impact of the SEC’s July 25, 2017 report on digital securities as well as enforcement actions and speeches made by the SEC’s Chairman will increase our compliance and legal costs. As a public company, we also expect that these rules and regulations will make it more difficult and expensive for us to obtain director and officer liability insurance in the future and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified persons to serve on our Board or as executive officers, and to maintain insurance at reasonable rates, or at all.
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Risks Related to Ownership of Our Common Stock
Our stock price may be volatile.
The market price of our common stock is likely to be highly volatile and could fluctuate widely in price in response to various factors, many of which are beyond our control, including the following:
| ● | changes in our industry including changes which adversely affect Bitcoin; | |
| ● | the continued volatility of the price of Bitcoin; | |
| ● | our ability to obtain working capital financing and commence our planned Bitcoin mining operations; | |
| ● | progress and publications of the commercial acceptance of Bitcoin and other cryptocurrencies; | |
| ● | additions or departures of key personnel including our executive officers; | |
| ● | sales of our common stock; | |
| ● | any public announcement of entering into new agreements and terms thereof, including with respect to the purchase of miners and contracts for the supply of electricity to our facility; | |
| ● | business disruptions caused by earthquakes, tornadoes, terrorism or other natural disasters; | |
| ● | our ability to execute our business plan; | |
| ● | operating results that fall below expectations; | |
| ● | loss of any strategic relationship; | |
| ● | adverse regulatory developments; and | |
| ● | economic and other external factors. |
In addition, the securities markets have from time-to-time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our common stock. As a result, you may be unable to resell your shares at a desired price.
We have not paid cash dividends in the past and do not expect to pay dividends in the future. Any return on investment may be limited to the value of our common stock.
We have never paid cash dividends on our common stock and do not anticipate doing so in the foreseeable future. The payment of dividends on our common stock will depend on earnings, financial condition and other business and economic factors affecting us at such time as our Board may consider relevant. If we do not pay dividends, our common stock may be less valuable because a return on your investment will only occur if our stock price appreciates.
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Because our common stock does not trade on a national securities exchange, the prices of our common stock may be more volatile and lower than if we were listed.
Our common stock trades on the OTCQB operated by OTC Markets Group Inc. This market is not a national securities exchange. While our common stock trading has been relatively active, generally the OTCQB does not have the same level of activity as a national securities exchange like Nasdaq. Most institutions will not purchase a security unless it is on a national securities exchange. In addition, they do not purchase stocks that trade below $5.00 per share. We may, in the future, take certain steps, including utilizing investor awareness campaigns, press releases, road shows and conferences to increase awareness of our business and any steps that we might take to bring us to the awareness of investors may require we compensate consultants with cash and/or stock. There can be no assurance that there will be any awareness generated or the results of any efforts will result in any impact on our trading volume. Consequently, investors may not be able to liquidate their investment or liquidate it at a price that reflects the value of the business and trading may be at an inflated price relative to the performance of our company due to, among other things, availability of sellers of our shares.
Our common stock is deemed a “penny stock,” which makes it more difficult for our investors to sell their shares.
Our common stock is subject to the “penny stock” rules adopted under Section 15(g) of the Exchange Act. The penny stock rules generally apply to companies whose common stock trades at less than $5.00 per share, subject to specific exceptions. Such exceptions include among others any equity security listed on a national securities exchange and any equity security issued by an issuer that has (i) net tangible assets of at least $2,000,000 if such issuer has been in continuous operation for three years, net tangible assets of at least $5,000,000, if such issuer has been in continuous operation for less than three years, or (iii) average annual revenue of at least $6,000,000 for the last three years. The “penny stock” designation requires any broker-dealer selling these securities to disclose certain information concerning the transaction, obtain a written agreement from the purchaser and determine that the purchaser is reasonably suitable to purchase the securities. These rules limit the ability of broker-dealers to solicit purchases of our common stock and therefore reduce its liquidity.
Moreover, as a result of apparent regulatory pressure from the SEC and the Financial Industry Regulatory Authority, a growing number of broker-dealers decline to permit investors, or otherwise make it difficult, to purchase and sell “penny stocks.” The “penny stock” designation may have a depressive effect upon our common stock price. If we remain subject to the penny stock rules for any significant period, it could have an adverse effect on the market, if any, for our securities. Because our common stock is subject to the penny stock rules, investors will find it more difficult to dispose of our securities.
Substantial future sales of our common stock by us or by our existing shareholders could cause our stock price to fall.
Additional equity financings or other share issuances by us, including shares issued in connection with strategic alliances and corporate partnering transactions, could adversely affect the market price of our common stock. Sales by existing shareholders of a large number of shares of our common stock in the public market or the perception that additional sales could occur could cause the market price of our common stock to drop.
Until January 31, 2022, we were a shell company and as such shareholders cannot rely on the provisions of Rule 144 for the resale of their shares until certain conditions are met.
We have been a shell company as defined under Rule 405 of the Securities Act of 1933 (“Securities Act”). As securities issued by a former shell company, the securities issued by us can only be resold pursuant to an effective registration statement and not by utilizing the provisions of Rule 144 until certain conditions are met, including that: (i) we are subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, (ii) we have filed all required reports under the Exchange Act of the preceding 12 months and (iii) one year has elapsed since we filed “Form 10” information (e.g. audited financial statements, management information and compensation, shareholder information, etc.).
Thus, a shareholder of ours will not be able to sell its shares until such time as a registration statement for those shares is filed or we become a reporting company, we have remained current on our Exchange Act filings for 12 months and we have filed the information as would be required by a “Form 10” filing.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with our consolidated financial statements and the accompanying notes, as well as the sections of this report titled “Business” and “Risk Factors.” The following overview provides a summary of our business and industry as more specifically described, including with respect to the risks and uncertainties inherent in our business, in the above-referenced sections of this report.
Overview
Prior to the Transaction, the Company was a shell company with no operations. Following the Transaction, we are a cryptocurrency mining company.
Nine Months Ended September 30, 2021 (“2021 Period”) Compared to the Period of March 9, 2020 to September 30, 2020 (“2020 Period”)
We were incorporated in March 2020 and had no revenue and immaterial expenses during the 2020 period.
Revenue
Our revenue for the 2021 Period was $1,175,013 and no revenue during the 2020 period. We anticipate that our revenue will increase in future quarters as we purchase additional mining equipment.
Gross Profit
Our gross profit for the 2021 Period was $239,740. We anticipate that our gross profit will increase as we continue to implement our business plan and purchase more mining equipment.
Operating Expenses
Our operating expenses for the 2021 Period was $3,095,141 and $48 for the 2020 Period. We anticipate that our operating expenses will continue to grow in future periods as we hire additional employees and ramp up our business.
Interest Expense
Our interest expense for the 2021 Period was $126,276. This expense relates to the interest on the equipment notes. We anticipate that our interest expense will increase as we raise funds and enter into hosting agreements which may require us to receive advances from the facility.
Net Loss
Our Net Loss for the 2021 Period was $3,037,318 as compared to our Net Loss of $48 in the 2020 Period. We anticipate that our business will become profitable as we launch additional mining equipment.
Liquidity and Capital Resources
As of January 31, 2022, EdgeMode had approximately $105,000 of cash. Our liquidity is primarily derived from selling the crypto that we mine, and debt and equity investments from accredited investors. In order to grow the business and help fund operations for the next 12 months, the Company intends on raising at least $40 million in a private placement or a registered offering of our securities. As of the closing of the Transaction, the Company has approximately $2.3 million of debt for equipment that the Company is currently mining of which approximately $1.6 million is due in 2022 and $700,000 is due in 2023. Additionally, we have a significant amount funds committed to the purchase of new Bitcoin miners. We can provide no assurance that we will have the ability to meet these payment requirements or that we will be successful raising capital to meet our working capital requirements.
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We will be required to raise a significant amount of more capital if we want to purchase all of the bitcoin mining equipment under our $300,000,000 purchase order. We can provide no assurance to investors that we will have access to such a large amount of capital and if so that it will be available on terms that we would accept. In such event, the Company may incur significant and/or shareholders will suffer large dilution.
If we fail to raise sufficient additional funds when needed or do not have sufficient cash flows from mining, we may be required to scale back our plan of operations.
Cash Flows used in Operating Activities
Our net cash used in operating activities for the 2021 Period and 2020 Period was $3,107 and $48, respectively. This related primarily to our net loss, offset by stock-based compensation, depreciation and accounts payable.
Cash Flows used in Investing Activities
Our net cash used in investing activities for the 2021 Period and 2020 Period was 689,201 and $0, respectively. This relates to the purchase of mining equipment.
Cash Flows from Financing Activities
Our net cash provided by financing acuities for the 2021 Period and 2020 Period was $2,109,415 and $54,975, respectively. These amounts related primarily to the issuance of equity and notes as well as amounts paid on equipment notes payable.
Significant Accounting Policies and Recent Accounting Pronouncements
Please see the notes to our financial statements included in this report for information about our Significant Accounting Policies and Recent Accounting Pronouncements.
LEGAL PROCEEDINGS
From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that will have, individually or in the aggregate, a material adverse effect on our business, financial condition or operating results.
MARKET FOR OUR COMMON STOCK
As of February 2, 2022, there were approximately 200 shareholders of record of the Company’s common stock. We believe that additional beneficial owners of our Common Stock hold shares in street name. Our Common Stock currently trades on the OTCQB market under the symbol “FWAV”.
Shares Eligible for Future Sale
No restricted shares of our common stock can be sold under Rule 144 until 12 months have passed since this report and the other requirements of Rule 144(i)(1)(ii) have been satisfied, including the Company being current in its SEC periodic reporting obligations.
Generally, pursuant to Rule 144, non-affiliate shareholders may sell freely after six months subject only to the current public information requirement, although because we are a former shell, we must be current in filing our Quarterly and Annual Reports. Affiliates may sell after six months subject to the Rule 144 volume, manner of sale (for equity securities), and current public information and notice requirements as well as the current reporting requirement. Because the Company was a shell as of the time of the Transaction, Rule 144 has two modifications to the above provisions. First for 12 months following the closing of the merger, shareholders will be subject to a 12 month holding period. Secondly, Rule 144 will only be available if the Company has filed all required Form 10-Qs and 10-Ks.
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An officer, director or other person in control of the Company may sell after 12 months with the following restrictions: (i) the Company is current in its SEC filings, (ii) certain manner of sale provisions, (iii) the filing of a Form 144, and (iv) volume limitations limiting the sale of shares within any three-month period to a number of shares that does not exceed 1% of the total number of outstanding shares. A person who has ceased to be an affiliate at least three months immediately preceding the applicable sale and who has owned such shares of common stock for at least one year may sell the shares under Rule 144 without regard to any of the limitations described above.
Such shares may be sold outside of the United States. Further, such shares may be sold to purchasers in the United States under Section 4(a)(1) of the Securities Act if paid for more than two years ago and if the seller is not an affiliate of the Company. However, some broker-dealers and transfer agents will not accept legal opinion relying on Section 4(a)(1).
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED SHAREHOLDERS MATTERS
The following table sets forth certain information regarding beneficial ownership of the Company’s common stock as of February 2, 2022, by (i) each person who is known by the Company to own beneficially more than 5% of any classes of outstanding common stock, (ii) each director of the Company, (iii) each of the Named Executive Officers, and (iv) all directors and executive officers of the Company as a group. Based on 383,208,340 shares of common stock outstanding as of February 2, 2022. Beneficial ownership is determined in accordance with Rule 13d-3 and 13d-5 under the Exchange Act, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under SEC rules, a person is considered a “beneficial owner” of a security if that person has or shares power to vote or direct the voting of such security or the power to dispose or direct the disposition of such security. A person is also considered to be a beneficial owner of any securities of which the person has a right to acquire beneficial ownership within 60 days. We believe that each individual or entity named has sole investment and voting power with respect to the securities indicated as beneficially owned by them, subject to community property laws, where applicable, except where otherwise noted in the footnotes to this table.
Unless otherwise specified in the notes to this table, the address for each person is: c/o EdgeMode, 350 North Orleans Street, Suite 9000N, Chicago, Il 60654, Attention: Corporate Secretary.
| Title of Class | Name of Beneficial Holder | Amount of Beneficial Ownership |
Percentage Beneficially Owned | |||||||
| 5% Shareholders: | ||||||||||
| Common Stock | Christina and Roger Dixon (1) | 54,354,375 | 14.2% | |||||||
| Directors and Named Executive Officers | ||||||||||
| Common Stock | Charlie Faulkner (2) | 87,045,385 | 21.0% | |||||||
| Common Stock | Simon Wajcenberg (3) | 100,231,784 | 24.1% | |||||||
| All directors and officers as a group (2 persons) | 187,277,169 | 41.9% | ||||||||
| (1) | Dixon. Roger Dixon was a Co-Founder of EdgeMode. Address is 3115, Five Dollar Road, Evansville, Indiana. |
| (2) | Faulkner. Mr. Faulkner is an executive officer and director of the Company. Includes 31,979,352 vested stock options. His ownership is included under “All directors and officers as a group”. |
| (3) | Wajcenberg. Mr. Wajcenberg is an executive officer and director of the Company. Includes 31,979,352 vested stock options. Includes shares beneficially owned by his wife. |
Changes in Control
We do not currently have any arrangements which if consummated may result in a change of control of our Company.
| 28 |
DIRECTORS AND EXECUTIVE OFFICERS
Upon the consummation of the Transaction, the following individuals have been appointed to the Board of Directors (“Board”) and executive management of the Company:
| Name | Age | Title | ||
| Charlie Faulkner | 36 | Chief Executive Officer; President and Director | ||
| Simon Wajcenberg | 53 | Chief Financial Officer, Treasurer, Secretary and Director (Executive Chairman) |
Charlie Faulkner has served as chief executive officer of EdgeMode since its inception in 2020. Since December 2016, he has served as an advisor at North Block Capital Ltd (“NB Capital”), an investment group that provides asset management, corporate advisory services, and technology solutions, which he co-founded in 2016.
Simon Wajcenberg has served as executive chairman of, and in other executive positions at, EdgeMode since its inception in 2020. Since December 2016, he has served as an advisor at NB Capital, which he co-founded in 2016.
Family Relationships and Other Arrangements
There are no family relationships among our directors and executive officers.
Director Independence
The Company is not a listed issuer whose securities are listed on a national securities exchange or an inter-dealer quotation system that has requirements that a majority of the board of directors be independent. We evaluate independence by the standards for director independence set forth in the Nasdaq Marketplace Rules. Under these rules, a director is not considered to be independent if he or she also is an executive officer or employee of the Company. Charlie Faulkner and Simon Wajcenberg are not considered to be independent directors under the standards for director independence set forth in the Nasdaq Marketplace Rules.
Committees of the Board of Directors
We presently do not have an audit committee, compensation committee, or other committee or committees performing similar functions, as our management believes that until this point it has been premature at the early stage of our management and business development to form an audit, compensation or other committees.
Shareholder Communications
Although we do not have a formal policy regarding communications with the Board, shareholders may communicate with the Board by writing to us at Fourth Wave Energy, Inc., 350 North Orleans Street, Suite 9000N, Chicago, IL 60654, Attention: Corporate Secretary. Shareholders who would like their submission directed to a member of the Board may so specify, and the communication will be forwarded, as appropriate.
| 29 |
Diversity
While we do not have a formal policy on diversity, our Board considers diversity to include the skill set, background, reputation, type and length of business experience of our Board members as well as a particular nominee’s contributions to that mix. Our Board believes that diversity brings a variety of ideas, judgments and considerations that benefit the Company and its shareholders. Although there are many other factors, the Board will seek individuals with experience on public company boards or the investment community, an expertise in cryptocurrency and accounting experience. The Company understands that the SEC has approved the Nasdaq Stock Market’s new diversity rule and will seek to comply with it.
Board Leadership Structure
Our Board does not have a policy as to whether the roles of Chairman of the Board of Directors and Chief Executive Officer should be separate or combined. However, we have chosen to separate the Chief Executive Officer and Board Chairman positions. Currently, our Chairman is Simon Wajcenberg. Our Board has determined that its current structure, with a separate Chairman and Chief Executive Officer, both of which are co-founders of EdgeMode, is in the best interests of the Company and its shareholders at this time. We believe that this Board leadership structure is the most appropriate for the Company. In the near future, we anticipate appointing independent directors. At such time, we will appoint an independent director as the Lead Director who will have broad responsibilities and authority. At such time, we will re-evaluate the composition of the Board and its leadership structure.
EXECUTIVE COMPENSATION
Set forth below is the information regarding the compensation paid, distributed or accrued by EdgeMode for the fiscal year ended December 31, 2021 to EdgeMode’s Chief Executive Officer (principal executive officer) serving during the last fiscal year and the other most highly compensated executive officers serving at the end of the last fiscal year whose compensation exceeded $100,000 (the “Named Executive Officers”). In accordance with SEC rules, the determination of Named Executive Officers gives effect to the Transaction and reflects compensation paid to applicable individuals by EdgeMode during the periods covered. EdgeMode did not begin paying compensation until January 2021.
Summary Compensation Table
| Name and Principal Positions | Fiscal Year | Salary $ |
Bonus $ |
All Other Compensation $ |
Total $ |
||||||||||||||
| Charlie Faulkner (1) | 2021 | 175,000 | 0 | 0 | 175,000 | ||||||||||||||
| Chief Executive Officer | |||||||||||||||||||
| Simon Wajcenberg (2) | 2021 | 175,000 | 0 | 0 | 175,000 | ||||||||||||||
| Chief Financial Officer | |||||||||||||||||||
| (1) | Represents amounts paid to Mr. Faulkner by EdgeMode prior to the Transaction closing. As a result of the Transaction, Mr. Faulkner was appointed our Chief Executive Officer. |
| (2) | Represents amounts paid to Mr. Wajcenberg by EdgeMode prior to the Transaction closing. Mr. Wajcenberg was appointed our Chief Financial Officer and Executive Chairman. |
The table above does not include advisory fees paid to an affiliated entity of the Named Executive Officers. See page 31.
| 30 |
Named Executive Officer Employment Agreements
EdgeMode employed Charlie Faulkner and Simon Wajcenberg pursuant to oral employment agreements with monthly salaries which began at $10,000 per month in early 2021 and were increased to $30,000 per month in October 2021. In connection with the Transaction, we entered into formal Employment Agreements with Charlie Faulkner and Simon Wajcenberg which provided for annual base salaries of $600,000 each and the grant to each of 31,979,352 five-year stock options with an exercise price of $0.40 per share.
Termination Provisions
Messrs. Faulkner and Wajcenberg are entitled to certain benefits in connection with a termination of their employment upon death, disability, dismissal without cause, or constructive termination. In any such termination, the executive will receive 12 months base salary and any performance bonus that he would have been due at the time of termination. In certain circumstances, the termination provision is subject to a cure period. Cause is generally defined as (i) committing or participating in an injurious act of fraud, gross neglect, misrepresentation, embezzlement or dishonesty against the Company; (ii) participating in any injurious act or acting recklessly or in a manner which was grossly negligent against the Company; engaging in a criminal enterprise involving moral turpitude, financial or securities fraud; (iii) felony conviction; and (iv) material failure to follow the directives of the Board.
Outstanding Equity Awards at Fiscal Year End
As of December 31, 2021, we did not have any outstanding unexercised options, stock or other equity incentive plan awards. On January 31, 2022, we granted approximately 64 million five-year stock options to Named Executive Officers.
Director Compensation
To date, we have not paid our director any compensation for services on our Board.
Equity Compensation Plan Information
As of December 31, 2021, EdgeMode did not have any securities authorized for issuance or outstanding under an equity compensation plan or equity compensation grants made outside of such a plan.
TRANSACTIONS WITH RELATED PERSONS
Set forth below is a brief description of the transactions since January 1, 2020 in which the EdgeMode was a participant and in which any director or executive officer of EdgeMode, any known 5% or greater shareholder of EdgeMode or any immediate family member of any of the foregoing persons, had a direct or indirect material interest as defined in Item 404(a) of Regulation S-K.
In connection with the equity fundraisings conducted under Regulation S under the Securities Act, EdgeMode paid $166,000 in advisory fees to an entity controlled by Simon Wajcenberg and Charles Faulkner, who were the principals of EdgeMode.
LEGAL PROCEEDINGS
From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that will have, individually or in the aggregate, a material adverse effect on our business, financial condition or operating results.
| 31 |
RECENT SALES OF UNREGISTERED SECURITIES
Other than the issuance of securities in the Transaction described in Item 3.02 of this report, which description is incorporated herein by reference, there were no unregistered sales of the Company’s securities which were not previously reported in the Company’s prior SEC filings.
DESCRIPTION OF SECURITIES
Common Stock
We are authorized to issue 500,000,000 shares of common stock. Holders of our common stock are each entitled to cast one vote for each share held of record on all matters presented to the shareholders. Cumulative voting is not allowed; hence, the holders of a majority of our outstanding common shares can elect all directors. Holders of our common stock are entitled to receive such dividends as may be declared by our Board out of funds legally available and, in the event of liquidation, to share pro rata in any distribution of our assets after payment of liabilities. Our Board is not obligated to declare a dividend. It is not anticipated that dividends will be paid in the foreseeable future. Holders of our common stock do not have preemptive rights to subscribe to additional shares if issued. There are no conversions, redemption, sinking fund or similar provisions regarding the common stock. All outstanding shares of common stock are fully paid and non-assessable.
Preferred Stock
We are authorized to issue 5,000,000 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. In connection with the Transaction, the only outstanding preferred stock was converted into common stock. As of the date of this report, there are no outstanding shares of preferred stock.
Although the Company presently has no commitments or contracts to issue any additional shares of preferred stock, authorized and unissued preferred stock could delay, discourage, hinder or preclude an unsolicited acquisition of the Company, could make it less likely that shareholders receive a premium for their shares as a result of any such attempt, and could adversely affect the market prices of, and the voting and other rights, of the holders of outstanding shares of the Company’s common stock.
Warrants
During September 2021 through January 2022 the Company issued five year common stock warrants to purchase an aggregate of 10,650,000 shares of common stock. The warrants are initially exercisable at $0.50 per share, which exercise price shall be reduced in the event of subsequent issuances at an effective price below the then exercise price, subject to exempt issuances by the Company. On or after March 2, 2022, the warrants may also be exercised on a cashless basis in the event there is no effective registration statement covering the underlying shares. If, at any time the VWAP of the Company’s common stock on its principal trading market exceeds 140% of the then exercise price and there is an effective registration statement under the Securities Act covering the resale of the shares, the Company may call for cancellation of the unexercised warrants.
Stock Options
The Company has issued approximately 86,00,000 five-year stock options at an exercise price of $0.40 per share.
Transfer Agent
Empire Stock Transfer is our transfer agent and it is located at 1859 Whitney Mesa Drive, Henderson, Nevada 89014.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our Bylaws authorize indemnification of a director, officer, employee or agent against expenses incurred by them in connection with any action, suit, or proceeding to which he is named a party by reason of his or her having acted or served in such capacity, except for liabilities arising from their own misconduct or negligence in performance of his duty. In addition, even a director, officer, employee, or agent found liable for misconduct or negligence in the performance of his duty may obtain such indemnification if, in view of all the circumstances in the case, a court of competent jurisdiction determines such person is fairly and reasonably entitled to indemnification.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers, or controlling persons pursuant to these provisions, we have been informed that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Act and is therefore unenforceable.
| 32 |
Item 3.02 Unregistered Sales of Equity Securities.
On January 31, 2022, the Company consummated the Transaction under the Merger Agreement. The disclosure in Item 1.01 is incorporated herein by reference. The issuances of the foregoing securities were exempt from registration pursuant to Section 4(a)(2) of the Securities Act and Rule 506(b) promulgated thereunder.
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Pursuant to the Merger Agreement, on January 31, 2022, Mr. J. Jacob Isaacs resigned as Chief Executive Officer and as a Board member of the Company, and each of Messrs. Charlie Faulkner and Simon Wajcenberg were appointed as officers and directors of the Company. The biographical information and employment terms for each of these individuals is set forth in Item 2.01 under “Directors and Officers” which is incorporated herein by reference.
Item 5.06 Change in Shell Company Status.
As a result of the closing of the Transaction described in Items 1.01 and 2.01 of this report, which description is incorporated by reference in this Item 5.06 of this report, the Company ceased being a shell company as such term is defined in Rule 12b-2 under the Exchange Act.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits.
| Incorporated by Reference | Filed or Furnished | |||||||||
| Exhibit # | Exhibit Description | Form | Date | Number | Herewith | |||||
| 2.1 | Agreement and Plan of Merger and Reorganization* | 8-K | 12/8/21 | 2.1 | ||||||
| 3.1 | Certificate of Incorporation, As Amended | Filed | ||||||||
| 3.2 | Bylaws | Filed | ||||||||
| 10.1 | Form of Executive Employment Agreement | Filed | ||||||||
| 10.2 | Consulting Agreement - Isaacs | Filed | ||||||||
| 10.3 | Form of Option Agreement | Filed | ||||||||
| 10.4 | Form of Note Conversion | Filed | ||||||||
| 10.5 | Compute North Master Agreement | Filed | ||||||||
| 10.6 | Trinity Mining Technologies | Filed | ||||||||
| 10.7 | 2CRSI Agreements | Filed | ||||||||
| 23.1 | Consent of Independent Registered Public Accounting Firm | Filed | ||||||||
| 99.1 | Audited Financial Statements of EdgeMode for the period March 9, 2020 (Inception) to December 31, 2020 | Filed | ||||||||
| 99.2 | Unaudited Financial Statements of EdgeMode for the Nine Months Ended September 30, 2021 | Filed | ||||||||
| 99.3 | Pro Forma Financial Information of EdgeMode | Filed | ||||||||
| 104 | Cover Page Interactive Data File -- the cover page XBRL tags are embedded within the Inline XBRL document | |||||||||
| * | Exhibits and/or Schedules have been omitted. The Company hereby agrees to furnish to the Staff of the Securities and Exchange Commission upon request any omitted information. |
| 33 |
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 hereunto duly authorized.
| FOURTH WAVE ENERGY, INC. | |||
| Date: February 4, 2022 | By: | /s/ Charlie Faulkner | |
| Name: | Charlie Faulkner | ||
| Title: | Chief Executive Officer | ||
| 34 |
Exhibit 3.1
Certifie d Copy 11/19/2021 09:25:15 AM Work Order Number: Reference Number: Through Date: Corporate Name: W2021111900430 - 1726483 20211904256 11/19/2021 09:25:15 AM Fourth Wave Energy, Inc. The undersigned filing officer hereby certifies that the attached copies are true and exact copies of all requested statements and related subsequent documentation filed with the Secretary of State’s Office, Commercial Recordings Division listed on the attached report. Document Number Description Number of Pages 20211847701 Amendment Before Issuance of Stock - 09/28/2021 2 20211152453 Annual List - 01/08/2021 2 20200576098 Certificate of Designation - 03/30/2020 4 20200563747 Amendment After Issuance of Stock - 03/23/2020 1 20200439032 Annual List - 01/27/2020 2 20190022391 - 99 Annual List - 01/17/2019 1 20180453583 - 29 Amendment - 10/17/2018 1 20180017671 - 53 Amendment - 01/11/2018 1 20180017672 - 64 Amended List - 01/11/2018 1 20170518113 - 09 Annual List - 12/07/2017 1 20170518114 - 10 Amendment - 12/07/2017 1 20170385610 - 93 Amended List - 09/08/2017 1 20170019683 - 17 Annual List - 01/17/2017 1 20160015439 - 51 Annual List - 01/13/2016 1 20150102673 - 27 Amendment - 03/04/2015 1 20150017898 - 21 Annual List - 01/14/2015 1 BARBARA K. CEGAVSKE Secretary of State KIMBERLEY PERONDI Deputy Secretary for Commercial Recordings STATE OF NEVADA OFFICE OF THE SECRETARY OF STATE Commercial Recordings Division 202 N. Carson Street Carson City, NV 89701 Telephone (775) 684 - 5708 Fax (775) 684 - 7138 North Las Vegas City Hall 2250 Las Vegas Blvd North, Suite 400 North Las Vegas, NV 89030 Telephone (702) 486 - 2880 Fax (702) 486 - 2888
20150017899 - 32 Annual List - 01/14/2015 1 20120865474 - 19 Annual List - 12/26/2012 1 20120005039 - 22 Annual List - 01/04/2012 1 20110097218 - 01 Initial List - 02/07/2011 1 20110046747 - 32 Articles of Incorporation - 01/21/2011 6 Certified By: Electronically Certified Certificate Number: B202111192165399 You may verify this certificate online at http://www.nvsos.gov Respectfully, BARBARA K. CEGAVSKE Nevada Secretary of State BARBARA K. CEGAVSKE Secretary of State KIMBERLEY PERONDI Deputy Secretary for Commercial Recordings STATE OF NEVADA OFFICE OF THE SECRETARY OF STATE Commercial Recordings Division 202 N. Carson Street Carson City, NV 89701 Telephone (775) 684 - 5708 Fax (775) 684 - 7138 North Las Vegas City Hall 2250 Las Vegas Blvd North, Suite 400 North Las Vegas, NV 89030 Telephone (702) 486 - 2880 Fax (702) 486 - 2888
Filed in the Office of Secretary of State State Of Nevada Business Number E0034092011 - 6 Filing Number 20211847701 Filed On 9/28/2021 10:00:00 AM Number of Pages 2
- b - ?! · ' 1/1 /: : d l lli K \ · .; : : :.: - • . - . - . - , : o . . •._ _ : - :; . ' . " "= · • < - - . . ' - " \ ". \ \ ) BARBARA K . CEGAVSKE Secretary of State 202 North Carson Street Carson City, Nevada 89701 - 4201 (775) 684 - 5708 · Website: www.nvsos.gov 4 T 5 C 6 ( C L Profit Corporation: Certificate of Amendment (PuRsuANTrn NRs 18 . 380 & 78 . 385/78 . 390) Certificate to Accompany Restated Articles or Amended and Restated Articles (PuRsuANT To NRs 78.403) Officer's Statement (PuRsuANTTo NRs 80 . 030 . Effective Date and ime: ( Optiona l ) Date : Time : (must not be later than 90 days after the certificate is filed) . Information Being hanged: ( Domest i c co r po r at i ons only) Changes to takes the follow i ng effect: O The entity name has been amended . 0 The registered agent has been changed . (attach Certificate of Acceptance from new registered agent) O The purpose of the entity has been amended . I.R J Th e authorize d shares hav e bee n amended. 0 The d i rectors, managers or general partners have been amended . 0 IRS tax language has been added . 0 Articles have been added . O Articles have been deleted . 0 Other . The articles have been amended as follows : (provide article numbers , if available) ! chan _ ge _ illion autherized shares to 500Million common shares (attach additional page(s) i f necessary) --- C _ e _ o '!.. . - _ Sign Title x Signature of Officer or Authorized Signer Title •it any proposed amendment would alter . or change any preference or any relative or other right given to any class or series of outstanding shares, then the amendment must be approved by the vote, in addition to the affirmative vote otherwise required, of the holders of shares representing a majority of the voting power of each class or series affected by the amendment regardless to limitations or restrictions on the voting power thereof . . Signature: Requ i red ) Please include any required or optional information in space below: (attach additional page(s) if necessary) urrently we have 5 , 000,000 authorized shares at 0.001 we need to change to common shares and add 495,000 , 000 shares making our total common shares 500,000,000 shares at 0 . 001 par value eave the other 1,000 shares at 0 . 01 as authorised and untouched This form must be accompanied by appropriate fees . Pag e 2 o f 2 Re vi s e d : 1 / 1 / 2019
BARBARA K. CEGAVSKE Secretary of State 202 North Carson Street Carson City, Nevada 89701 - 4201 (775) 684 - 5708 Website: www.nvsos.gov www.nvsilverflume.gov Annual or Amended List and State Business License Application ANNUAL AMENDED (check one) List of Officers, Managers, Members, General Partners, Managing Partners, Trustees or Subscribers: Fourth Wave Energy, Inc. NV20111048323 NAME OF ENTITY Entity or Nevada Business Identification Number (NVID) TYPE OR PRINT ONLY - USE DARK INK ONLY - DO NOT HIGHLIGHT IMPORTANT: Read instructions before completing and returning this form. Please indicate the entity type (check only one): Corporation This corporation is publicly traded, the Central Index Key number is: 0001273511 Nonprofit Corporation (see nonprofit sections below) Limited - Liability Company Limited Partnership Limited - Liability Partnership Limited - Liability Limited Partnership Business Trust Corporation Sole Additional Officers, Managers, Members, General Partners, Managing Partners, Trustees or Subscribers, may be listed on a supplemental page. CHECK ONLY IF APPLICABLE Pursuant to NRS Chapter 76, this entity is exempt from the business license fee. 001 - Governmental Entity 006 - NRS 680B.020 Insurance Co, provide license or certificate of authority number For nonprofit entities formed under NRS chapter 80: entities without 501(c) nonprofit designation are required to maintain a state business license, the fee is $200.00. Those claiming an exemption under 501(c) designation must indicate by checking box below. Pursuant to NRS Chapter 76, this entity is a 501(c) nonprofit entity and is exempt from the business license fee. Exemption Code 002 For nonprofit entities formed under NRS Chapter 81: entities which are Unit - owners' association or Religious, Charitable, fraternal or other organization that qualifies as a tax - exempt organization pursuant to 26 U.S.C $ 501(c) are excluded from the requirement to obtain a state business license. Please indicate below if this entity falls under one of these categories by marking the appropriate box. If the entity does not fall under either of these categories please submit $200.00 for the state business license. Unit - owners' Association Religious, charitable, fraternal or other organization that qualifies as a tax - exempt organization pursuant to 26 U.S.C. $501(c) For nonprofit entities formed under NRS Chapter 82 and 80: Charitable Solicitation Information - check applicable box Does the Organization intend to solicit charitable or tax deductible contributions? No - no additional form is required Yes - the "Charitable Solicitation Registration Statement" is required. The Organization claims exemption pursuant to NRS 82A 210 - the "Exemption From Charitable Solicitation Registration Statement" is required **Failure to include the required statement form will result in rejection of the filing and could result in late fees.** page 1 of 2 Filed in the Office of Secretary of State State Of Nevada Business Number E0034092011 - 6 Filing Number 20211152453 Filed On 01/08/2021 05:46:11 AM Number of Pages 2
BARBARA K. CEGAVSKE Secretary of State 202 North Carson Street Carson City, Nevada 89701 - 4201 (775) 684 - 5708 Website: www.nvsos.gov www.nvsilverflume.gov Annual or Amended List and State Business License Application - Continued Officers, Managers, Members, General Partners, Managing Partners, Trustees or Subscribers: CORPORATION, INDICATE THE TREASURER : J. JACOB ISAACS USA Name Country 75 E Santa Clara St 6th Fl San Jose CA 95113 Address City State Zip/Postal Code CORPORATION, INDICATE THE DIRECTOR : J. JACOB ISAACS USA Name Country 75 E Santa Clara St 6th Fl San Jose CA 95113 Address City State Zip/Postal Code CORPORATION, INDICATE THE SECRETARY : J.JACOB ISAACS USA Name Country 75 E Santa Clara St 6th Fl San Jose CA 95113 Address City State Zip/Postal Code CORPORATION, INDICATE THE PRESIDENT : J. JACOB ISAACS USA Name Country 75 E Santa Clara St 6th Fl San Jose CA 95113 Address City State Zip/Postal Code None of the officers and directors identified in the list of officers has been identified with the fraudulent intent of concealing the identity of any person or persons exercising the power or authority of an officer or director in furtherance of any unlawful conduct. I declare, to the best of my knowledge under penalty of perjury, that the information contained herein is correct and acknowledge that pursuant to NRS 239.330, it is a category C felony to knowingly offer any false or forged instrument for filing in the Office of the Secretary of State. X J JACOB ISAACS Signature of Officer, Manager, Managing Member, General Partner, Managing Partner, Trustee, Subscriber, Member, Owner of Business, Partner or Authorized Signer FORM WILL BE RETURNED IF UNSIGNED Title President Date 01/08/2021 page 2 of 2
Filed in the Office of Secretary of State State Of Nevada Business Number E0034092011 - 6 Filing Number 20200576098 Filed On 3/30/2020 8:00:00 AM Number of Pages 4
From : 303 839 5414 Page : 4/6 D?t : 3/_27/2_020 12:29 : 29 PM . - - - . ( - - - - . . . - CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF THE SERIES A PREFERRED STOCK OF FOURT H WAVE ENERGY , INC. (f/k/a PIERRE COR P ) The relative rights and preferences of the Series A Preferred Shares are as follows: 1. Designation and Amount . The share s of suc h serie s shal l be designed as 11 Series A Preferred Shares" (tbe "Series A Preferred Shares"), $ 0 . 01 par value, and the number of shares constituting such series shall be 1 , 000 . The number of shares constituting such series may, unless prohibited by the Articles of Incorporation, be decreased by . resolution of the Board of Directors ; provided that no decrease shall reduce the number of Series A Preferred Shares to a number less than the number of shares then outstanding plus the number of shares issuable upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Corporation convertible in Series A Preferred Shares . 2. Dividends and Distributions . (i) The holders of Series A Preferred Shar:es, in preference to the holders of Common Shares, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, annual dividends payable in cash on the 31 st day of December in each year, commencing on December 31 , 2020 at the rate of $ 0 . 10 per share per year . (ii) Dividends which are not declared will not accrue . Dividends not declared will not cumulate . Accrued but unpaid dividends shall not bear interest . Dividends paid on the Series A Preferred Shares in an amount less than the total amount of such dividends at the time such dividends are declared and become payable shall be allocated pro rata on a share - by - share basis among all such shares outstanding at that time . The Board of Directors may fix a record date for the determination of holders of Series A Preferred Shares entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than thirty ( 30 ) days prior to the date fixed for the payment thereof . 3 . Voting Rights . Each Series A Preferred Share will entitle the holder thereof to vote on all matters submitted to a vote of the shareholders of the Corporation or with respect to actions that may be taken by written consent . The number of votes that the holder each Series A preferred shares will be entitled to cast is determined by the following formula : Xx 250% 1,000 Where: X = number of votes entitled to be cast by holders of this Corporation's common stock or by holders of any other outstanding security of this Corporation. This fax was received by GFI FaxMaker fax se,ver . For more information , v i sit: http : //www . gfi . com
F rom : 30 3 83 9 5414 Page : 5/ 6 D † lt_ e 3/_27/2_02 0 12 : 29:29 PM Except as otherwise provided herein or in any other Certificate of Designation creating a series of Preferred Shares or by law, the holders of Series A Preferred Shares and the holders of Common Shares and any other capital shares of the Corporation having general voting rights shall vote together as one class on all matters submitted to a vote of the shareholders of the Corporation . Except as otherwise provided herein or by law, the holders of Series A Preferred Shares shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Shares and any other capital stock of the Corporation having general voting rights as set forth herein) for taking any corporate action . 4. Certain Restrictions (i) Whenever dividends declared or other distributions payable on the Series A Preferred Shares as provided in Section 2 hereof are in arrears, thereafter and until all unpaid dividends and distributions on Series A Preferred Shares outstanding shall have been paid in full, the Corporation shall not : (a) declare or pay dividends, or make any other distributions, on any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Shares ; (b) declare or pay dividends, or make any other distributions, on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Shares, except dividends paid ratably on the Series A Preferred Shares and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the - hol ers of all such shares are then entitled ; (c) redeem or purchase or otherwise acquire for consideration shares of any stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Shares, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of stock of the Corporation ranking junior (both as to dividends and upon liquidation, dissolution or winding up) to the Series A Preferred Shares ; or (d) redeem or purchase or otherwise acquire for consideration any Series A Preferred Shares, or any shares of stock ranking on a parity with the Series A Preferred Shares, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series of classes . 2 This fa x was received by GFI FaxMaker fax server . For more information , visit: http://www . gfi . com
From : 303 839 5414 Page : 6/6 D † l e 3/_27/2920 12 : 29 : 29 PM (ii) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under subparagraph (i) of this Section 4 , purchase or otherwise acquire such shares at such time and in such manner . 5. Reacquired Shares . Any Series A Preferred Shares purchased or otherwise acquired by the Corporation in any manner whatsoever shall constitute authorized but unissued Preferred Shares and may be reissued as part of a new series of Preferred Shares by resolution or resolutions of the Board of Directors, subject to the conditions and restrictions on issuance set forth herein, in the Articles of Incorporation, or in any other Certificate of Designation creating a series of Preferred Shares or as otherwise required by law . 6. Liquidation, Dissolution or Winding Up . Upon any liquidation, dissolution or winding up of the Corporation, no distribution shall be made to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Shares unless, pri'or thereto, the holders of Series A Preferred Shares shall have received $ 1 . 00 per share, plus an amount equal to declared and unpaid dividends and distributions thereon t o th e date of suc h payment . 7. Conversion . A t any tim e and a t the option of the holder of th e Serie s A Preferred Stock, each share of the Series A Preferred Stock will be con v ertible at any time into one share of the Corporation's common stock . In the event the Corporation shall at any time after March 26 , 2020 declare or pay any dividend on Common Shares payable in Common Shares , or effect a subdivision or combination or consolidation of the outstanding Common Shares (by reclassification or otherwise) into a greater or lesser number of Common Shares, then in each such case the number of Common Shares issuable upon the conversion of the Series A Preferred Shares immediately prior to such event shall be adjusted by multiplying such number by a fraction, the numerator of which is the number of Common Shares outstanding immediately after such event and the denominator of which is the number of Common Shares that were outstanding immediately prior to such event . If any Series A Preferred share or shares are converted into a loan, and after demand for payment the Corporation fails to pay the amounts due the holder, then the holder shall be entitled to recover all principal and interest and all costs of collection, including a reasonable attorney's fee . 8. Consolidation, Merger, Exchange, etc . . In case the Corporation shall enter into any consolidation, merger, combinatio statutory share exchange or other transaction in which the Common Shares are exchanged for or changed into other stock or securities, money and/or any other property, then in any such case the Series A Preferred Shares shall at the same time be similarly exchanged or changed into an amount per share equal to the aggregate amount of stock, securities, money and/or any other property (payable in kind), as the case may be, into which or for which each Common Share is changed or exchanged . 4 111 W a ve Cort ofDcsig Ser i A Attach, 3 - 27 - 20 3 This fa x was recei v ed by GFI Fa x Maker fax server . For more information , visit: http : //www . gf i. com
Filed in the Office of Secretary of State State Of Nevada Business Number E0034092011 - 6 Filing Number 20200563747 Filed On 3/23/2020 8:00:00 AM Number of Pages 1
BARBARA K. CEGAVSKE Secretary of State 202 North Carson Street Carson City, Nevada 89701 - 4201 (775) 684 - 5708 Website: www.nvsos.gov www.nvsilverflume.gov Annual or Amended List and State Business License Application ANNUAL AMENDED (check one) List of Officers, Managers, Members, General Partners, Managing Partners, Trustees or Subscribers: PIERRE CORP. NV20111048323 NAME OF ENTITY Entity or Nevada Business Identification Number (NVID) TYPE OR PRINT ONLY - USE DARK INK ONLY - DO NOT HIGHLIGHT IMPORTANT: Read instructions before completing and returning this form. Please indicate the entity type (check only one): Corporation This corporation is publicly traded, the Central Index Key number is: 0001652958 Nonprofit Corporation (see nonprofit sections below) Limited - Liability Company Limited Partnership Limited - Liability Partnership Limited - Liability Limited Partnership Business Trust Corporation Sole Additional Officers, Managers, Members, General Partners, Managing Partners, Trustees or Subscribers, may be listed on a supplemental page. CHECK ONLY IF APPLICABLE Pursuant to NRS Chapter 76, this entity is exempt from the business license fee. 001 - Governmental Entity 006 - NRS 680B.020 Insurance Co, provide license or certificate of authority number For nonprofit entities formed under NRS chapter 80: entities without 501(c) nonprofit designation are required to maintain a state business license, the fee is $200.00. Those claiming an exemption under 501(c) designation must indicate by checking box below. Pursuant to NRS Chapter 76, this entity is a 501(c) nonprofit entity and is exempt from the business license fee. Exemption Code 002 For nonprofit entities formed under NRS Chapter 81: entities which are Unit - owners' association or Religious, Charitable, fraternal or other organization that qualifies as a tax - exempt organization pursuant to 26 U.S.C $ 501(c) are excluded from the requirement to obtain a state business license. Please indicate below if this entity falls under one of these categories by marking the appropriate box. If the entity does not fall under either of these categories please submit $200.00 for the state business license. Unit - owners' Association Religious, charitable, fraternal or other organization that qualifies as a tax - exempt organization pursuant to 26 U.S.C. $501(c) For nonprofit entities formed under NRS Chapter 82 and 80: Charitable Solicitation Information - check applicable box Does the Organization intend to solicit charitable or tax deductible contributions? No - no additional form is required Yes - the "Charitable Solicitation Registration Statement" is required. The Organization claims exemption pursuant to NRS 82A 210 - the "Exemption From Charitable Solicitation Registration Statement" is required **Failure to include the required statement form will result in rejection of the filing and could result in late fees.** page 1 of 2 Filed in the Office of Secretary of State State Of Nevada Business Number E0034092011 - 6 Filing Number 20200439032 Filed On 01/27/2020 06:27:46 AM Number of Pages 2
BARBARA K. CEGAVSKE Secretary of State 202 North Carson Street Carson City, Nevada 89701 - 4201 (775) 684 - 5708 Website: www.nvsos.gov www.nvsilverflume.gov Annual or Amended List and State Business License Application - Continued Officers, Managers, Members, General Partners, Managing Partners, Trustees or Subscribers: CORPORATION, INDICATE THE TREASURER : J. JACOB ISAACS USA Name Country 750 N San Vicente suite 800 West West Hollywood CA 90069 Address City State Zip/Postal Code CORPORATION, INDICATE THE DIRECTOR : J. JACOB ISAACS USA Name Country 750 N San Vicente suite 800 West West Hollywood CA 90069 Address City State Zip/Postal Code CORPORATION, INDICATE THE PRESIDENT : J.JACOB ISAACS USA Name Country 750 N San Vicente suite 800 West West Hollywood CA 90069 Address City State Zip/Postal Code CORPORATION, INDICATE THE SECRETARY : J.JACOB ISAACS USA Name Country 750 N San Vicente suite 800 West West Hollywood CA 90069 Address City State Zip/Postal Code None of the officers and directors identified in the list of officers has been identified with the fraudulent intent of concealing the identity of any person or persons exercising the power or authority of an officer or director in furtherance of any unlawful conduct. I declare, to the best of my knowledge under penalty of perjury, that the information contained herein is correct and acknowledge that pursuant to NRS 239.330, it is a category C felony to knowingly offer any false or forged instrument for filing in the Office of the Secretary of State. X J.JACOB ISAACS Signature of Officer, Manager, Managing Member, General Partner, Managing Partner, Trustee, Subscriber, Member, Owner of Business, Partner or Authorized Signer FORM WILL BE RETURNED IF UNSIGNED Title President Date 01/27/2020 page 2 of 2
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ROSSMILLER Secretary of State 20 6 Nort h Carso n Street Carso n City , Nevada 897014299 ( 775 ) 634 - 5706 Wehs.ite: www.nvs.os.gov Articles of Incorporation (PURSUAl'JT TO NRS CHAPTER 78) US S BLACKlN K ONL'i ' • 0 0 NO T HlGHl.!Gi - <T 1, Name of C - orporat!on: 2 \ RE;g:istered Agent for Service o f P - rocess: (,.,h&•" om,, one 'XI'< ) Wadena Corp. Ƒ Nom':ommeeda l !'fagista; - e d Agent ( n<1m e snd a_ ? H:J5 S OOJ<J'/ \ ) QB f 7 OffiC G or Pcsitio n wit h Er;!ii.v L.. J Jr:ari e zri11ctc1ms tK!iiw ) · N;:;mcJ of Nnnc0rnn10,1;1al Regrstemd A(,.s,nt Of!: NAf'le C1f Title of Dffi<'& o, Dther Pc.l \ ltkln 1,, - .,il'h Crltit:( N0vada Ci \ t Carson City NV 8lT':l d Addr1.1 1802 Nort h Carso n Street ; Suit e 108 --------- l 1 - • - 1a_ H _i,_g_ A c _;_ '" < _ _ 0 _zl_ tc t _i_ m , _,_•_n·_ , rr_"'_ ' - " - "_'_l_ad_d_,,_,_,_ ) c _,_ > ····· ---- "·"'·····""''"'···2._.1;_ , _c_,>_l><_ . -- ~l 3.Autlwrlzed St o k ( n:..untJ,,, . u! Nun1borof st1ai:c wirho<;t pa r valve,· j Number of shares •,vifh ;;h.c;reo ; c,irp,) faii,i n 'ff. Pa r value $O OOI per Share • f! ( :l{hNf;:t? (; to 1 ss t, le) parva/u : 100,000,000 Common l_lp . '. - ' . (fo 89701 1 ' Daniel A. Kramer Nan,(; Addr S.Se&; of the, Boar d of Otrectorsf'frustees: ( e; - ,,c h Diredwffmioh" - e mvst b¢ a na \ - lta1 ;::etson ,., , k!s I '. - 6 y, .;Jr s <, f ,iri, \ attach atldi.tiona ! pag1 lf me - r e lht m two dxi,ctorsie>'US' e$/ 4Nm • es and 1802 Nort h Carso n Street ; Suit e 108 /;tt'rX,t A<1ctt,';:i.:, 2)' NaFJC Carson City NV 89701 State Z!f,Co<is ow . - ., "' ' : 1 " """ ' 81• \ :ii! A,jdu,;c,,; City Stc1ta Zlr.,Cooe ' , 5, Pt1rpos e { o lkrmi; Yl<' , lr" , 1n:t)I01'1!:C) TJ1 0 pyq,ase c t !I! ( . , ( :OF!'.;P:'."!1 ( io n shof( /.,, - e:: Any legal Purpose ' . 6 , Name . Ad.ctress an d Sigo.itur e of tncorporator: tatt_;icJ1 adcll!:om l page 1f more !h.J n cni; ir,mrpt;r;: - ,t ( ;r ) ·•x ,,e;;. ' I ' \ Dani d A . Krnrn.;:r _, . . , . . .... Name ' 1802 Nort h Carso n Street; Suit e 108 fa.Jdl'eS \ '. . " ................. .. _, .. ., .... h10(H):ll'.lcralor Sigtl';)tvre. Carson City City NV 89701 sv,w, z,pca&J 7. Cert!ftcate of Acceptance of Appointment of Registered Agent: f Mrnby accept appcJntmont as Registered Ag m - 1" for the obove named Entity. X January21,2011 A.tiih<>riz Sigtiaron, ;;if Reglste,red A r..t er On i:J,ebtff cl Reglstered Ag nt Entity Date '" - ~~ --- ~ - --- . - .... t f,e..,._,.,: $em \ 1t:,1 \ ' oi $(,ii)) NRS f8. i>..>'!icles R,,w i t"< i s>< • 7 - ! - :I!.!
Articles of Incorporation Of Wadena Corp. First. The name of the corporation is Wadena Corp. Second. The registered office of the corporation in the State of Nevada is located at 1802 N. Carson Street, Suite 108, Carson City, Nevada 89701. The corporation may maintain an office, or offices, in such other places within or without the State of Nevada as may be from time to time designated by the Board of Directors or the By - Laws of the corporation. The corporation may conduct all corporation business of every kind and nature outside the State of Nevada as well as within the State of Nevada. Third. The objects for which this corporation is formed are to engage in any lawful activity, including, but not limited to the following: a) Shall have such rights, privileges and powers as may be conferred upon corporations by any existing law. b) May at any time exercise such rights, privileges and powers, when not inconsistent with the purposes and objects for which this corporation is organized. c) Shall have power to have succession by its corporate name for the period limited in its certificate or articles of incorporation, and when no period is limited, perpetually, or until dissolved and its affairs wound up according to law. d) Shall have power to sue and be sued in any court of law or equity. e) Shall have power to make contracts. f) Shall have power to hold, purchase and convey real and personal estate and to mortgage or lease any such real and personal estate with its franchises. The power to hold real and personal estate shall include the power to take the same by devise or bequest in the State of Nevada, or in any other state, territory or country. g) Shall have power to appoint such officers and agents as the affairs of the corporation shall require, and to allow them suitable compensation. h) Shall have power to make By - Laws not inconsistent with the constitution or laws of the United States, or of the State of Nevada, for the management, regulation and government of its affairs and property, the transfer of its stock, the transaction of its business, and the calling and holding of meetings of its stockholders. i) Shall have power to wind up and dissolve itself, or be wound up or dissolved. j) Shall have power to adopt and use a common seal or stamp, and alter the same at pleasure. The use of a seal or stamp by the corporation on any corporate documents is not necessary. The corporation may use a seal or stamp, if it desires, but such use or nonuse shall not in any way affect the legality of the document. k) Shall have the power to borrow money and contract debts when necessary for the transaction of its business, or for the exercise of its corporate rights, privileges or franchises, or for any other lawful purpose of its incorporation; to issue bonds,
promissory notes, bills of exchange, debentures, and other obligations and evidences of indebtedness, payable at a specified time or times, or payable upon the happening of a specified event or events, whether secured by mortgage, pledge or otherwise, or unsecured, for money borrowed, or in payment for property purchased, or acquired, or for any other lawful object. I) Shall have power to guarantee, purchase, hold, sell, assign, transfer, mortgage, pledge or otherwise dispose of the shares of the capital stock of, or any bonds, securities or evidences of the indebtedness created by, any other corporation or corporations of the State of Nevada, or any other state or government, and, while owners of such stock, bonds, securities or evidences of indebtedness, to exercise all rights, powers and privileges of ownership, including the right to vote, if any. m) Shall have power to purchase, hold, sell and transfer shares of its own capital stock, and use therefore its capital, capital surplus, surplus, or other property to fund. n) Shall have power to conduct business, have one or more offices, and conduct any legal activity in the State of Nevada, and in any of the several states, territories, possessions and dependencies of the United States, the District of Columbia, and any foreign countries. o) Shall have power to do all and everything necessary and proper for the accomplishment of the objects enumerated in its certificate or articles of incorporation, or any amendment thereof, or necessary or incidental to the protection and benefit of the corporation, and, in general, to carry on any lawful business necessary or incidental to the attainment of the objects of the corporation, whether or not such business is similar in nature to the objects set forth in the certificate or articles of incorporation of the corporation, or any amendments thereof. p) Shall have power to make donations for the public welfare or for charitable, scientific or educational purposes. q) Shall have power to enter into partnerships, general or limited, or joint ventures, in connection with any lawful activities, as may be allowed by law. Fourth. That the total number of stock authorized that may be issued by the Corporation is one hundred million (100,000,000) shares of Common stock with a par value of one tenth of one cent ($0.001 ) per share and no other class of stock shall be authorized. Said shares may be issued by the corporation from time to time for such considerations as may be fixed by the Board of Directors. Fifth. The governing board of the corporation shall be known as directors, and the number of directors may from time to time be increased or decreased in such manner as shall be provided by the By - Laws of this corporation, providing that the number of directors shall not be reduced to fewer than one (1). The first Board of Directors shall be one (1) in number and the name and post office address of the Director shall be listed as follows: Daniel A. Kramer 1802 N. Carson St., Ste. 108, Carson City, NV 89701
Sixth. The capital stock, after the amount of the subscription price, or par value, has been paid in, shall not be subject to assessment to pay the debts of the corporation. Seventh. The name and post office address of the Incorporator signing the Articles of Incorporation is as follows: Daniel A. Kramer 1802 N. Carson St., Ste.108, Carson City, NV 89701 Eighth. The Registered Agent for this corporation shall be VAL - U - CORP SERVICES, INC. The address of the Registered Agent, and, the registered or statutory address of this corporation in the State of Nevada, shall be: 1802 N. Carson Street, Suite 108, Carson City, Nevada 89701. Ninth. The corporation is to have perpetual existence. Tenth. In furtherance and not in limitation of the powers conferred by the statute, the Board of Directors is expressly authorized: a) Subject to the By - Laws, if any, adopted by the Stockholders, to make, alter or amend the By - Laws of the corporation. b) To fix the amount to be reserved as working capital over and above its capital stock paid in; to authorize and cause to be executed, mortgages and liens upon the real and personal property of this corporation. c) By resolution passed by a majority of the whole Board, to designate one (1) or more committees, each committee to consist of one or more of the Directors of the corporation, which, to the extent provided in the resolution, or in the By - Laws of the corporation, shall have and may exercise the powers of the Board of Directors in the management of the business and affairs of the corporation. Such committee, or committees, shall have such name, or names as may be stated in the By - Laws of the corporation, or as may be determined from time to time by resolution adopted by the Board of Directors. d) When and as authorized by the affirmative vote of the Stockholders holding stock entitling them to exercise at least a majority of the voting power given at a Stockholders meeting called for that purpose, or when authorized by the written consent of the holders of at least a majority of the voting stock issued and outstanding, the Board of Directors shall have power and authority at any meeting to sell, lease or exchange all of the property and assets of the corporation, including its good will and its corporate franchises, upon such terms and conditions as its Board of Directors deems expedient and for the best interests of the corporation. Eleventh. No shareholder shall be entitled as a matter of right to subscribe for or receive additional shares of any class of stock of the corporation, whether now or hereafter authorized, or any bonds, debentures or securities convertible into stock, but such additional shares of stock or other securities convertible into stock may be issued or disposed ofby the
Board of Directors to such persons and on such terms as in its discretion it shall deem advisable. Twelfth. No Director or Officer of the corporation shall be personally liable to the corporation or any of its stockholders for damages for breach of fiduciary duty as a Director or Officer involving any act or omission of any such Director or Officer; provided, however, that the foregoing provision shall not eliminate or limit the liability of a Director or Officer (i) for acts or omissions which involve intentional misconduct, fraud or a knowing violation of the law, or (ii) the payment of dividends in violation of Section 78.300 of the Nevada Revised Statutes. Any repeal or modification of this Article by the Stockholders of the corporation shall be prospective only, and shall not adversely affect any limitations on the personal liability of a Director or Officer of the corporation for acts or omissions prior to such repeal or modification. Thirteenth. This corporation reserves the right to amend, alter, change or repeal any provision contained in the Articles oflncorporation, in the manner now or hereafter prescribed by statute, or by the Articles oflncorporation, and all rights conferred upon Stockholders herein are granted subject to this reservation. I, the undersigned, being the Incorporator hereinbefore named for the purpose of forming a corporation pursuant to General Corporation Law of the State of Nevada, do make and file these Articles oflncorporation, hereby declaring and certifying that the facts herein stated are true, and accordingly have hereunto set my hand this January 21, 2011. Daniel A. Kran1e1 Incorporator
Exhibit 3.2
BYLAWS
OF
WADENA CORP. (Nevada)
TABLE OF CONTENTS
| Page | ||
| ARTICLE I | ||
| OFFICES | ||
| 1.1 | Business Office | 1 |
| 1.2 | Registered Office and Registered Agent | 1 |
| ARTICLE II | ||
| SHARES AND TRANSFER THEREOF | ||
| 2.1 | Regulation | 1 |
| 2.2 | Stock Certificates: Facsimile Signatures and Validation | 1 |
| 2.3 | Fractions of Shares: Insurance; Payment of Value or Issuance of Scrip | 1 |
| 2.4 | Cancellation of Outstanding Certificates and Issuance of New Certificates: Order of Surrender; Penalties for Failure to Comply | 2 |
| 2.5 | Consideration for Shares: Types; Adequacy; Effect of Receipt; Actions of Corporation Pending Receipt in Future | 2 |
| 2.6 | Stockholder's Liability: No Individual Liability Except for Payment for which Shares were Authorized to be Issued or which was Specified in Subscription Agreement | 3 |
| 2.7 | Lost, Stolen, or Destroyed Certificates | 3 |
| 2.8 | Transfer of Shares | 3 |
| 2.9 | Restrictions on Transfer of Shares | 3 |
| 2.10 | Transfer Agent | 4 |
| 2.11 | Close of Transfer Book and Record Date | 4 |
| ARTICLE III | ||
| STOCKHOLDERS AND MEETINGS THEREOF | ||
| 3.1 | Stockholders of Record | 4 |
| 3.2 | Meetings | 4 |
| 3.3 | Annual Meeting | 5 |
| 3.4 | Special Meetings | 5 |
| 3.5 | Actions at Meetings not Regularly Called: Ratification and Approval | 5 |
| 3.6 | Notice of Stockholders' Meeting: Signature; Contents; Service | 5 |
| 3.7 | Waiver of Notice | 6 |
| 3.8 | Voting Record | 6 |
| 3.9 | Quorum | 6 |
| 3.10 | Organization | 6 |
| 3.11 | Manner of Acting | 7 |
| 3.12 | Stockholders' Proxies | 7 |
| 3.13 | Voting of Shares | 8 |
| ii |
| Page | ||
| 3.14 | Voting by Ballot | 8 |
| 3.15 | Cumulative Voting | 8 |
| 3.16 | Consent of Stockholders in Lieu of Meeting | 8 |
| 3.17 | Maintenance of Records at Registered Office; Inspection and Copying of Records | 8 |
| ARTICLE IV | ||
| DIRECTORS, POWERS AND MEETINGS | ||
| 4.1 | Board of Directors | 9 |
| 4.2 | General Powers | 9 |
| 4.3 | Regular Meetings | 9 |
| 4.4 | Special Meetings | 10 |
| 4.5 | Actions at Meetings Not Regularly Called: Ratification and Approval | 10 |
| 4.6 | Notice of Directors’ Meetings | 10 |
| 4.7 | Waiver of Notice | 10 |
| 4.8 | Quorum | 10 |
| 4.9 | Organization | 11 |
| 4.10 | Manner of Acting | 11 |
| 4.11 | Participation by Telephone or Similar Method | 11 |
| 4.12 | Consent of Directors in Lieu of Meeting | 11 |
| 4.13 | Vacancies | 11 |
| 4.14 | Compensation | 11 |
| 4.15 | Removal of Directors | 12 |
| 4.16 | Resignations | 12 |
| ARTICLE V | ||
| OFFICERS | ||
| 5.1 | Number | 12 |
| 5.2 | Election and Term of Office | 12 |
| 5.3 | Removal | 12 |
| 5.4 | Vacancies | 12 |
| 5.5 | Powers | 12 |
| 5.6 | Compensation | 14 |
| 5.7 | Bonds | 14 |
| ARTICLE VI | ||
| PROVISIONS APPLICABLE TO OFFICERS AND DIRECTORS GENERALLY | ||
| 6.1 | Exercise of Powers and Performance of Duties by Directors and Officers | 14 |
| 6.2 | Restrictions on Transactions Involving Interested Directors or Officers; Compensation of Directors | 14 |
| 6.3 | Indemnification of Officers, Directors, Employees and Agents; Advancement of Expenses | 15 |
| iii |
| Page | ||
| ARTICLE VII | ||
| DIVIDENDS; FINANCE | ||
| 7.1 | Dividends | 17 |
| 7.2 | Reserve Funds | 17 |
| 7.3 | Banking | 17 |
| ARTICLE VIII | ||
| CONTRACTS, LOANS, AND CHECKS | ||
| 8.1 | Execution of Contracts | 17 |
| 8.2 | Loans | 17 |
| 8.3 | Checks | 18 |
| 8.4 | Deposits | 18 |
| ARTICLE IX | ||
| FISCAL YEAR | ||
| 18 | ||
| ARTICLE X | ||
| CORPORATE SEAL | ||
| 18 | ||
| ARTICLE XI | ||
| AMENDMENTS | ||
| 18 | ||
| ARTICLE XII | ||
| COMMITTEES | ||
| 12.1 | Appointment | 18 |
| 12.2 | Name | 18 |
| 12.3 | Membership | 18 |
| 12.4 | Procedure | 19 |
| 12.5 | Meetings | 19 |
| 12.6 | Vacancies | 19 |
| 12.7 | Resignations and Removal | 19 |
| CERTIFICATE | ||
| 20 |
| iv |
ARTICLE I
OFFICES
1.1 Business Office. The principal office and place of business of the corporation is located in the State of California, Suite 105, 4220 Fair Ave., Studio City, CA, 91602. Other offices and places of business may be established from time to time by resolution of the Board of Directors or as the business of the corporation may require.
| 1.2 | Registered Office and Registered Agent. The registered agent of the corporation for the service of process in the state of Nevada is Nevada Business Center LLC and the registered office of the registered agent for the service of process is 311 W Third Street, Carson City, NV, 89703. |
| 1.3 | The registered agent of the corporation may be changed from time to time by the Board of Directors in accordance with the procedures set forth in the Nevada Business Corporation Act. |
ARTICLE II
SHARES AND TRANSFER THEREOF
2.1 Regulation. The Board of Directors may make such rules and regulations as it may deem appropriate concerning the issuance, transfer, and registration of certificates for shares of the corporation, including the appointment of transfer agents and registrars.
2.2 Stock Certificates: Facsimile Signatures and Validation.
(A) Every stockholder shall be entitled to have a certificate, signed by officers or agents designated by the corporation for the purpose, certifying the number of shares owned by him in the corporation.
(B) Whenever any certificate is countersigned or otherwise authenticated by a transfer agent or transfer clerk, and by a registrar, then a facsimile of the signatures of the officers or agents of the corporation may be printed or lithographed upon such certificate in lieu of the actual signatures.
(C) In the event any officer or officers who shall have signed, or whose facsimile signature shall have been used on, any certificate or certificates for stock shall cease to be such officer or officers of the corporation, whether because of death, resignation or other reason, before such certificate or certificates shall have been delivered by the corporation, such certificate or certificates may nevertheless be adopted by the corporation and be issued and delivered as though the person or persons who signed such certificate or certificates, or whose facsimile signature shall have been used thereon, had not ceased to be such officer or officers of the corporation.
2.3 Fractions of Shares: Issuance; Payment of Value or Issuance of Scrip. The corporation is not obligated to, but may, execute and deliver a certificate for or including a fraction of a share. In lieu of executing and delivering a certificate for a fraction of a share, the corporation may, upon resolution of the Board of Directors:
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(A) make payment to any person otherwise entitled to become a holder of a fractional share, which payment shall be in accordance with the provisions of the Nevada Business Corporation Act; or
(B) issue such additional fraction of a share as is necessary to increase the fractional share to a full share; or
(C) execute and deliver registered or bearer scrip over the manual or facsimile signature of an officer of the corporation or of its agent for that purpose, exchangeable as provided on the scrip for full share certificates, but the scrip does not entitle the holder to any rights as a stockholder except as provided on the scrip. The scrip may contain any other provisions or conditions, as permitted by the Nevada Business Corporation Act, that the corporation, by resolution of the Board of Directors, deems advisable.
2.4 Cancellation of Outstanding Certificates and Issuance of New Certificates: Order of Surrender; Penalties for Failure to Comply. All certificates surrendered to the corporation for transfer shall be canceled and no new certificates shall be issued in lieu thereof until the former certificate for a like number of shares shall have been surrendered and canceled, except as hereinafter provided with respect to lost, stolen or destroyed certificates.
When the Articles of Incorporation are amended in any way affecting the statements contained in the certificates for outstanding shares, or it becomes desirable for any reason, in the discretion of the Board of Directors, to cancel any outstanding certificate for shares and issue a new certificate therefor conforming to the rights of the holder, the Board of Directors may order any holders of outstanding certificates for shares to surrender and exchange them for new certificates within a reasonable time to be fixed by the Board of Directors. Such order may provide that no holder of any such certificate so ordered to be surrendered shall be entitled to vote or to receive dividends or exercise any of the other rights of stockholders of record until he shall have complied with such order, but such order shall only operate to suspend such rights after notice and until compliance. The duty of surrender of any outstanding certificates may also be enforced by action at law.
2.5 Consideration for Shares: Types; Adequacy; Effect of Receipt; Actions of Corporation Pending Receipt in Future.
(A) The Board of Directors may authorize shares to be issued for consideration consisting of any tangible or intangible property or benefit to the corporation, including, but not limited to, cash, promissory notes, services performed, contracts for services to be performed, or other securities of the corporation.
(B) Before the corporation issues shares, the Board of Directors must determine that the consideration received or to be received for the shares to be issued is adequate. The judgment of the Board of Directors as to the adequacy of the consideration received for the shares issued is conclusive in the absence of actual fraud in the transaction.
(C) When the corporation receives the consideration for which the Board of Directors authorized the issuance of shares, the shares issued therefore are fully paid.
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(D) The corporation may place in escrow shares issued for a contract for future services or benefits or a promissory note, or make any other arrangements to restrict the transfer of the shares. The corporation may credit distributions made for the shares against their purchase price, until the services are performed, the benefits are received or the promissory note is paid. If the services are not performed, the benefits are not received or the promissory note is not paid, the shares escrowed or restricted and the distributions credited may be canceled in whole or in part.
2.6 Stockholder's Liability: No Individual Liability Except for Payment for which Shares were Authorized to be Issued or which was Specified in Subscription Agreement. Unless otherwise provided in the articles of incorporation, no stockholder of the corporation is individually liable for the debts or liabilities of the corporation. A purchaser of shares of stock from the corporation is not liable to the corporation or its creditors with respect to the shares, except to pay the consideration for which the shares were authorized to be issued or which was specified in the written subscription agreement.
2.7 Lost, Stolen, or Destroyed Certificates. Any stockholder claiming that his certificate for shares is lost, stolen, or destroyed may make an affidavit or affirmation of the fact and lodge the same with the Secretary of the corporation, accompanied by a signed application for a new certificate. Thereupon, and upon the giving of a satisfactory bond of indemnity to the corporation, a new certificate may be issued of the same tenor and representing the same number of shares as were represented by the certificate alleged to be lost, stolen or destroyed. The necessity for such bond and the amount required to be determined by the President and Treasurer of the corporation, unless the corporation shall have a transfer agent, in which case the transfer agent shall determine the necessity for such bond and the amount required.
2.8 Transfer of Shares. Subject to the terms of any stockholder agreement relating to the transfer of shares or other transfer restrictions contained in the Articles of Incorporation or authorized therein, shares of the corporation shall be transferable on the books of the corporation by the holder thereof in person or by his duly authorized attorney, upon the surrender and cancellation of a certificate or certificates for a like number of shares. Upon presentation and surrender of a certificate for shares properly endorsed and payment of all taxes therefor, the transferee shall be entitled to a new certificate or certificates in lieu thereof. As against the corporation, a transfer of shares can be made only on the books of the corporation and in the manner hereinabove provided, and the corporation shall be entitled to treat the holder of record of any share as the owner thereof and shall not be bound to recognize any equitable or other claim to or interest in such share on the part of any other person, whether or not it shall have express or other notice thereof, save as expressly provided by the statutes of the State of Nevada.
2.9 Restrictions on Transfer of Shares.
The Corporation will be governed by each of the following restrictions:
(A) No shares maybe transferred except with the prior approval of the directors, who may in their absolute discretion refuse to register the transfer of any shares, such approval to be evidenced by a resolution of the directors.
(B) There shall not be any invitation to the public to subscribe for any shares or debt obligations of the corporation
(C) The number of shareholders of the Corporation exclusive of:
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(i) persons who are in the employment of the Corporation or of an affiliate of the Corporation
(ii) persons who, having formerly been in the employment of the Corporation or an affiliate of the Corporation, were, while in that employment, shareholders of the Corporation and have continued to be shareholders of the Corporation after termination of that employment, is limited to not more than 50 persons, two or more persons who are joint registered owners of one or more shares being counted as one shareholder.
2.10 Transfer Agent. Unless otherwise specified by the Board of Directors by resolution, the Secretary of the corporation shall act as transfer agent of the certificates representing the shares of stock of the corporation. He shall maintain a stock transfer book, the stubs of which shall set forth among other things, the names and addresses of the holders of all issued shares of the corporation, the number of shares held by each, the certificate numbers representing such shares, the date of issue of the certificates representing such shares, and whether or not such shares originate from original issue or from transfer. Subject to Section 3.7, the names and addresses of the stockholders as they appear on the stubs of the stock transfer book shall be conclusive evidence as to who are the stockholders of record and as such entitled to receive notice of the meetings of stockholders; to vote at such meetings; to examine the list of the stockholders entitled to vote at meetings; to receive dividends; and to own, enjoy and exercise any other property or rights deriving from such shares against the corporation. Each stockholder shall be responsible for notifying the Secretary in writing of any change in his name or address and failure so to do will relieve the corporation, its directors, officers and agents, from liability for failure to direct notices or other documents, or pay over or transfer dividends or other property or rights, to a name or address other than the name and address appearing on the stub of the stock transfer book.
2.11 Close of Transfer Book and Record Date. For the purpose of determining stockholders entitled to notice of or to vote at any meeting of stockholders, or any adjournment thereof, or stockholders entitled to receive payment of any dividend, or in order to make a determination of stockholders for any other proper purpose, the Board of Directors may prescribe a period not exceeding sixty (60) days prior to any meeting of the stockholders during which no transfer of stock on the books of the corporation may be made, or may fix a day not more than sixty (60) days prior to the holding of any such meeting as the day as of which stockholders entitled to notice of and to vote at such meetings shall be determined; and only stockholders of record on such day shall be entitled to notice or to vote at such meeting. When a determination of stockholders entitled to vote at any meeting of stockholders has been made as provided in this section, such determination shall apply to any adjournment thereof.
ARTICLE III
STOCKHOLDERS AND MEETINGS THEREOF
3.1 Stockholders of Record. Only stockholders of record on the books of the corporation shall be entitled to be treated by the corporation as holders in fact of the shares standing in their respective names, and the corporation shall not be bound to recognize any equitable or other claim to, or interest in, any shares on the part of any other person, firm or corporation, whether or not it shall have express or other notice thereof, except as expressly provided by the Nevada Business Corporation Act.
3.2 Meetings. Meetings of stockholders shall be held at the principal office of the corporation, or at such other place, either within or without the State of Nevada, as specified from time to time by the Board of Directors. If the Board of Directors shall specify another location such change in location shall be recorded on the notice calling such meeting.
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3.3 Annual Meeting. The annual meeting of stockholders of the corporation for the election of directors, and for the transaction of such other business as may properly come before the meeting, shall be held on such date, and at such time and place as the Board of Directors shall designate by resolution. If the election of directors shall not be held within the time period designated herein for any annual meeting of the stockholders, the Board of Directors shall cause the election to be held at a special meeting of the stockholders as soon thereafter as may be convenient. Failure to hold the annual meeting at the designated time shall not work a forfeiture or dissolution of the corporation.
3.4 Special Meetings. Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute, may be called by the President, by a majority of the Board of Directors, or by the person or persons authorized by resolution of the Board of Directors.
3.5 Actions at Meetings Not Regularly Called: Ratification and Approval. Whenever all stockholders entitled to vote at any meeting consent, either by (i) a writing on the records of the meeting or filed with the Secretary; or (ii) presence at such meeting and oral consent entered on the minutes; or (iii) taking part in the deliberations at such meeting without objection; the doings of such meeting shall be as valid as if had at a meeting regularly called and noticed. At such meeting any business may be transacted which is not excepted from the written consent or to the consideration of which no objection for want of notice is made at the time.
If a meeting be irregular for want of notice or of such consent, provided a quorum was present at such meeting, the proceedings of the meeting may be ratified and approved and rendered likewise valid and the irregularity or defect therein waived by a writing signed by all stockholders having the right to vote at such meeting.
Such consent or approval of stockholders may be made by proxy or attorney, but all such proxies and powers of attorney must be in writing.
3.6 Notice of Stockholders' Meeting: Signature; Contents; Service.
(A) The notice of stockholders' meetings shall be in writing and signed by the President or a Vice President, or the Secretary, or the Assistant Secretary, or by such other person or persons as designated by the Board of Directors. Such notice shall state the purpose or purposes for which the meeting is called and the time when, and the place, which may be within or without the State of Nevada, where it is to be held.
A copy of such notice shall be either delivered personally to, or shall be mailed postage prepaid to, or shall be sent by telecopy to, each stockholder of record entitled to vote at such meeting not less than ten (10) nor more than sixty (60) days before such meeting. If mailed, it shall be directed to a stockholder at his address as it appears on the records of the corporation, and upon such mailing of any such notice the service thereof shall be complete, and the time of the notice shall begin to run from the date upon which such notice is deposited in the mail for transmission to such stockholder. Personal delivery of any such notice to any officer of a corporation or association, or to any member of a partnership, shall constitute delivery of such notice to such corporation, association, or partnership. If sent by telecopy, it shall be evidenced by proof of transmission to the intended recipient.
Notice duly delivered or mailed to a stockholder in accordance with the provisions of this section shall be deemed sufficient, and in the event of the transfer of his stock after such delivery or mailing and prior to the holding of the meeting, it shall not be necessary to deliver or mail notice of the meeting upon the transferee.
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(B) Unless otherwise provided in the Articles of Incorporation or these Bylaws, whenever notice is required to be given, under any provision of Nevada law or the Articles of Incorporation or Bylaws of the corporation, to any stockholder to whom:
(i) Notice of two consecutive annual meetings, and all notices of meetings or of the taking of action by written consent without a meeting to him during the period between those two consecutive annual meetings; or
(ii) All, and at least two, payments sent by first-class mail of dividends or interest on securities during a 12-month period, have been mailed addressed to him at his address as shown on the records of the corporation and have been returned undeliverable, the giving of further notices to him is not required. Any action or meeting taken or held without notice to such a stockholder has the same effect as if the notice had been given. If any such stockholder delivers to the corporation a written notice setting forth his current address, the requirement that notice be given to him is reinstated.
3.7 Waiver of Notice. Whenever any notice whatever is required to be given to stockholders, a waiver thereof in writing, signed by the person or persons entitled to the notice, whether before or after the time stated therein, shall be deemed equivalent thereto.
3.8 Voting Record. The officer or agent having charge of the stock transfer books for shares of the corporation shall make, at least ten (10) days before such meeting of stockholders, a complete record of the stockholders entitled to vote at each meeting of stockholders or any adjournment thereof, arranged in alphabetical order, with the address of and the number of shares held by each. The record, for a period of ten (10) days prior to such meeting, shall be kept on file at the principal office of the corporation, whether within or without the State of Nevada, and shall be subject to inspection by any stockholder for any purpose germane to the meeting at any time during usual business hours. Such record shall be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any stockholder during the whole time of the meeting for the purposes thereof.
The original stock transfer books shall be the prima facie evidence as to who are the stockholders entitled to examine the record or transfer books or to vote at any meeting of stockholders.
3.9 Quorum. A majority of the outstanding shares of the corporation entitled to vote, represented in person or by proxy, shall constitute a quorum at any meeting of stockholders, except as otherwise provided by the Nevada Business Corporation Act and the Articles of Incorporation. In the absence of a quorum at any such meeting, a majority of the shares so represented may adjourn the meeting from time to time for a period not to exceed sixty (60) days without further notice. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally noticed. The stockholders present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum.
3.10 Organization. The Board of Directors shall elect a chairman from among the directors to preside at each meeting of the stockholders. The Board of Directors shall elect a secretary to record the discussions and resolutions of each meeting.
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3.11 Manner of Acting. If a quorum is present, the affirmative vote of the majority of the shares represented at the meeting and entitled to vote on the subject matter shall be the act of the stockholders, unless the vote of a greater proportion or number or voting by classes is otherwise required by statute or by the Articles of Incorporation or these Bylaws.
3.12 Stockholders' Proxies.
(A) At any meeting of the stockholders of the corporation any stockholder may designate another person or persons to act as a proxy or proxies. If any stockholder designates two or more persons to act as proxies, a majority of those persons present at the meeting, or, if only one is present, then that one has and may exercise all of the powers conferred by the stockholder upon all of the persons so designated unless the stockholder provides otherwise.
(B) Without limiting the manner in which a stockholder may authorize another person or persons to act for him as proxy pursuant to subsection (A), the following constitute valid means by which a stockholder may grant such authority:
(i) A stockholder may execute a writing authorizing another person or persons to act for him as proxy. Execution may be accomplished by the signing of the writing by the stockholder or his authorized officer, director, employee, or agent or by causing the signature of the stockholder to be affixed to the writing by any reasonable means, including, but not limited to, a facsimile signature.
(ii) A stockholder may authorize another person or persons to act for him as proxy by transmitting or authorizing the transmission of a telegram, cablegram, or other means of electronic transmission to the person who will be the holder of the proxy or to a firm that solicits proxies or like agent who is authorized by the person who will be the holder of the proxy to receive the transmission. Any such telegram, cablegram or other means of electronic transmission must either set forth or be submitted with information from which it can be determined that the telegram, cablegram or other electronic transmission was authorized by the stockholder. If it is determined that the telegram, cablegram, or other electronic transmission is valid, the persons appointed by the corporation to count the votes of stockholders and determine the validity of proxies and ballots or other persons making those determinations must specify the information upon which they relied.
(C) Any copy, communication by telecopier, or other reliable reproduction of the writing or transmission created pursuant to subsection (B), may be substituted for the original writing or transmission for any purpose for which the original writing or transmission could be used, if the copy, communication by telecopier, or other reproduction is a complete reproduction of the entire original writing or transmission.
(D) No such proxy is valid after the expiration of six (6) months from the date of its creation, unless it is coupled with an interest, or unless the stockholder specifies in it the length of time for which it is to continue in force, which may not exceed seven (7) years from the date of its creation. Subject to these restrictions, any proxy properly created is not revoked and continues in full force and effect until another instrument or transmission revoking it or a properly created proxy bearing a later date is filed with or transmitted to the secretary of the corporation or another person or persons appointed by the corporation to count the votes of stockholders and determine the validity of proxies and ballots.
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3.13 Voting of Shares. Unless otherwise provided by the Articles of Incorporation or these Bylaws, each outstanding share entitled to vote shall be entitled to one vote upon each matter submitted to a vote at a meeting of stockholders, and each fractional share shall be entitled to a corresponding fractional vote on each such matter.
3.14 Voting by Ballot. Voting on any question or in any election may be by voice vote unless the presiding officer shall order or any stockholder shall demand that voting be by ballot.
3.15 Cumulative Voting. No stockholder shall be permitted to cumulate his votes in the election of directors or for any other matter voted upon by stockholders.
3.16 Consent of Stockholders in Lieu of Meeting. Any action required or permitted to be taken at a meeting of the stockholders may be taken without a meeting if a written consent thereto is signed by stockholders holding at least a majority of the voting power, except that:
(A) If any greater proportion of voting power is required for such action at a meeting, then the greater proportion of written consents is required; and
(B) This general provision for action by written consent does not supersede any specific provision for action by written consent contained in the Articles of Incorporation, these Bylaws, or the Nevada Business Corporation Act.
In no instance where action is authorized by written consent need a meeting of stockholders be called or notice given. The written consent must be filed with the minutes of the proceedings of the stockholders.
3.17 Maintenance of Records at Registered Office; Inspection and Copying of Records.
(A) The corporation shall keep a copy of the following records at its registered office:
(i) a copy certified by the Nevada Secretary of State of its Articles of Incorporation, and all amendments thereto;
(ii) a copy certified by an officer of the corporation of its Bylaws and all amendments thereto; and
(ii) a stock ledger or a duplicate stock ledger, revised annually, containing the names, alphabetically arranged, of all persons who are stockholders of the corporation, showing their places of residence, if known, and the number of shares held by them respectively. In lieu of the stock ledger or duplicate stock ledger, the corporation may keep a statement setting out the name of the custodian of the stock ledger or duplicate stock ledger, and the present and complete post office address, including street and number, if any, where the stock ledger or duplicate stock ledger specified in this section is kept.
(B) The corporation shall maintain the records required by subsection (A) in written form or in another form capable of conversion into written form within a reasonable time.
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(C) Any person who has been a stockholder of record of the corporation for at least six (6) months immediately preceding his demand, or any person holding, or thereunto authorized in writing by the holders of, at least 5 percent of all of its outstanding shares, upon at least five (5) days' written demand is entitled to inspect in person or by agent or attorney, during usual business hours, the stock ledger or duplicate stock ledger, whether kept in the registered office of the corporation in Nevada or elsewhere, and to make extracts therefrom. Holders of voting trust certificates representing shares of the corporation must be regarded as stockholders for the purpose of this subsection.
(D) An inspection authorized by subsection (C) may be denied to a stockholder or other person upon his refusal to furnish to the corporation an affidavit that the inspection is not desired for a purpose which is in the interest of a business or object other than the business of the corporation and that he has not at any time sold or offered for sale any list of stockholders of any domestic or foreign corporation or aided or abetted any person in procuring any such record of stockholders for any such purpose.
(E) In every instance where an attorney or other agent of the stockholder seeks the right of inspection, the demand must be accompanied by a power of attorney executed by the stockholder authorizing the attorney or other agent to inspect on behalf of the stockholder.
(F) The right to copy records under subsection (C) includes, if reasonable, the right to make copies by photographic, photocopy, or other means.
(G) The corporation may impose a reasonable charge to recover the costs of labor and materials and the cost of copies of any documents provided to the stockholder.
ARTICLE IV
DIRECTORS
4.1 Board of Directors. The business and affairs of the corporation shall be managed by a board of not less than one (1) nor more than eight (8) directors who shall be natural persons of at least eighteen (18) years of age but who need not be stockholders of the corporation or residents of the State of Nevada and who shall be elected at the annual meeting of stockholders or some adjournment thereof. Each director shall hold office until the next succeeding annual meeting of stockholders and until his successor shall have been elected and shall qualify or until his death or until he shall resign or shall have been removed. The Board of Directors may increase or decrease the number of directors by resolution.
4.2 General Powers. The business and affairs of the corporation shall be managed by the Board of Directors which may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute or by the Articles of Incorporation or by these Bylaws directed or required to be exercised or done by the stockholders. The directors shall pass upon any and all bills or claims of officers for salaries or other compensation and, if deemed advisable, shall contract with officers, employees, directors, attorneys, accountants, and other persons to render services to the corporation.
Any contract or conveyance, otherwise lawful, made in the name of the corporation, which is authorized or ratified by the Board of Directors, or is done within the scope of the authority, actual or apparent, given by the Board of Directors, binds the corporation, and the corporation acquires rights thereunder, whether the contract is executed or is wholly or in part executory.
4.3 Regular Meetings. A regular, annual meeting of the Board of Directors shall be held at the same place as, and immediately after, the annual meeting of stockholders, and no notice shall be required in connection therewith. The annual meeting of the Board of Directors shall be for the purpose of electing officers and the transaction of such other business as may come before the meeting. The Board of Directors may provide, by resolution, the time and place, either within or without the State of Nevada, for the holding of additional regular meetings without other notice than such resolution.
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4.4 Special Meetings. Special meetings of the Board of Directors or any committee thereof may be called by or at the request of the President or any two directors or, in the case of a committee, by any member of that committee. The person or persons authorized to call special meetings of the Board of Directors or committee may fix any place, either within or without the State of Nevada, the date, and the hour of the meeting and the business proposed to be transacted at the meeting as the place for holding any special meeting of the Board of Directors or committee called by them.
4.5 Actions at Meetings Not Regularly Called: Ratification and Approval. Whenever all directors entitled to vote at any meeting consent, either by (i) a writing on the records of the meeting or filed with the Secretary; or (ii) presence at such meeting and oral consent entered on the minutes; or (iii) taking part in the deliberations at such meeting without objection; the doings of such meeting shall be as valid as if had at a meeting regularly called and noticed. At such meeting any business may be transacted which is not excepted from the written consent or to the consideration of which no objection for want of notice is made at the time.
If a meeting be irregular for want of notice or of such consent, provided a quorum was present at such meeting, the proceedings of the meeting may be ratified and approved and rendered likewise valid and the irregularity or defect therein waived by a writing signed by all directors having the right to vote at such meeting.
4.6 Notice of Directors’ Meetings. Written notice of any special meeting of the Board of Directors or any committee thereof shall be given as follows:
(A) By mail to each director at his business address at least three (3) days prior to the meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail, so addressed, with postage thereon prepaid;
(B) By personal delivery or telegram at least twenty-four (24) hours prior to the meeting to the business address of each director, or in the event such notice is given on a Saturday, Sunday, or holiday, to the residence address of each director. If notice be given by telegram, such notice shall be deemed to be delivered when the telegram is delivered to the telegraph company; or
(C) By telecopy providing proof of transmission to the intended recipient.
Such notice shall state the place, date, and hour of the meeting and the business proposed to be transacted at the meeting.
4.7 Waiver of Notice. Whenever any notice whatever is required to be given to directors, a waiver thereof in writing, signed by the person or persons entitled to the notice, whether before or after the time stated therein, shall be deemed equivalent thereto.
4.8 Quorum. Unless the Articles of Incorporation or these Bylaws provide for a different proportion, a majority of the number of directors then holding office or, in the case of a committee, then constituting such committee, at a meeting duly assembled is necessary to constitute a quorum for the transaction of business, but a smaller number may adjourn from time to time without further notice, until a quorum is secured.
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4.9 Organization. The Board of Directors shall elect a chairman from among the directors to preside at each meeting of the Board of Directors and committee thereof. The Board of Directors or committee shall elect a secretary to record the discussions and resolutions of each meeting.
4.10 Manner of Acting. The act of directors holding a majority of the voting power of the Board of Directors or, in the case of a committee of the Board of Directors, present at a meeting at which a quorum is present, shall be the act of the Board of Directors, unless the act of a greater number is required by the Nevada Business Corporation Act or by the Articles of Incorporation or these Bylaws.
4.11 Participation by Telephone or Similar Method. Unless otherwise restricted by the Articles of Incorporation or these Bylaws, members of the Board of Directors or any committee designated by the Board of Directors may participate in a meeting of such board or committee by means of a telephone conference or similar method of communication by which all persons participating in the meeting can hear and converse with each other. Participation in a meeting pursuant to this section constitutes presence in person at such meeting. Each person participating in the meeting shall sign the minutes thereof. The minutes may be signed in counterparts.
4.12 Consent of Directors in Lieu of Meeting. Unless otherwise restricted by the Articles of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if, before or after the action, a written consent thereto is signed by all the members of the board or such committee. Such written consent shall be filed with the minutes of proceedings of the board or committee.
4.13 Vacancies.
(A) Any vacancy occurring in the Board of Directors may be filled by the affirmative vote of a majority of the remaining directors, though less than a quorum of the Board of Directors. A director elected to fill a vacancy shall be elected for the unexpired term of his predecessor in office, and shall hold such office until his successor is duly elected and shall qualify. Any directorship to be filled by reason of an increase in the number of directors shall be filled by the affirmative vote of a majority of the directors then in office, though less than a quorum, or by an election at an annual meeting, or at a special meeting of stockholders called for that purpose. A director chosen to fill a position resulting from an increase in the number of directors shall hold office only until the next election of directors by the stockholders, and until his successor shall be elected and shall qualify.
(B) Unless otherwise provided in the Articles of Incorporation, when one or more directors give notice of his or their resignation to the board, effective at a future date, the board may fill the vacancy or vacancies to take effect when the resignation or resignations become effective, each director so appointed to hold office during the remainder of the term of office of the resigning director or directors.
4.14 Compensation. By resolution of the Board of Directors and irrespective of any personal interest of any of the members, each director may be paid his expenses, if any, of attendance at each meeting of the Board of Directors, and may be paid a stated salary as director or a fixed sum for attendance at each meeting of the Board of Directors or both. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefore.
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4.15 Removal of Directors. Any director may be removed from office by the vote of stockholders representing not less than two-thirds of the voting power of the issued and outstanding stock entitled to voting power, except that the Articles of Incorporation may require the concurrence of a larger percentage of the stock entitled to voting power in order to remove a director.
4.16 Resignations. A director of the corporation may resign at any time by giving written notice to the Board of Directors, President or Secretary of the corporation. The resignation shall take effect upon the date of receipt of such notice, or at such later time specified therein. The acceptance of such resignation shall not be necessary to make it effective, unless the resignation requires such acceptance to be effective.
ARTICLE V
OFFICERS
5.1 Number. The officers of the corporation shall be a President, a Secretary, and a Treasurer, all of whom shall be elected by the Board of Directors. Such other officers and assistant officers as may be deemed necessary may be elected or appointed by the Board of Directors. Any two or more offices may be held by the same person.
5.2 Election and Term of Office. The officers of the corporation to be elected by the Board of Directors shall be elected annually by the Board of Directors at the first meeting of the Board of Directors held after the annual meeting of the stockholders. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as practicable. Each officer shall hold office until his successor shall have been duly elected and shall have qualified or until his death or until he shall resign or shall have been removed in the manner hereinafter provided.
5.3 Removal. Any officer or agent may be removed by the Board of Directors, for cause or without cause, whenever in its judgment the best interests of the corporation will be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Election or appointment of an officer or agent shall not of itself create contract rights.
5.4 Vacancies. A vacancy in any office because of death, resignation, removal, disqualification, or otherwise, may be filled by the Board of Directors for the unexpired portion of the term. In the event of absence or inability of any officer to act, the Board of Directors may delegate the powers or duties of such officer to any other officer, director, or person whom it may select.
5.5 Powers. The officers of the corporation shall exercise and perform the respective powers, duties and functions as are stated below, and as may be assigned to them by the Board of Directors.
(A) President. The President shall be the chief executive officer of the corporation and, subject to the control of the Board of Directors, shall have general supervision, direction and control over all of the business and affairs of the corporation. The President shall, when present, and in the absence of a Chairman of the Board, preside at all meetings of the stockholders and of the Board of Directors. The President may sign, with the Secretary or any other proper officer of the corporation authorized by the Board of Directors, certificates for shares of the corporation and deeds, mortgages, bonds, contracts, or other instruments that the Board of Directors has authorized to be executed, except in cases where the signing and execution thereof shall be expressly delegated by the Board of Directors or by these Bylaws to some other officer or agent of the corporation, or shall be required by law to be otherwise signed or executed; and in general shall perform all duties incident to the office of President and such other duties as may be prescribed by the Board of Directors from time to time.
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(B) Vice President. If elected or appointed by the Board of Directors, the Vice President (or in the event there is more than one Vice President, the Vice Presidents in the order designated by the Board of Directors, or in the absence of any designation, then in the order of their election) shall, in the absence of the President or in the event of his death, inability or refusal to act, perform all duties of the President, and when so acting, shall have all the powers of and be subject to all the restrictions upon the President. Any Vice President may sign, with the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary, certificates for shares of the corporation; and shall perform such other duties as from time to time may be assigned to him by the President or by the Board of Directors.
(C) Secretary. The Secretary shall: keep the minutes of the proceedings of the stockholders and of the Board of Directors in one or more books provided for that purpose; see that all notices are duly given in accordance with the provisions of these Bylaws or as required by law; be custodian of the corporate records and of the seal of the corporation and see that the seal of the corporation is affixed to all documents the execution of which on behalf of the corporation under its seal is duly authorized; keep a register of the post office address of each stockholder which shall be furnished to the Secretary by such stockholder; sign with the Chairman or Vice Chairman of the Board of Directors, or the President, or a Vice President, certificates for shares of the corporation, the issuance of which shall have been authorized by resolution of the Board of Directors; have general charge of the stock transfer books of the corporation; and in general perform all duties incident to the office of Secretary and such other duties as from time to time may be assigned to him by the President or by the Board of Directors.
(D) Assistant Secretary. The Assistant Secretary, when authorized by the Board of Directors, may sign with the Chairman or Vice Chairman of the Board of Directors or the President or a Vice President certificates for shares of the corporation the issuance of which shall have been authorized by a resolution of the Board of Directors. An Assistant Secretary, at the request of the Secretary, or in the absence or disability of the Secretary, also may perform all of the duties of the Secretary. An Assistant Secretary shall perform such other duties as may be assigned to him by the President or by the Secretary.
(E) Treasurer. The Treasurer shall: have charge and custody of and be responsible for all funds and securities of the corporation; receive and give receipts for moneys due and payable to the corporation from any source whatsoever and deposit all such moneys in the name of the corporation in such banks, trust companies or other depositories as shall be selected in accordance with the provisions of these Bylaws; and keep accurate books of accounts of the corporation's transactions, which shall be the property of the corporation, and shall render financial reports and statements of condition of the corporation when so requested by the Board of Directors or President. The Treasurer shall perform all duties commonly incident to his office and such other duties as may from time to time be assigned to him by the President or the Board of Directors. In the absence or disability of the President and Vice President or Vice Presidents, the Treasurer shall perform the duties of the President.
(F) Assistant Treasurer. An Assistant Treasurer may, at the request of the Treasurer, or in the absence or disability of the Treasurer, perform all of the duties of the Treasurer. He shall perform such other duties as may be assigned to him by the President or by the Treasurer.
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5.6 Compensation. All officers of the corporation may receive salaries or other compensation if so ordered and fixed by the Board of Directors. The Board shall have authority to fix salaries and other compensation in advance for stated periods or render the same retroactive as the Board may deem advisable. No officer shall be prevented from receiving such salary by reason of the fact that he is also a director of the corporation.
5.7 Bonds. If the Board of Directors by resolution shall so require, any officer or agent of the corporation shall give bond to the corporation in such amount and with such surety as the Board of Directors may deem sufficient, conditioned upon the faithful performance of their respective duties and offices.
ARTICLE VI
PROVISIONS APPLICABLE TO OFFICERS AND DIRECTORS GENERALLY
6.1 Exercise of Powers and Performance of Duties by Directors and Officers. Directors and officers of the corporation shall exercise their powers, including, in the case of directors, powers as members of any committee of the board upon which they may serve, in good faith, in a manner he reasonably believes to be in the best interests of the corporation, and with such care as an ordinarily prudent person in a like position would use under similar circumstances. In performing their respective duties, directors and officers shall be entitled to rely on information, opinions, reports books of account or statements, including financial statements and other financial data, in each case prepared or presented by persons and groups listed in subsections (A), (B) and (C) of this section; but a director or officer shall not be entitled to rely on such information if he has knowledge concerning the matter in question that would cause such reliance to be unwarranted. Those persons and groups on whose information, opinions, reports, and statements a director or officer is entitled to rely upon are:
(A) One or more officers or employees of the corporation whom the director or officer reasonably believes to be reliable and competent in the matters prepared or presented;
(B) Counsel, public accountants, or other persons as to matters which the director or officer reasonably believes to be within such persons' professional or expert competence; or
(C) A committee of the board upon which he does not serve, duly established in accordance with the provisions of the Articles of Incorporation or these Bylaws, as to matters within its designated authority and matters on which committee the director or officer reasonably believes to merit confidence.
6.2 Restrictions on Transactions Involving Interested Directors or Officers; Compensation of Directors.
(A) No contract or other transaction between the corporation and one or more of its directors or officers, or between the corporation and any corporation, firm, or association in which one or more of its directors or officers are directors or officers or are financially interested, is void or voidable solely for this reason or solely because any such director or officer is present at the meeting of the Board of Directors or a committee thereof that authorizes or approves the contract or transaction, or because the vote or votes of common or interested directors are counted for that purpose, if the circumstances specified in any of the following paragraphs exist:
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(i) The fact of the common directorship, office or financial interest is disclosed or known to the Board of Directors or committee and noted in the minutes, and the board or committee authorizes, approves, or ratifies the contract or transaction in good faith by a vote sufficient for the purpose without counting the vote or votes of the common or interested director or directors.
(ii) The fact of the common directorship, office or financial interest is disclosed or known to the stockholders, and they approve or ratify the contract or transaction in good faith by a majority vote of stockholders holding a majority of the voting power. The votes of the common or interested directors or officers must be counted in any such vote of stockholders.
(iii) The fact of the common directorship, office or financial interest is not disclosed or known to the director or officer at the time the transaction is brought before the Board of Directors of the corporation for action.
(iv) The contract or transaction is fair as to the corporation at the time it is authorized or approved.
(B) Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or a committee thereof that authorizes, approves, or ratifies a contract or transaction, and if the votes of the common or interested directors are not counted at the meeting, then a majority of the disinterested directors may authorize, approve, or ratify a contract or transaction.
6.3 Indemnification of Officers, Directors, Employees and Agents; Advancement of Expenses.
(A) The corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative, except an action by or in the right of the corporation, by reason of the fact that he is or was a director, officer, employee, or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, or other enterprise, against expenses, including attorneys' fees, judgments, fines, and amounts paid in settlement actually and reasonably incurred by him in connection with the action, suit, or proceeding if he acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, does not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and that, with respect to any criminal action or proceeding, he had reasonable cause to believe that his conduct was unlawful.
(B) The corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending, or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee, or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise against expenses, including amounts paid in settlement and attorneys' fees actually and reasonably incurred by him in connection with the defense or settlement of the action or suit if he acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation. Indemnification may not be made for any claim, issue, or matter as to which such a person has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable to the corporation or for amounts paid in settlement to the corporation, unless and only to the extent that the court in which the action or suit was brought or other court of competent jurisdiction determines upon application that in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper.
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(C) To the extent that a director, officer, employee, or agent of the corporation has been successful on the merits or otherwise in defense of any action, suit, or proceeding referred to in subsections (A) and (B), or in defense of any claim, issue, or matter therein, he must be indemnified by the corporation against expenses, including attorneys' fees, actually and reasonably incurred by him in connection with the defense.
(D) Any indemnification under subsections (A) and (B), unless ordered by a court or advanced pursuant to subsection (E), must be made by the corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee, or agent is proper in the circumstances. The determination must be made:
(i) By the stockholders;
(ii) By the Board of Directors by majority vote of a quorum consisting of directors who were not parties to the act, suit or proceeding;
(iii) If a majority vote of a quorum consisting of directors who were not parties to the act, suit or proceeding so orders, by independent legal counsel in a written opinion; or
(iv) If a quorum consisting of directors who were not parties to the act, suit or proceeding cannot be obtained, by independent legal counsel in a written opinion.
(E) The Articles of Incorporation, these Bylaws, or an agreement made by the corporation may provide that the expenses of officers and directors incurred in defending a civil or criminal action, suit, or proceeding must be paid by the corporation as they are incurred and in advance of the final disposition of the action, suit, or proceeding, upon receipt of an undertaking by or on behalf of the director or officer to repay the amount if it is ultimately determined by a court of competent jurisdiction that he is not entitled to be indemnified by the corporation. The provisions of this subsection do not affect any rights to advancement of expenses to which corporate personnel other than directors or officers may be entitled under any contract or otherwise by law.
(F) The indemnification and advancement of expenses authorized in or ordered by a court pursuant to this section:
(i) Does not exclude any other rights to which a person seeking indemnification or advancement of expenses may be entitled under the Articles of Incorporation or any bylaw, agreement, vote of stockholders or disinterested directors, or otherwise, for either an action in his official capacity or an action in another capacity while holding his office, except that indemnification, unless ordered by a court pursuant to subsection (B) or for the advancement of expenses made pursuant to subsection (E), may not be made to or on behalf of any director or officer if a final adjudication establishes that his acts or omissions involved intentional misconduct, fraud, or a knowing violation of the law and was material to the cause of action.
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(ii) Continues for a person who has ceased to be a director, officer, employee or agent and inures to the benefit of the heirs, executors, and administrators of such a person.
ARTICLE VII
DIVIDENDS; FINANCE
7.1 Dividends. The Board of Directors from time to time may declare and the corporation may pay dividends on its outstanding shares upon the terms and conditions and in the manner provided by the Nevada Business Corporation Act and the Articles of Incorporation.
7.2 Reserve Funds. The Board of Directors, in its discretion, may set aside from time to time, out of the net profits or earned surplus of the corporation, such sum or sums as it deems expedient as a reserve fund to meet contingencies, for equalizing dividends, for maintaining any property of the corporation, and for any other purpose.
7.3 Banking. The moneys of the corporation shall be deposited in the name of the corporation in such bank or banks or trust company or trust companies, as the Board of Directors shall designate, and may be drawn out only on checks signed in the name of the corporation by such person or persons as the Board of Directors, by appropriate resolution, may direct. Notes and commercial paper, when authorized by the Board, shall be signed in the name of the corporation by such officer or officers or agent or agents as shall be authorized from time to time.
ARTICLE VIII
CONTRACTS, LOANS, AND CHECKS
8.1 Execution of Contracts. Except as otherwise provided by statute or by these Bylaws, the Board of Directors may authorize any officer or agent of the corporation to enter into any contract, or execute and deliver any instrument in the name of, and on behalf of the corporation. Such authority may be general or confined to specific instances. Unless so authorized, no officer, agent, or employee shall have any power to bind the corporation for any purpose, except as may be necessary to enable the corporation to carry on its normal and ordinary course of business.
8.2 Loans. No loans shall be contracted on behalf of the corporation and no negotiable paper or other evidence of indebtedness shall be issued in its name unless authorized by the Board of Directors. When so authorized, any officer or agent of the corporation may effect loans and advances at any time for the corporation from any bank, trust company, or institution, firm, corporation, or individual. An agent so authorized may make and deliver promissory notes or other evidence of indebtedness of the corporation and may mortgage, pledge, hypothecate, or transfer any real or personal property held by the corporation as security for the payment of such loans. Such authority, in the Board of Directors' discretion, may be general or confined to specific instances.
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8.3 Checks. Checks, notes, drafts, and demands for money or other evidence of indebtedness issued in the name of the corporation shall be signed by such person or persons as designated by the Board of Directors and in the manner prescribed by the Board of Directors.
8.4 Deposits. All funds of the corporation not otherwise employed shall be deposited from time to time to the credit of the corporation in such banks, trust companies or other depositories as the Board of Directors may select.
ARTICLE IX
FISCAL YEAR
The fiscal year of the corporation shall be the year adopted by resolution of the Board of Directors.
ARTICLE X
CORPORATE SEAL
The Board of Directors may provide a corporate seal which shall be circular in form and shall have inscribed thereon the name of the corporation and the state of incorporation and the words "CORPORATE SEAL."
ARTICLE XI
AMENDMENTS
Any Article or provision of these Bylaws may be altered, amended or repealed, and new Bylaws may be adopted by a majority of the directors present at any meeting of the Board of Directors of the corporation at which a quorum is present.
ARTICLE XII
COMMITTEES
12.1 Appointment. The Board of Directors by resolution adopted by a majority of the full Board, may designate one or more committees, which, to the extent provided in the resolution or resolutions or in these Bylaws, have and may exercise the powers of the Board of Directors in the management of the business and affairs of the corporation, and may have power to authorize the seal of the corporation to be affixed to all papers on which the corporation desires to place a seal. The designation of such committee and the delegation thereto of authority shall not operate to relieve the Board of Directors, or any member thereof, of any responsibility imposed by law.
12.2 Name. The committee or committees must have such name or names as may be stated in these Bylaws or as may be determined from time to time by resolution adopted by the Board of Directors.
12.3 Membership. Each committee must include at least one director. Unless the Articles of Incorporation or these Bylaws provide otherwise, the board of directors may appoint natural persons who are not directors to serve on committees.
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12.4 Procedure. A committee shall elect a presiding officer from its members and may fix its own rules of procedure which shall not be inconsistent with these Bylaws. It shall keep regular minutes of its proceedings and report the same to the Board of Directors for its information at the meeting thereof held next after the proceedings shall have been taken.
12.5 Meetings. Regular meetings of a committee may be held without notice at such time and places as the committee may fix from time to time by resolution. Provisions relating to the call of special meetings, notice requirements for special meetings, waiver of notice, quorum requirements relating to meetings, and method of taking action by a committee, are provided in Article IV hereof.
12.6 Vacancies. Any vacancy in a committee may be filled by a resolution adopted by a majority of the full Board of Directors.
12.7 Resignations and Removal. Any member of a committee may be removed at any time with or without cause by resolution adopted by a majority of the full Board of Directors. Any member of a committee may resign from such committee at any time by giving written notice to the President or Secretary of the corporation, and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.
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CERTIFICATE
I hereby certify that the foregoing Bylaws, consisting of 20 pages, including this page, constitute the Bylaws of Wadena Corp. approved by the Board of Directors of the corporation effective as of January 22, 2011.
_______________________________________
Mr. Rodney McLellan, President and Secretary
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Exhibit 10.1
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered this ____ day of January 2022 (the “Effective Date”) between Fourth Wave Energy, Inc., a Nevada corporation whose principal place of business is _____________________________ (the “Corporation”) and _______________, an individual whose address is ___________________________ (the “Executive”).
RECITALS
WHEREAS, the Executive served as an executive officer of EdgeMode, a Wyoming corporation (“Edge”), an entity acquired by the Corporation pursuant to the terms and conditions of that certain Agreement and Plan of Merger and Reorganization dated December 2, 2021 by and among the Corporation, Edge and FWAV Acquisition Corp. (the “Merger Agreement”).
WHEREAS, pursuant to the term of the Merger Agreement, the Executive was appointed an executive officer of the Corporation.
WHEREAS, the Company desires to employ the Executive and the Executive desires to be employed by the Company pursuant to the terms of this Agreement.
WHEREAS, the Executive, by virtue of the Executive's employment with the Corporation, has and will become familiar with and possessed with the manner, methods, trade secrets and other confidential information pertaining to the Corporation's business, including the Corporation's client base.
NOW, THEREFORE, in consideration of the mutual agreements herein made, the Corporation and the Executive do hereby agree as follows:
1. Recitals. The above recitals are true, correct, and are herein incorporated by reference.
2. Employment. The Corporation hereby employs the Executive, and the Executive hereby accepts employment, upon the terms and conditions hereinafter set forth.
3. Authority and Power During Employment Period.
(a) Duties and Responsibilities. During the term of this Agreement, the Executive will serve as ___________ Executive Officer and shall have general executive operating supervision over the property, business and affairs of the Corporation, its subsidiaries and divisions, subject to the guidelines and direction of the Board of Directors of the Corporation.
(b) Time Devoted. Throughout the term of the Agreement, the Executive shall devote substantially of the Executive's business time and attention to the business and affairs of the Corporation consistent with the Executive's senior executive position with the Corporation, except for reasonable vacations and except for illness or incapacity, but nothing in the Agreement shall preclude the Executive from engaging in personal business, including as a member of the Board of Directors of affiliated companies, charitable and community affairs, provided that such activities do not interfere with the regular performance of the Executive's duties and responsibilities under this Agreement.
4. Term. The Term of employment hereunder will commence on the Effective Date and end on the third (3rd) anniversary of the Effective Date and may be extended for additional one (1) year periods (each a “Renewal Term”) by written consent of the Corporation and the Executive at least sixty (60) days before the expiration of the Term or the Renewal Term, as the case may be, unless this Agreement shall have been terminated pursuant to Section 6 of this Agreement.
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5. Compensation and Benefits.
(a) Salary. The Executive shall be paid a base salary (“Base Salary”), payable in accordance with the Corporation's policies from time to time for senior executives, at an annual rate of Six Hundred Thousand Dollars ($600,000).
(b) Stock Option. The Executive shall also receive a five (5) year non-qualified Stock Option to purchase up to ________________ shares of the Company’s common stock (the “Common Stock”) at an exercise price of $______ per share (the “Stock Option”), vesting on the Effective Date, the form of Stock Option attached hereto.
(c) Discretionary Bonus. In addition to the Base Salary and Stock Option, the Executive shall be entitled to such bonus compensation (in the form of cash, stock options, capital stock or any combination thereof) as the Board of Directors may determine from time to time in its sole discretion.
(d) Executive Benefits. The Executive shall be entitled to participate in all benefit programs of the Corporation currently existing or hereafter made available to executive and/or salaried employees including, but not limited to, stock option plans, pension and other retirement plans, group life insurance, hospitalization, surgical and major medical coverage, sick leave, salary continuation, vacation and holidays, long-term disability, and other fringe benefits.
(e) Vacation. During each fiscal year of the Corporation, the Executive shall be entitled to such amount of vacation consistent with the Executive's position and length of service to the Corporation.
(f) Business Expense Reimbursement. During the Term of employment, the Executive shall be entitled to receive proper reimbursement for all reasonable, out of-pocket expenses incurred by the Executive (in accordance with the policies and procedures established by the Corporation) in performing services hereunder, provided the Executive properly accounts therefor.
6. Termination.
(a) Death. This Agreement will terminate upon the death of the Executive; however, the Executive's Base Salary shall be paid to the Executive's designated beneficiary, or, in the absence of such designation, to the estate or other legal representative of the Executive, for a period of one (1) year after the date of death at the annual rate in effect immediately prior to his death in addition to any Performance Bonus which shall have been earned at the time of the death of the Executive. Other death benefits will be determined in accordance with the terms of the Corporation's benefit programs and plans.
(b) Disability.
(1) The Executive’s employment will terminate in the event of his disability, upon the first (1st) day of the month following the determination of disability as provided below. Following such a termination, the Executive shall be entitled to compensation in accordance with the Corporation's disability compensation practice for senior executives, including any separate arrangement or policy covering the Executive, but in all events the Executive shall continue to receive his Base Salary, at the annual rate in effect immediately prior to the commencement of disability, for one (1) year after the date of termination. Any amounts provided for in this Section 6(b) shall not be offset by other long-term disability benefits provided to the Executive by the Corporation or Social Security.
(2) For the purposes of this Agreement, “Disability” shall be deemed to have occurred if (A) the Executive is unable, by reason of a physical or mental condition, to perform his duties under this Agreement for an aggregate of one hundred eighty (180) days in any 12-month period or (B) the Executive has a guardian of the person or estate appointed by a court of competent jurisdiction.
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Anything herein to the contrary notwithstanding, if, following a termination of employment due to disability, the Executive becomes re-employed, whether as an executive or a consultant, any compensation, annual incentive payments or other benefits earned by the Executive from such employment shall be offset against any compensation continuation due to the Executive hereunder.
(c) Termination by the Corporation For Cause.
(1) Nothing herein shall prevent the Corporation from terminating Executive for Cause, as hereinafter defined. The Executive shall continue to receive compensation only for the period ending with the date of such termination as provided in this Section 6(c). Any rights and benefits the Executive may have in respect of any other compensation shall be determined in accordance with the terms of such other compensation arrangements or such plans or programs.
(2) “Cause” shall mean: (A) committing or participating in an injurious act of fraud, gross neglect, misrepresentation, embezzlement or dishonesty against the Corporation; (B) committing or participating in any other injurious act or omission wantonly, willfully, recklessly or in a manner which was grossly negligent against the Corporation; (C) engaging in a criminal enterprise involving moral turpitude, financial or securities fraud; (D) conviction for a felony under the laws of the United States or any state thereof; (E) material failure to follow the directives of the Corporation’s Board of Directors; or (F) any assignment of this Agreement in violation of Section 14 of this Agreement.
(3) Notwithstanding anything else contained in this Agreement, this Agreement will not be deemed to have been terminated for Cause unless and until there shall have been delivered to the Executive a notice of termination stating that the Executive committed one of the types of conduct set forth in Section 6(c)(2) of this Agreement and specifying the particulars thereof and the Executive shall be given a fifteen (15) day period to cure such conduct set forth in Section 6(c)(2).
(d) Termination by the Corporation Other Than For Cause.
(1) The foregoing notwithstanding, the Corporation may terminate the Executive's employment for whatever reason it deems appropriate; provided, however, that in the event such termination is not based on Cause, as provided in Section 6(c) above, the Corporation may terminate this Agreement upon giving the Executive thirty (30) days' prior written notice. During such thirty (30) day period, the Executive shall continue to perform the Executive's duties pursuant to this Agreement. Notwithstanding any such termination, the Corporation shall continue to pay to the Executive the Base Salary and Executive Benefits he would be entitled to receive under this Agreement for the lesser of: (i) the balance of the Term of this Agreement or (ii) twelve (12) months from the date of termination, together with any Performance Bonus which may have been earned as of the date of termination.
(2) In the event that the Executive's employment with the Corporation is terminated pursuant to this Section 6(d), Section 6(f) or Section 7(a) of this Agreement and all references thereto shall be voidable as to the Executive and the Corporation.
(e) Voluntary Termination. If the Executive terminates the Executive's employment on the Executive's own volition (except as provided in Section 6(f) prior to the expiration of the Term of this Agreement, including any renewals thereof, such termination shall constitute a voluntary termination and in such event the Executive shall be limited to the same rights and benefits as provided in connection with a termination for Cause as provided in Section 6(c).
(f) Constructive Termination of Employment. A termination by the Corporation without Cause under Section 6(d) shall be deemed to have occurred upon the occurrence of one or more of the following events without the express written consent of the Executive:
(1) a material breach of the Agreement by the Corporation; or
(2) failure by a successor company to assume the obligations under the Agreement.
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Anything herein to the contrary notwithstanding, the Executive shall give written notice to the Board of Directors of the Corporation that the Executive believes an event has occurred which would result in a Constructive Termination of the Executive's employment under this Section 6(f), which written notice shall specify the particular act or acts, on the basis of which the Executive intends to so terminate the Executive's employment, and the Corporation shall then be given the opportunity, within thirty (30) days of its receipt of such notice, to cure said event; provided, however, there shall be no period permitted to cure a second occurrence of the same event and in no event will there be any period to cure following the occurrence of two events described in this Section 6(f).
7. Covenant Not To Compete and Non-Disclosure of Information.
(a) Covenant Not To Compete. The Executive acknowledges and recognizes the highly competitive nature of the Corporation's Business and the goodwill, continued patronage, and the names and addresses of the Corporation's Clients (as hereinafter defined) constitute a substantial asset of the Corporation having been acquired through considerable time, money and effort. Accordingly, in consideration of the execution of this Agreement, and as except as may specifically otherwise approved by the Corporation’s Board of Directors, the Executive agrees to the following:
(1) That during the Restricted Period (as hereinafter defined) and within the Restricted Area (as hereinafter defined), the Executive will not, individually or in conjunction with others, directly or indirectly, engage in any Business Activities (as hereinafter defined), whether as an officer, director, proprietor, employer, partner, independent contractor, investor (other than as a holder solely as an investment of less than one percent (1%) of the outstanding capital stock of a publicly traded corporation), consultant, advisor, agent or otherwise.
(2) That during the Restricted Period and within the Restricted Area, the Executive will not, directly or indirectly, compete with the Corporation by soliciting, inducing or influencing any of the Corporation's Clients which have a business relationship with the Corporation at the time during the Restricted Period to discontinue or reduce the extent of such relationship with the Corporation.
(3) That during the Restricted Period and within the Restricted Area, the Executive will not (A) directly or indirectly recruit, solicit or otherwise influence any employee or agent of the Corporation to discontinue such employment or agency relationship with the Corporation, or (B) employ or seek to employ, or cause or permit any business which competes directly or indirectly with the Business Activities of the Corporation (the “Competitive Business”) to employ or seek to employ for any Competitive Business any person who is then (or was at any time within two (2) years prior to the date Executive or the Competitive Business employs or seeks to employ such person) employed by the Corporation.
(b) Non-Disclosure of Information. The Executive acknowledges that the Corporation's trade secrets, private or secret processes, methods and ideas, as they exist from time to time, customer lists and information concerning the Corporation's sources, products, services, pricing, training methods, development, technical information, marketing activities and procedures, credit and financial data concerning the Corporation and/or the Corporation's Clients including, but not limited to, all original written, recorded, or graphic matters whatsoever, and any and all copies thereof, pertaining to: (i) business plans, joint venture agreements, licensing agreements, financial information, contracts, customers, products, specifications, plans, drawings, prototypes, processes, methods, research, development or other information relating to the business activities and operations of the Corporation and its affiliates; (ii) patents, patent applications, patent disclosures and inventions; (iii) trademarks, service marks, trade dress, trade names, URL's, designs, artwork, logos and corporate names and registrations and applications for registration thereof, together with all of the goodwill associated therewith; (iv) copyrights (registered or unregistered) and copyrightable works and registrations and applications for registration thereof; (v) mask works and registrations and applications for registration thereof; (vi) computer software, data, data bases and documentation thereof; (vii) trade secrets and other confidential information (including ideas, formulas, compositions, inventions (whether patentable or unpatentable and whether or not reduced to practice), know-how, manufacturing and production processes and techniques, research and development information, drawings, specifications, designs, plans, proposals, technical data, copyrightable works, financial and marketing plans and customer and supplier lists and information); (vii) other intellectual property rights; and (ix) copies and tangible embodiments thereof (in whatever form or medium) (collectively, the “Proprietary Information”) are valuable, special and unique assets of the Corporation, access to and knowledge of which are essential to the performance of the Executive hereunder. In light of the highly competitive nature of the industry in which the Corporation's business is conducted, the Executive agrees that all Proprietary Information, heretofore or in the future obtained by the Executive as a result of the Executive's association with the Corporation shall be considered confidential.
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In recognition of this fact, the Executive agrees that the Executive, during the Restricted Period, will not use or disclose any of such Proprietary Information for the Executive's own purposes or for the benefit of any person or other entity or organization (except the Corporation) under any circumstances unless such Proprietary Information has been publicly disclosed generally or, unless upon written advice of legal counsel reasonably satisfactory to the Corporation, the Executive is legally required to disclose such Proprietary Information. Documents (as hereinafter defined) prepared by the Executive or that come into the Executive's possession during the Executive's association with the Corporation are and remain the property of the Corporation, and when this Agreement terminates, such Documents shall be returned to the Corporation at the Corporation's principal place of business, as provided in the Notice provision (Section 10) of this Agreement.
(c) Documents. “Documents” shall mean all original written, recorded, or graphic matters whatsoever, and any and all copies thereof, including, but not limited to: papers; books; records; tangible things; correspondence; communications; telex messages; memoranda; work-papers; reports; affidavits; statements; summaries; analyses; evaluations; client records and information; agreements; agendas; advertisements; instructions; charges; manuals; brochures; publications; directories; industry lists; schedules; price lists; client lists; statistical records; training manuals; computer printouts; books of account, records and invoices reflecting business operations; all things similar to any of the foregoing however denominated. In all cases where originals are not available, the term “Documents” shall also mean identical copies of original documents or non-identical copies thereof.
(d) Corporation's Clients. The “Corporation's Clients” shall be deemed to be any persons, partnerships, corporations, professional associations or other organizations for or with whom the Corporation has performed Business Activities, including, but not limited to, suppliers or vendors with whom the Corporation has done or is endeavoring to do business.
(e) Restrictive Period. The “Restrictive Period” shall be deemed to be two (2) years following termination of this Agreement.
(f) Restricted Area. The Restricted Area shall be deemed to mean the ___________________.
(g) Business Activities. “Business Activities” shall be deemed to any business activities concerning owning, operating, managing, promoting or soliciting clients for the Corporation’s Business, and any additional activities which the Corporation or any of its affiliates may engage in during any portion of the twelve (12) months prior to the termination of Executive's employment.
(h) Covenants as Essential Elements of this Agreement. It is understood by and between the parties hereto that the foregoing covenants contained in Sections 7(a) and (b) are essential elements of this Agreement, and that but for the agreement by the Executive to comply with such covenants, the Corporation would not have agreed to enter into this Agreement. Such covenants by the Executive shall be construed to be agreements independent of any other provisions of this Agreement. The existence of any other claim or cause of action, whether predicated on any other provision in this Agreement, or otherwise, as a result of the relationship between the parties shall not constitute a defense to the enforcement of such covenants against the Executive. To the extent that the covenants contained in this Section 7 may later be deemed by a court to be too broad to be enforced with respect to their duration or with respect to any particular activity or geographic area, the court making such determination shall have the power to reduce the duration or scope of the provision, and to add or delete specific words or phrases to or from the provision. The provision as modified shall then be enforced.
(i) Survival After Termination of Agreement. Notwithstanding anything to the contrary contained in this Agreement, the covenants in Sections 7(a) and (b) shall survive the termination of this Agreement and the Executive's employment with the Corporation.
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(j) Remedies.
(1) The Executive acknowledges and agrees that the Corporation's remedy at law for a breach or threatened breach of any of the provisions of Section 7(a) or (b) herein would be inadequate and the breach shall be per se deemed as causing irreparable harm to the Corporation. In recognition of this fact, in the event of a breach by the Executive of any of the provisions of Section 7(a) or (b), the Executive agrees that, in addition to any remedy at law available to the Corporation, including, but not limited to monetary damages, all rights of the Executive to payment or otherwise under this Agreement and all amounts then or thereafter due to the Executive from the Corporation under this Agreement may be terminated and the Corporation, without posting any bond, shall be entitled to obtain, and the Executive agrees not to oppose the Corporation's request for equitable relief in the form of specific performance, temporary restraining order, temporary or permanent injunction or any other equitable remedy which may then be available to the Corporation.
(2) The Executive acknowledges that the granting of a temporary injunction, temporary restraining order or permanent injunction merely prohibiting the use of Proprietary Information would not be an adequate remedy upon breach or threatened breach of Section 7(a) or (b) and consequently agrees, upon proof of any such breach, to the granting of injunctive relief prohibiting any form of competition with the Corporation. Nothing herein contained shall be construed as prohibiting the Corporation from pursuing any other remedies available to it for such breach or threatened breach.
8. Indemnification. The Executive shall continue to be covered by the Articles of Incorporation and By-Laws of the Corporation with respect to matters occurring on or prior to the date of termination of the Executive's employment with the Corporation, subject to all the provisions of Nevada and Federal law, the Articles of Incorporation of the Corporation and the By-Laws of the Corporation then in effect. Such reasonable expenses, including attorneys' fees, that may be covered by these indemnification provisions shall be paid by the Corporation on a current basis in accordance with such provision, the Corporation's Articles of Organization, By-Laws and Nevada law. To the extent that any such payments by the Corporation pursuant to these provisions may be subject to repayment by the Executive pursuant to the provisions of the Corporation's Articles of Incorporation and/or By-Laws, or pursuant to Nevada or Federal law, such repayment shall be due and payable by the Executive to the Corporation within twelve (12) months after the termination of all proceedings, if any, which relate to such repayment and to the Corporation's affairs for the period prior to the date of termination of the Executive's employment with the Corporation and as to which Executive has been covered by such applicable provisions. Further, the Corporation agrees to maintain directors’ and officers’ indemnification and errors and omission insurance policies during all periods of Executive’s employment.
9. Withholding. Anything to the contrary notwithstanding, all payments required to be made by the Corporation hereunder to the Executive or the Executive's estate or beneficiaries shall be subject to the withholding of such amounts, if any, relating to tax and other payroll deductions as the Corporation may reasonably determine it should withhold pursuant to any applicable law or regulation. In lieu of withholding such amounts, the Corporation may accept other arrangements pursuant to which it is satisfied that such tax and other payroll obligations will be satisfied in a manner complying with applicable law or regulation.
10. Notices. Any notice required or permitted to be given under the terms of this Agreement shall be sufficient if in writing and if sent postage prepaid by registered or certified mail, return receipt requested; by overnight delivery; by courier; or by confirmed telecopy, in the case of the Executive to the Executive's last place of business or residence as shown on the records of the Corporation, or in the case of the Corporation to its principal office as set forth in the first paragraph of this Agreement, or at such other place as it may designate.
11. Waiver. Unless agreed in writing, the failure of either party, at any time, to require performance by the other of any provisions hereunder shall not affect its right thereafter to enforce the same, nor shall a waiver by either party of any breach of any provision hereof be taken or held to be a waiver of any other preceding or succeeding breach of any term or provision of this Agreement. No extension of time for the performance of any obligation or act shall be deemed to be an extension of time for the performance of any other obligation or act hereunder.
12. Completeness and Modification. This Agreement constitutes the entire understanding between the parties hereto superseding all prior and contemporaneous agreements or understandings among the parties hereto concerning the Agreement. This Agreement may be amended, modified, superseded or canceled, and any of the terms, covenants, representations, warranties or conditions hereof may be waived, only by a written instrument executed by the parties or, in the case of a waiver, by the party to be charged.
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13. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which shall constitute but one agreement.
14. Binding Effect/Assignment. This Agreement shall be binding upon the parties hereto, their heirs, legal representatives, successors and assigns. This Agreement shall not be assignable by the Executive but shall be assignable by the Corporation in connection with the sale, transfer or other disposition of its business or to any of the Corporation's affiliates controlled by or under common control with the Corporation.
15. Governing Law. This Agreement shall become valid when executed and accepted by Corporation. The parties agree that it shall be deemed made and entered into in the State of Nevada and shall be governed and construed under and in accordance with the laws of the State of Nevada. Anything in this Agreement to the contrary notwithstanding, the Executive shall conduct the Executive's business in a lawful manner and faithfully comply with applicable laws or regulations of the state, city or other political subdivision in which the Executive is located.
16. Further Assurances. All parties hereto shall execute and deliver such other instruments and do such other acts as may be necessary to carry out the intent and purposes of this Agreement.
17. Headings. The headings of the sections are for convenience only and shall not control or affect the meaning or construction or limit the scope or intent of any of the provisions of this Agreement.
18. Survival. Any termination of this Agreement shall not, however, affect the ongoing provisions of this Agreement which shall survive such termination in accordance with their terms.
19. Severability. The invalidity or unenforceability, in whole or in part, of any covenant, promise or undertaking, or any section, subsection, paragraph, sentence, clause, phrase or word or of any provision of this Agreement shall not affect the validity or enforceability of the remaining portions thereof.
20. Arbitration. In the event of any dispute over the interpretation or operation of this Agreement, the parties agree to submit the dispute to arbitration in ______________________ County, State of _____________ pursuant to the Commercial Arbitration Rules of the American Arbitration Association and to accept the award of the arbitrators as final and binding. The successful party will be awarded reasonable attorneys' fees, expenses and costs.
21. Construction. This Agreement shall be construed within the fair meaning of each of its terms and not against the party drafting the document.
22. Role of Counsel. The Executive acknowledges his understanding that this Agreement was prepared at the request of the Corporation by its counsel, and that such firm did not represent the Executive in conjunction with this Agreement or any of the related transactions. The Executive, as further evidenced by his signature below, acknowledges that he has had the opportunity to obtain the advice of independent counsel of his choosing prior to his execution of this Agreement and that he has availed himself of this opportunity to the extent he deemed necessary and advisable.
THE EXECUTIVE ACKNOWLEDGES THAT THE EXECUTIVE HAS READ ALL OF THE TERMS OF THIS AGREEMENT, UNDERSTANDS THE AGREEMENT, AND AGREES TO ABIDE BY ITS TERMS AND CONDITIONS.
[SIGNATURE PAGE TO FOLLOW]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of date set forth in the first paragraph of this Agreement.
THE CORPORATION:
FOURTH WAVE ENERGY, INC.
By: _________________________
Name:
Its:
THE EXECUTIVE
_____________________________
Name:
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Exhibit 10.2
CONSULTING SERVICES AGREEMENT
This Consulting Services Agreement (the “Agreement”) is made as of January 31, 2022 (the “Effective Date”), by and between FOURTH WAVE ENERGY, INC., a Nevada corporation with an address at 350 North Orleans Street, Suite 9000n, Chicago, IL 60654 (the “Company”) and J. Jacob Isaacs, an individual with an address of 269 S. Beverly Drive, #460, Beverly Hills, CA 90212 (the “Consultant”) (the Company and Consultant together the “Parties” or individually a “Party”).
WHEREAS, the Company and the Consultant desire to enter into this Agreement, pursuant to which the Consultant will provide consulting services as a Consultant to the Company, subject to the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the mutual covenants and obligations contained herein, the Company and the Consultant, intending to be legally bound, hereby agree as follows:
A. Engagement
The Consultant shall provide the Services defined below in Section C herein for the Company, reporting to its Chief Executive Officer and Board of Directors (the “Engagement”). In this capacity, the Consultant agrees to devote his best efforts, energies and skill to the full discharge of his duties and responsibilities.
B. Term
Services under this Agreement will commence on the Effective Date and shall continue for a period of one-year (the “Term”); unless earlier terminated in accordance with the provisions of Section H below.
C. Services to be Performed
1. During the Term of this Agreement, the Consultant shall serve the Company in the capacity of a consultant and shall provide general corporate services, post-merger transitional services, audit related services and investor relations services (collectively the “Services”).
2. The Consultant will use the highest degree of skill and expertise to professionally and ethically accomplish the Services within the Term of this Agreement and to project a positive image of the Company, in accordance with the Company’s policies and procedures and applicable law.
D. Compensation for Services
1. Compensation for Services. During the Term of this Agreement the Consultant shall receive cash compensation at the rate of $11,500 per month payable monthly on each one-month anniversary of the Effective Date. The Consultant shall not be entitled to reimbursement for expenses incurred by Consultant in the performance of his duties unless he has received prior written approval from the Company. Consultant shall also receive a five (5) year non-qualified Stock Option to purchase up to 19,987,095 shares of the Company’s common stock (the “Common Stock”) at an exercise price of $0.40 per share (the “Stock Option”), vesting on the three-month anniversary of the Effective Date (the “Vesting Date”), the form of Stock Option attached hereto.
2. Consultant acknowledges that the foregoing provisions of this Section D constitute the sole and entire compensation payable to it under this Agreement and the Parties specifically agree that no compensation, benefits or other reimbursements of any other nature shall be paid or payable to Consultant as a result of the provision of Services hereunder.
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E. Confidentiality
1. Confidential Information. Consultant acknowledges that it may be necessary for the Company during the course of the Engagement, to disclose certain confidential and proprietary information (“Confidential Information”) to Consultant, in order for Consultant to perform the Services pursuant to this Agreement. Consultant shall not disclose or use, at any time either during or after the Term of this Agreement, for his own benefit or for the benefit of any third party, any Confidential Information without the Company’s prior written permission except to the extent necessary to perform the Services on the Company’s behalf. Confidential Information includes, without limitation:
| (a) | The written, printed, graphic or electronically recorded materials furnished by the Company for Consultant to use; |
| (b) | Any written or tangible information stamped “confidential,” “proprietary” or with a similar legend or any information that the Company makes reasonable efforts to maintain its secrecy; |
| (c) | Business, research and development, regulatory and marketing plans, objectives and/or strategies, financial information, corporate initiatives, contractual and business arrangements, customer lists, supplier lists, sales projections, product information, product launch plans, regulatory submissions, pricing information of the Company and its affiliates; |
| (d) | Information, data, test results, patent applications, methodologies, operating procedures, trade secrets, design formulas, know-how, techniques, analyses, technology, processes, protocols, specifications and instructions relating to the Company’s proprietary products, including safety data and reference standards, investigators brochures, documents and reports, computer programs and inventories, discoveries and improvements of any kind, sales projections, product information, pricing information of the Company and its affiliates; |
| (e) | Information, know-how, trade secrets, materials and tangible property belonging to customers and suppliers of the Company and other third parties who have disclosed such confidential and proprietary information to the Company about whom Consultant gained knowledge as a result of providing Services to the Company; |
| (f) | Any data, deliverables or other work product or information generated or developed by Consultant in connection with the performance of Services under this Agreement, including all Creative Materials; and |
| (g) | Any copies, extracts, notes, or summaries of any information described in clauses (a) through (f). |
Notwithstanding any of the foregoing, Confidential Information shall not include any information that:
| (a) | is or becomes available in the public domain through no fault of, or act or failure to act on the part of Consultant; |
| (b) | is rightfully in Consultant’s possession at the time of disclosure by the Company, as evidenced by Consultant’s written records maintained in the ordinary course of business; or |
| (c) | is obtained, after the Effective Date, by Consultant from any third party that is lawfully in possession of such Confidential Information and not in violation of any contractual or legal obligation with respect to such Confidential Information. |
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2. At any time upon request of the Company or upon Termination of this Agreement, Consultant shall promptly deliver to the Company: (i) all Confidential Information (and all copies thereof) and all other property (including but not limited to document files, computer disks and keys) furnished to Consultant, by the Company and all other materials prepared by Consultant, containing any Confidential Information; and (ii) a certification that all Confidential Information has been delivered to the Company.
3. Notwithstanding the return of Confidential Information or the Termination of this Agreement, Consultant, will continue to be bound by the obligations of confidentiality pursuant to this Section F. In addition to its other legal rights, the Company shall be entitled to temporary and permanent injunctive relief and specific performance to remedy any breach or attempted breach of this Section E of the Agreement.
F. Non-Solicitation; Non-Disparagement
1. Non-Solicitation. Consultant covenants and agrees that during the term of this Agreement, and for a two (2) year period immediately following the termination of this Agreement, regardless of the reason therefor, the Consultant shall not solicit, induce, aid or suggest to: (a) any employee to leave such employ, (b) any contractor, Consultant or other service provider to terminate such relationship, or (b) any customer, agency, vendor, or supplier of the Company to cease doing business with the Company.
2. Non-disparagement. The Consultant will not make any remarks or adverse statements, in any and all media (e.g., in writing, orally or on the internet via, among other things, blogs, message boards and social networks), about the Company or its affiliates that could reasonably be construed as disparaging or defamatory, or to cast the Company or any of its affiliates in a negative light, or harm the Company’s or any of its affiliates’ current or prospective business plans.
G. Exclusivity as to Services
During the term of this Agreement, Consultant shall not provide services to any direct or indirect competitor of the Company.
H. Termination
1. Generally. The Company may terminate this Agreement for whatever reason it deems appropriate and without cause ninety days from the Effective Date, subject to the provision of ten days prior written notice of termination. Upon such termination, Consultant will receive any unpaid compensation earned through such date of termination. This Agreement will also terminate automatically, each a “Termination Date:” (a) upon the expiration of the Term; (b) upon mutual agreement of the Parties; (c) in the event either Party becomes insolvent or a petition in bankruptcy is filed or any insolvency proceedings are instituted by or against either Party, or either Party liquidates its business; or (d) upon Consultant’s death.
2. By the Company for Cause. The Company may terminate this Agreement for Cause by action of its Board of Directors (the “Board”). For purposes of this Agreement, “Cause” shall mean: (a) Consultant’s conviction, guilty plea, plea of nolo contendre, or entering into any other plea admitting guilt of any felony; (b) the deliberate engaging by Consultant in any unethical acts or gross misconduct which is materially injurious to the Company, monetarily or otherwise, such as fraud or embezzlement; or (c) Consultant’s failure to materially observe or perform any of the terms or provisions of this Agreement, or the Services hereunder, which failure remains uncured following thirty (30) days’ prior written notice from the Company. Upon Termination of this Agreement for Cause, Consultant will cease performing Services and will no longer be authorized to perform any Services on behalf of the Company, except at the express request and approval of the Company’s Board of Directors of the Company. Upon termination for Cause, Consultant will receive any unpaid compensation earned through the Termination Date. In the event the Consultant is terminated for Cause prior to the Vesting Date, the Stock Option shall not vest and shall be be forfeited.
I. Indemnification
1. The Company agrees to defend, indemnify and hold Consultant harmless from and against any and all claims, liabilities, losses, damages, and expenses arising out of: (a) any breach by the Company of its warranties, representations, covenants and obligations outlined in this Agreement; and (b) the gross negligence or willful misconduct of the Company; and (c) the failure of the Company to comply with all legal requirements to the best of its knowledge at the time.
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2. Consultant agrees to defend, indemnify and hold the Company harmless from and against any and all claims, liabilities, losses, damages, and expenses arising out of: (a) any breach by Consultant of his warranties, representations, covenants and obligations outlined in this Agreement; (b) the gross negligence or willful misconduct of Consultant; and (c) the failure of Consultant to comply with all legal requirements to the best of his knowledge at the time.
3. The Parties further agree that they shall not, without the prior written consent of the other Party, settle, compromise or consent to the entry of any judgment in any pending or threatened claim, action, suit or proceeding in respect of which defense and/or indemnification may be sought hereunder unless such settlement, compromise or consent includes an unconditional release of the Party seeking defense and/or indemnity from all liability arising out of such claim, action, suit or proceeding.
4. The Party seeking defense or indemnification hereunder shall: (i) promptly notify the other Party of the matter for which defense or indemnification is sought; (ii) subject to the immediately preceding sentence of this paragraph, provide the other Party with sole control over the defense and/or settlement thereof, including but not limited to the selection of counsel; and (iii) at the request of the Party providing defense and/or indemnification, fully cooperate in the provision of full and complete information and reasonable assistance with respect to the defense of such matter.
J. Survival
The obligations of the Parties pursuant to Sections E, D, F and I shall survive the Termination of this Agreement, regardless of the reason for such Termination, along with any and all other provisions that expressly provide for survival of Termination.
K. Relationship of the Parties; Independent Contractor Status
The Parties agree that the relationship created by this Engagement is one of an independent contractor. The Parties further agree that Consultant, is not and shall not be considered an employee of the Company and is not and shall not be entitled to any of the rights and/or benefits that the Company provides for the Company's employees (including any employee pension, health, vacation pay, sick pay or other fringe benefits offered by the Company under plan or practice) by virtue of the Services being rendered by Consultant. Consultant acknowledges and agrees that the Company does not, and shall not, maintain or procure any workers’ compensation or unemployment compensation insurance for or on behalf of Consultant, and shall make no state temporary disability or family leave insurance payments on behalf of Consultant, and Consultant agrees that Consultant will not be entitled to these benefits in connection with performance of the Services under this Agreement. Consultant is responsible for all taxes, if any, imposed on it in connection with its performance of Services under this Agreement, including any federal, state and local income, sales, use, excise and other taxes or assessments thereon.
L. Binding Nature; Assignments
This Agreement shall be binding upon and inure to the benefit of the Parties hereto and their respective successors, representatives, administrators, heirs, executors and permitted assigns, except that the duties of Consultant are personal and shall not be assigned or subcontracted without the Company’s prior written consent and any purported assignment without such written consent shall be deemed void and unenforceable.
M. Entire Agreement; Amendments
This Agreement contains the entire understanding between the Parties with respect to its subject matter and supersedes all previous negotiations, agreements or understandings between the Parties, whether written or verbal. This Agreement may not be amended or modified, except in writing, executed by duly authorized representatives of the Parties hereto.
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N. Governing Law; Consent to Jurisdiction and Venue
This agreement shall be governed by and construed in accordance with the laws of the State of Nevada, without giving effect to principles of conflicts of laws. The Parties agree that any dispute concerning or arising under this Agreement shall be subject to the exclusive jurisdiction of the state and federal courts of New York, and each Party agrees to submit to the personal and exclusive jurisdiction and venue of such courts.
O. Notices
All notices required or permitted to be delivered under this Agreement shall be in writing and sent to the principal place of business of the Party to whom they are addressed. Notices to Consultant shall be delivered to the attention of Consultant. Notices to the Company shall be delivered to the attention of the Chief Executive Officer. All notices under this Agreement shall be deemed delivered only if sent by overnight mail or courier with return receipt, personal delivery or email (with confirmation of receipt).
P. Severability
If any provision of this Agreement is found to be invalid or unenforceable for any reason by a court of competent jurisdiction, that provision shall be stricken from this Agreement and that finding shall not invalidate any other terms of this Agreement, which terms shall remain in full force and effect according to the surviving terms of this Agreement. In such an event, the Parties shall negotiate with one another to agree on a provision which the Parties would have agreed if they had known of the defect when they signed this Agreement, in order to achieve the same commercial outcome and objectives of this Agreement that were intended upon its execution.
[Signature Page Follows]
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IN WITNESS WHEREOF, this Agreement has been duly executed by or on behalf of the Parties as of the Effective Date.
| FOURTH WAVE ENERGY, INC. | |||
| By: | /s/ J. Jacob Isaacs | ||
| Name: | J. Jacob Isaacs, an individual | ||
| Title: | |||
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Exhibit 10.3
STOCK OPTION GRANT
This STOCK OPTION GRANT, dated as of January _____, 2022 is delivered by Fourth Wave Energy, Inc., a Nevada corporation (the “Company”) to _______________________, an individual resident of ____________________ (the “Employee”).
RECITALS
| A. | The Board of Directors of the Company has decided to make a stock option grant to Employee as part of the consideration payable to Employee pursuant to an Employee Agreement between the Company and Employee dated even herewith (the “Employment Agreement”). |
| B. | The Board of the Company has approved the Employment Agreement and the grant of the options included in the Employment Agreement. |
NOW, THEREFORE, the parties to this Employment Agreement, intending to be legally bound hereby, agree as follows:
1. Grant of Option. Subject to the terms and conditions set forth in this Stock Option Grant, the Company hereby grants to the Employee an option (“Option”) to purchase _________ shares of common stock of the Company (“Option Shares”) at an exercise price of $____ per Share (the “Option Price”). The Option shall become exercisable according to Paragraph 2 below.
2. Exercisability of Option. The option shall be a non-qualified option and shall become vested and exercisable immediately.
3. Term of Option. The stated expiration date of the option shall be the five (5) year anniversary of the date hereof, subject to earlier termination as provided under the Employment Agreement.
4. Exercise Procedures.
(a) Subject to the provisions of Paragraphs 2 and 3 above, the Employee may exercise part or all of the exercisable Option by giving the Board written notice of intent to exercise in the manner provided in this Stock Option Grant, specifying the number of Shares as to which the Option is to be exercised. On the delivery date, the Employee shall pay the exercise price (i) in cash, or (ii) in the event the Company’s common Stock is publicly traded, with the approval of the Board, by delivering Shares of the Company which shall be valued at their Fair Market Value (as defined below) on the date of delivery, or (iii) with the approval of the Board, by a combination of (i) and (ii). Fair Market Value of a share of Common Stock as of a particular date (the “Determination Date”) shall mean: (i) If the Company's Common Stock is traded on an exchange or is quoted on the NASDAQ Global Market, NASDAQ Global Select Market, the NASDAQ Capital Market, the New York Stock Exchange or the American Stock Exchange, then the average of the closing sale prices of the Common Stock for the five (5) trading days immediately prior to (but not including) the Determination Date; or (ii) If the Company's Common Stock is not traded on an exchange or on the NASDAQ Global Market, NASDAQ Global Select Market, the NASDAQ Capital Market, the New York Stock Exchange or NYSE MKT, but is traded on the OTC Markets or in the over-the-counter market, then the average of the closing bid and ask prices reported for the five (5) trading days immediately prior to (but not including) the Determination Date.
(b) The obligation of the Company to deliver Shares upon exercise of the Option shall be subject to all applicable laws, rules, and regulations and such approvals by governmental agencies as may be deemed appropriate by the Board, including such actions as Company counsel shall deem necessary or appropriate to comply with relevant securities laws and regulations. The Company may require that the Employee represent that the Employee is purchasing Shares for the Employee’s own account and not with a view to or for sale in connection with any distribution of the Shares, or such other representation as the Board deems appropriate. The Company shall withhold amounts required to be withheld for any taxes, if applicable. Subject to Board approval, the Employee may elect to satisfy any income tax withholding obligation of the Company with respect to the Option by having Shares withheld up to an amount that does not exceed the minimum applicable withholding tax rate for federal (including FICA), state and local tax liabilities.
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5. Reservation of Common Stock. The Company hereby represents and warrants that there have been reserved, and the Company shall at all applicable times keep reserved until issued (if necessary) as contemplated by this Section 5, out of the authorized and unissued shares of Common Stock, sufficient shares to provide for the exercise of the rights of purchase represented by this Option. The Company agrees that all Option Shares issued upon due exercise of the Option shall be, at the time of delivery of the certificates for such Option Shares, duly authorized, validly issued, fully paid and non-assessable shares of Common Stock of the Company.
6. Adjustments. Subject and pursuant to the provisions of this Section 6, the Option Price and number of Option Shares subject to this Option shall be subject to adjustment from time to time as set forth hereinafter.
(a) If the Company shall, at any time or from time to time while this Option is outstanding, pay a dividend or make a distribution on its Common Stock in shares of Common Stock, subdivide its outstanding shares of Common Stock into a greater number of shares or combine its outstanding shares of Common Stock into a smaller number of shares or issue by reclassification of its outstanding shares of Common Stock any shares of its capital stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing corporation), then (i) the Option Price in effect immediately prior to the date on which such change shall become effective shall be adjusted by multiplying such Option Price by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such change and the denominator of which shall be the number of shares of Common Stock outstanding immediately after giving effect to such change and (ii) the number of Option Shares purchasable upon exercise of this Option shall be adjusted by multiplying the number of Option Shares purchasable upon exercise of this Option immediately prior to the date on which such change shall become effective by a fraction, the numerator of which is shall be the Option Price in effect immediately prior to the date on which such change shall become effective and the denominator of which shall be the Option Price in effect immediately after giving effect to such change, calculated in accordance with clause (i) above. Such adjustments shall be made successively whenever any event listed above shall occur.
(b) In case the Company shall do any of the following (each, a “Triggering Event”): (i) consolidate or merge with or into any other Person (as defined below) and the Company shall not be the continuing or surviving corporation of such consolidation or merger, or (ii) permit any other Person to consolidate with or merge into the Company and the Company shall be the continuing or surviving Person but, in connection with such consolidation or merger, any capital stock of the Company shall be changed into or exchanged for securities of any other Person or cash or any other property, or (iii) transfer all or substantially all of its properties or assets to any other Person, or (iv) effect a capital reorganization or reclassification of its capital stock, then, and in the case of each such Triggering Event, proper provision shall be made to the Option Price and the number of Option Shares that may be purchased upon exercise of this Option so that, upon the basis and the terms and in the manner provided in this Option, the Optionholder of this Option shall be entitled upon the exercise hereof at any time after the consummation of such Triggering Event, to the extent this Option is not exercised prior to such Triggering Event, to receive at the Option Price as adjusted to take into account the consummation of such Triggering Event, in lieu of the Common Stock issuable upon such exercise of this Option prior to such Triggering Event, the securities, cash and property to which such Optionholder would have been entitled upon the consummation of such Triggering Event if such Optionholder had exercised the rights represented by this Option immediately prior thereto (including the right of a shareholder to elect the type of consideration it will receive upon a Triggering Event), subject to adjustments (subsequent to such corporate action) as nearly equivalent as possible to the adjustments provided for elsewhere in this Section 6, and the Option Price shall be adjusted to equal the product of (A) the closing price of the common stock of the continuing or surviving corporation as a result of such Triggering Event as of the date immediately preceding the date of the consummation of such Triggering Event multiplied by (B) the quotient of (i) the Option Price divided by (ii) the Fair Market Value per share of Common Stock as of the date immediately preceding the issuance date of this Option. Immediately upon the occurrence of a Triggering Event, the Company shall notify the Optionholder in writing of such Triggering Event and provide the calculations in determining the number of Option Shares issuable upon exercise of the new Option and the adjusted Option Price. Upon the Optionholder’s request, the continuing or surviving corporation as a result of such Triggering Event shall issue to the Optionholder a new Option of like tenor evidencing the right to purchase the adjusted number of Option Shares and the adjusted Option Price pursuant to the terms and provisions of this Section 6(b). For purposes of this Section 6(b), “Person” means any individual, corporation, partnership, joint venture, limited liability company, association or any other entity.
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7. No Employment or Other Rights. The grant of the Option shall not confer upon the Employee any right to be retained by or in the employ or service of the Company and shall not interfere in any way with the right of the Company to terminate the Agreement. The right of the Company to terminate the Agreement at any time for any reason is specifically reserved, as provided in the Agreement.
8. No Shareholder Rights. Neither the Employee, nor any person entitled to exercise the Employee’s rights in the event of Employee’s death, shall have any of the rights and privileges of a shareholder with respect to the Shares subject to the Option, until certificates for Shares have been issued upon the exercise of the Option.
9. Assignment and Transfers. The rights and interests of the Employee under this Agreement may not be sold, assigned, encumbered or otherwise transferred except, in the event of the death of the Employee, by will or by the laws of descent and distribution. In the event of any attempt by the Employee to alienate, assign, pledge, hypothecate, or otherwise dispose of the Option or any right hereunder, except as provided for in this Agreement, or in the event of the levy or any attachment, execution or similar process upon the rights or interests hereby conferred, the Company may terminate the Option by notice to the Employee, and the Option and all rights hereunder shall thereupon become null and void.
10. Applicable Law. The validity, construction, interpretation and effect of this instrument shall be governed by and construed in accordance with the laws of the State of Nevada, without giving effect to the conflicts of laws provisions thereof.
11. Notice. Any notice to the Company provided for in this instrument shall be addressed to the Company in care of the Chief Financial Officer at the Company’s principal executive offices at 350 North Orleans Street, Suite 9000n, Chicago, IL 60654, and any notice to the Employee shall be addressed to Employee at ___________________________________________, or to such other address as the Employee may designate to the Company in writing. Any notice shall be delivered by hand, sent by telecopy or enclosed in a properly sealed envelope addressed as stated above, registered and deposited, postage prepaid, in a post office regularly maintained by the United States Postal Service.
IN WITNESS WHEREOF, the Company has caused its duly authorized officers to execute and attest this Agreement, and the Employee has executed this Agreement, effective as of the Date of Grant.
| EdgeMode | Employee | |||
| By: | Accepted: | |||
| Charles Faulkner, Chief Executive Officer | Name: | |||
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Exhibit 10.4
NOTE CONVERSION AGREEMENT
THIS NOTE CONVERSION AGREEMENT (the “Agreement”) is made as of November , 2021 by and between Fourth Wave Energy, Inc., a Nevada corporation (the “Company”), and _________ (the “Holder”). The Company and Holder are hereinafter each called a “Party” and together, the “Parties”.
RECITALS
A. Holder is the owner of that certain Promissory Note of the Company dated ______ _, 2021 in the original principal amount of $_______ (the “Note”).
B. The Company expects to execute a definitive merger agreement with EdgeMode, Inc., a Wyoming corporation (“EdgeMode”) on or before December 31, 2021(the “Signing Date Deadline”) and to complete and close the merger contemplated thereby (the “Merger”) on or before January 31, 2022 (the “Closing Date Deadline”).
C. Subject to the Company’s satisfaction of the Signing Date Deadline and the Closing Date Deadline, Holder has agreed to convert the Note, in accordance with the terms hereof, no later than the closing date for the merger.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company and Holder agree as follows:
1. Conversion. Subject to the Company’s satisfaction of the Signing Date Deadline and the Closing Date Deadline, Holder hereby agrees to convert the principal amount outstanding on the Note and all accrued interest due thereunder into common stock of the Company (the “Conversion Shares”) on or before the closing date of the Merger in accordance with the conversion terms of the Note.
2. Representations by Holder. Holder hereby represents and warrants to the Company that:
| (a) | The execution, delivery and performance by Holder of this Agreement has been duly authorized by all necessary action on the part of Holder. |
| (b) | The execution, delivery and performance of this Agreement does not and will not violate any law, rule, regulation or order applicable to Holder, including without limitation the laws under which it is organized, and does not and will not be in conflict with, result in the breach of, or constitute a default under, any agreement, instrument, or other document to which Holder is a party or by which it or its property is bound. |
| (c) | Holder has good title to and is the sole legal and beneficial owner of the Note free and clear of all liens, encumbrances, adverse claims, options and rights of others. |
| (d) | Holder understands the Conversion Shares will be issued without registration under the Securities Act of 1933, as amended (the “Act”) in reliance upon an exemption pursuant to Section 4(a)(2) of the Act and the representations made by Holder herein. |
| (e) | Holder (i) has (either independently or in conjunction with its advisors and representatives) such knowledge, sophistication and experience in the Company’s and EdgeMode’s business and financial matters that it is capable of evaluating the merits and risks of an investment in the Conversion Shares, (ii) is aware of the economic risks of an investment in the Conversion Shares and can bear the economic risk of an investment in the Conversion Shares, (iii) will be acquiring the Conversion Shares for investment for Holder’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, (iv) has no present intention of selling, granting any participation in, or otherwise distributing such Conversion Shares, and (v) does not presently have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or to any third person, with respect to any of the Conversion Shares. |
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| (f) | Holder is familiar with the business and operations of the Company and EdgeMode and has had the opportunity to ask questions of the management of the Company and to receive satisfactory answers to such questions. |
3. Representations by the Company. The Company hereby represents and warrants to Holder that:
| (a) | The execution, delivery and performance by the Company of this Agreement and the issuance and delivery of the Conversion Shares upon conversion of the principal of and interest on the Note have been duly authorized by all necessary action on the part of the Company. |
| (b) | When issued to Holder in accordance with the terms of this Agreement, the Conversion Shares will be duly and validly authorized and issued, fully paid and non-assessable. |
| (c) | The execution, delivery and performance of this Agreement does not and will not violate any law, rule, regulation or order applicable to the Company, including without limitation the law under which it is organized, and does not and will not be in conflict with, result in the breach of, or constitute a default under, any agreement, instrument, or other document to which the Company is a party or by which it or its property is bound. |
4. Governing Law; Jurisdiction; Venue. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to its conflicts of law principles. THE PARTIES HEREBY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS OF THE STATE OF NEW YORK, SITTING IN NEW YORK, NEW YORK FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT. THE PARTIES HEREBY IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION WHICH THEY MAY NOW OR HEREAFTER HAVE TO THE JURISDICTION OF SUCH COURTS OR THE LAYING OF VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
5. Severability. In the event that any provision of this Agreement shall be held by a court of competent jurisdiction to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions of this Agreement shall not in any way be affected or impaired thereby.
6. Merger. The Parties hereto agree that this Agreement constitutes the complete and exclusive statement of the terms and conditions between the Parties covering the subject matter hereof, supersedes all prior agreements and understandings concerning such subject matter, whether oral or written, and cannot be amended except in writing executed by an authorized representative of each Party.
7. Counterparts. Any number of counterparts of this Agreement may be executed and each such executed counterpart shall be deemed an original and all such counterparts taken together shall be a single instrument. This Agreement, to the extent signed and delivered by means of a facsimile machine or electronic mail, shall be treated in all manners and respects and for all purposes as an original agreement or instrument and shall be considered to have the same binding legal effect as if it were the original signed version thereof delivered in person.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have executed this agreement as of the date first written above.
Fourth Wave Energy, Inc., a Nevada corporation
By: _________________________________
Name: J. Jacob Isaacs
Title: Chief Executive Officer
Holder
________________________
(Name of Holder)
By: _________________________________
Name: _______________________________
Title: ________________________________
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Exhibit 10.5
 |
MASTER AGREEMENT
This Master Agreement (the “Agreement”), dated 05/31/2021, is between Compute North LLC (“Compute North”) and EdgeMode Inc. (“Customer”). In consideration of the promises set forth below, the parties agree as follows:
| 1. | Services. Subject to the terms and conditions of this Agreement, Compute North shall provide, and Customer shall pay for, the colocation, managed and other services (the “Services”) for Customer’s equipment (the “Equipment”) identified on the order form attached hereto as Exhibit A, as may be updated in writing and duly signed by Customer and Compute North from time to time (the “Order Form”). Compute North shall provide the Services consistent with, and as more fully described in, its customer handbook (the “Customer Handbook”), available at www.computenorth.com/handbook-sla.pdf and incorporated herein, as Compute North may update from time to time in is sole discretion. |
| 2. | Colocation Services. |
| 2.1. | Colocation Facility. Compute North will provide cryptocurrency mining facility, including rack space, electrical power, ambient air cooling, internet connectivity and physical security (“Colocation Services”) for the Equipment at the Compute North facility specified the Order Form (the “Facility”) in accordance with the Customer Handbook. |
| 2.2. | Acceptable Use Policy. Customer’s receipt of Colocation Services and its use of Equipment under this Agreement is subject to Customer’s compliance with Compute North’s then-current Acceptable Use Policy, available at www.computenorth.com/acceptable-use-policy and incorporated herein, as Compute North may update from time to time in its sole discretion. |
| 2.3. | Customer Portal. Compute North will provide Customer with access to its customer portal (the “Customer Portal”). Customer’s access to and use of the Customer Portal is subject to, and Customer agrees to be bound by, Compute North’s Terms of Use, available at www.computenorth.com/terms-of-use/ and incorporated herein, as Compute North may update from time to time in its sole discretion. All written notices required by Customer under this Agreement shall be submitted using the Customer Portal. |
| 2.4. | Transfer of Equipment. Customer shall provide prompt written notice to Compute North if it transfers legal title to any Equipment to a third party. In the event of such a transfer, Customer shall remain obligated to pay Compute North the Monthly Service Fees for the transferred Equipment for the remainder of the term applicable to such Equipment (the “Equipment Term”) unless and until such Equipment is placed into service under, and is subject to, a collocation agreement between the acquiring third party and Compute North, which shall be at Compute North’s sole discretion. |
| 2.5. | Transfer of Services. Customer may not sublicense, assign, delegate or otherwise transfer its receipt of Colocation Services under this Agreement to any third party without Compute North’s express written consent, which Compute North may withhold in its sole discretion. In the event Compute North gives consent, Customer shall remain fully responsible and liable to Compute North for the performance of all of Customer’s obligations under this Agreement, and under no circumstances shall Compute North be deemed to be providing any Colocation Services to any third party for Customer or on its behalf. |
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| 3. | Managed Services. |
| 3.1. | Managed Services. Compute North will provide managed services for the Equipment as elected on the Order Form (“Managed Services”). Compute North will provide Managed Services in a professional and workmanlike manner consistent with the Customer Handbook. If Customer does not elect Managed Services, Customer shall be solely responsible for configuring and maintaining the Equipment remotely via VPN. |
| 3.2. | Third-Party Management. Customer shall notify Compute North if it engages a third party to provide services on its behalf with respect to the Equipment. Customer shall be fully responsible and liable to Compute North under this Agreement for any acts or omissions by any third-party service provider acting for or on its behalf. |
| 4. | Hardware Acquisition. Compute North agrees to sell to Customer, and Customer agrees to buy from Compute North, such hardware, if any, elected on the Order Form (“Acquired Hardware”). A deposit equal to fifty percent (50%) of the fee set forth on the Order Form (the “Hardware Deposit”) shall be due and payable as of the date on which Compute North and Customer have both executed the Order Form, with the remaining amount due and payable by the earlier of (a) the date on which Compute North notifies Customer that the Acquired Hardware has been shipped or (b) thirty (30) days after the Hardware Deposit. Legal title to the Acquired Equipment only shall transfer to Customer when the fee for the Acquired Hardware is paid in full. The Acquired Hardware shall be Equipment subject to this Agreement upon its delivery to the Facility. Customer solely shall be responsible for determining whether the Acquired Hardware is fit and suitable for its particular purposes. Customer acknowledges that no warranty, express or implied, is provided by Compute North for any Acquired Hardware and agrees that the only warranties associated therewith are the warranties, if any, offered or made by the manufacturers thereof. |
| 5. | Term and Termination. |
| 5.1. | Term. This Agreement shall be effective as of the date on which it has been executed by both Compute North and Customer (the “Effective Date”), and shall remain in effect for the remainder of any Equipment Term set forth on the Order Form. The Equipment Term for the Equipment shall commence as of the date Compute North notifies Customer in writing that such Equipment has been received and turned on by Compute North. |
| 5.2. | Equipment Return. Upon Customer’s written request, and provided Customer has paid all amounts then due and owing under this Agreement, Compute North shall decommission and return the corresponding Equipment to Customer upon the expiration of an Equipment Term as provided in Section 10.4. |
| 5.3. | Termination for Cause. Compute North may terminate this Agreement for cause immediately upon written notice to Customer if Customer: (a) fails to make any payment(s) due pursuant to this Agreement; (b) violates, or fails to perform or fulfill any covenant or provision of this Agreement, and any such matter is not cured within ten (10) days after written notice from Compute North; (c) enters into bankruptcy, dissolution, financial failure or insolvency; or (d) enters into an assignment, sale or merger with a third party, unless approved in writing in advance by Compute North (each, a “Default”). | |
| 5.4 | Effect of Default. In the event of a Default by Customer, Compute North shall have the right, but not the obligation, to terminate this Agreement on written notice to Customer, and Customer shall pay immediately to Compute North all amounts then owed under this Agreement and, as liquidated damages and not a penalty, all amounts due for the remainder of the applicable term of the Agreement. If Customer fails to make any such payments, in addition to any other rights and remedies it may have, Compute North shall have the right to (a) sell or retain possession of, (b) reconfigure for Compute North’s use, or (c) remove and store at Customer’s expense, all or any portion of the Equipment without any cost, obligation or liability of Compute North to Customer. |
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| 6. | Fees and Payment. |
| 6.1. | Initial Fees. The Initial Setup Fees and Initial Deposit set forth on the Order Form and any Hardware Deposit shall be due and payable as of the date on which Compute North and Customer have both executed the Order Form. The Initial Setup Fees, Initial Deposit and Hardware Deposit are non- refundable and non-transferrable under any circumstance. |
| 6.2. | Monthly Fees. On the first day of every month during the Term of this Agreement, Customer shall pay Compute North the Monthly Service Fees and Monthly Package Fees (collectively, the “Fees”) set forth on the Order Form. Compute North reserves the right to adjust the Monthly Service Fees if the configuration or performance of the Equipment differs materially from that stated on the Order Form, as reasonably determined by Compute North. |
| 6.3. | Taxes. All amounts payable by Customer under this Agreement are exclusive of, and Customer shall solely be responsible for paying, all taxes, duties and fees, including federal, state and local taxes on manufacture, sales, gross income, receipts, occupation and use, not based on Compute North’s income that arise out of this Agreement. |
| 6.4. | Payment Method. All payments due and owing under this Agreement shall be made through automated clearing house (“ACH”) transfers by Compute North from an account established by Customer at a United States bank designated by Customer (the “Payment Account”). Customer hereby agrees to execute and deliver to Compute North or its ACH payment agent an authorization agreement authorizing Compute North to initiate ACH transfers from the Payment Account to Compute North in the amounts required or permitted under this Agreement. For as long as this Agreement remains effective, Customer shall be responsible for all costs, expenses or other fees and charges incurred by Compute North as a result of any failed or returned ACH transfers, whether resulting from insufficient sums being available in the Payment Account or otherwise. Any other payment method must be pre-authorized by Compute North and will be subject to a fee. |
| 6.5. | Service Credits. All requests for service credits will be governed by the then-current Compute North credit policy published at www.computenorth.com/credit-request. All requests for service credits must be submitted to Compute North online via this link. |
| 6.6. | All amounts payable by Customer under this Agreement are exclusive of, and Customer shall solely be responsible for paying, all taxes, duties and fees, including federal, state and local taxes on manufacture, sales, gross income, receipts, occupation and use, not based on Compute North’s income that arise out of this Agreement, including requirements for renewable energy certificates, allowances or other carbon offsets required by or otherwise necessary for compliance with any federal, state, local or other applicable law. |
| 7. | Security Interest. Customer hereby grants a security interest in the Equipment and Acquired Hardware in favor of Compute North to secure the obligations of Customer under this Agreement. Compute North may, at such time as it determines appropriate, file a UCC 1 Financing Statement in such places as it determines to evidence the security interest granted by Customer to Compute North under this Agreement. Customer represents and warrants that it has not granted a security interest in the Equipment or Acquired Hardware in favor of a third party priority over the security interest granted to Compute North herein. |
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| 8. | Network and Access. |
| 8.1. | Network. Compute North will provide a minimum of 100 mbps of local network connectivity to each piece of Equipment on a single Ethernet segment. Customer may elect to use Compute North’s standard firewall and Dynamic Host Configuration Protocol (“DHCP”) services by notifying Compute North in writing. Customer is solely responsible for all network and device security, including providing an appropriate firewall and managing passwords. Customer acknowledges and agrees that Compute North may monitor Customer’s network usage and traffic and Customer hereby authorizes Compute North to access, collect and use data relating to the Equipment and Customer’s use thereof. |
| 8.2. | Access. Only those persons specifically authorized by Compute North in writing may access the Facility. Compute North may deny or suspend Customer’s access to the Equipment based on Compute North’s then-current Security Policies and Procedures, which include, but are not limited to: |
| 8.2.1. | All access into the Facility must be supervised by a Compute North representative; |
| 8.2.2. | Customer shall provide two (2) day’ written notice to Compute North prior to any maintenance or repair of the Equipment; |
| 8.2.3. | Customer shall perform Equipment maintenance and repairs during normal business hours (Monday-Friday, 7AM – 6PM Central Time); |
| 8.2.4. | Customer may request immediate or after-hour access to the Facility to perform emergency maintenance. Compute North will make every reasonable attempt to accommodate Customer’s after-hour emergency access requests. |
Customer shall be solely responsible for any damage or loss caused by anyone acting for or on its behalf while at the Facility.
| 8.3. | Hazardous Conditions. If, in the reasonable discretion of Compute North, any hazardous conditions arise on, from, or affecting the Facility, whether caused by Customer or a third party, Compute North is hereby authorized to suspend service under this Agreement without subjecting Compute North to any liability. |
| 8.4. | Demand Response/Load Resource Participation Program. Customer acknowledges and understands that Compute North participates in various Demand Response/Load Resource Participation Programs (“LRP Program”) at its facilities. As set forth in the Customer Handbook, the LRP Program provides the local grid operator with the capability to shut off the power load serving Compute North customers in response to emergency load situations. Customer agrees that the Fees reflect Compute North’s participation in the LRP Program and that Compute North shall have no liability to Customer for any actions or omissions due to or resulting from its participation in the LRP Program. |
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| 9. | Pause and Reactivation. |
| 9.1. | Equipment Pause. At Compute North’s sole discretion, and provided that Customer has paid all amounts then due and owing under this Agreement, Compute North may permit Customer may pause and suspend Services for specified Equipment (“Paused Equipment”). The pause shall remain in effect until the earlier of (i) the six (6) month anniversary of the date upon which Services were paused and suspended and (ii) the date upon which Customer gives written notice to Compute North that it intends to resume use of the Paused Equipment. If Customer does not resume use of the Paused Equipment by the six (6) month anniversary of the date upon which Services were paused, Customer agrees that legal title to the Equipment shall transfer to Compute North and this Agreement shall be deemed terminated with respect to such Equipment. |
| 9.2. | Reconfiguration. While Services are paused, Compute North may reconfigure and use the Paused Equipment for and on its own behalf. Such use may include revoking Customer’s access to the Paused Equipment and reconfiguring the Paused Equipment so that all profits accrue to Compute North’s benefit without owing any compensation, payment or other consideration to Customer. Compute North also may remove and store at Customer’s risk and expense all or a portion of the Equipment and provide the space previously occupied thereby to a third party without any cost, obligation or liability to Customer. Customer acknowledges and agrees it is and shall remain solely liable for the Paused Equipment at all times during which service is paused and suspended and that Compute North shall not have any liability to Customer for its use of the Paused Equipment or for any loss, deletion or corruption of Customer’s data or files on the Paused Equipment. |
| 9.3. | Fees During Pause. Upon reconfiguration of the Paused Equipment by Compute North, Customer shall not owe Fees with respect thereto. Customer otherwise shall remain liable to Compute North for all amounts due and payable with respect to the Paused Equipment, and the Equipment Term for such Paused Equipment shall be extended by a like period. |
| 9.4. | Reactivation. Within five (5) business days of receiving written notice from Customer, Compute North shall reconfigure the identified Paused Equipment for Customer’s use. Customer shall pay Compute North its then-current Setup Fee for each device reconfigured for Customer’s use, which shall be due and payable to Compute North with its next monthly invoice following reconfiguration. |
| 10. | Removals and Relocation of Equipment. |
| 10.1. | Relocation. Compute North may require Customer to relocate the Equipment within the facility or to another Compute North facility upon twenty (20) days’ prior written notice to Customer, provided that the site of relocation shall afford comparable environmental conditions for the Equipment and comparable accessibility to the Equipment. Notwithstanding the foregoing, Compute North shall not arbitrarily or capriciously require Customer to relocate the Equipment. If the Equipment is relocated according to this Section, the reasonable costs of relocating the Equipment and improving the Facility to which the Equipment will be relocated shall be borne by Compute North. |
| 10.2. | Interference. If at any time the Equipment causes unacceptable interference to existing or prospective Compute North customers or their Equipment in Compute North’s reasonable opinion, Compute North may require Customer to remove or relocate the Equipment at Customer's sole expense. If Customer is unable to cure such interference by relocating the Equipment, Compute North may terminate this Agreement without further obligation to Customer under this Agreement. |
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| 10.3. | Emergency. In the event of an emergency, as determined in Compute North’s reasonable discretion, Compute North may rearrange, remove, or relocate the Equipment without any liability to Compute North. Notwithstanding the foregoing, in the case of emergency, Compute North shall provide Customer, to the extent practicable, reasonable notice prior to rearranging, removing, or relocating the Equipment. |
| 10.4. | Equipment Return. Provided that Customer has paid all amounts then due and owing under this Agreement, Compute North shall decommission and make the corresponding Equipment available to Customer for pickup at, or shipment from, the Facility within five (5) business days of Customer’s written request. Customer shall be responsible for packing and removing the Equipment from the Facility at its sole cost, expense and risk within seven (7) business days of the date on which Compute North notifies Customer that the Equipment is available for return. If Customer does not remove the Equipment as provided herein, Customer agrees that legal title to the Equipment shall transfer to Compute North. Customer shall remain liable to Compute North for all amounts due for the remainder of the applicable Equipment Term for such Equipment, if any. |
| 11. | Customer Responsibilities. |
| 11.1. | Compliance with Laws. Customer’s use of the Facility and the Equipment located at the Facility must at all times conform to all applicable laws, including international laws, the laws of the United States of America, the laws of the states in which Customer is doing business, and the laws of the city, county and state where the Facility is located. |
| 11.2. | Licenses and Permits. Customer shall be responsible for obtaining any licenses, permits, consents, and approvals from any federal, state or local government that may be necessary to install, possess, own, or operate the Equipment. |
| 11.3. | Insurance. Customer acknowledges that Compute North is not an insurer and Equipment is not covered by any insurance policy held by Compute North. Customer is solely responsible for obtaining insurance coverage for the Equipment. Customer shall have commercial general liability insurance for both bodily injury and property damage. |
| 11.4. | Equipment in Good Working Order. Except with respect to Acquired Hardware, Customer shall be responsible for delivering the Equipment to the Facility in good working order and suitable for use in the Facility. Customer shall be responsible for any and all costs associated with the troubleshooting and repair of Equipment received in non-working order, including parts and labor at Compute North’s then-current rates. Compute North is not responsible in any way for installation delays or loss of profits as a result of Equipment deemed not to be in good working order upon arrival at Facility. |
| 11.5. | Modification or Overclocking of Equipment. Customer shall notify and obtain prior written approval from Compute North before any material modifications, alternations, firmware adjustments, over- or under-clocking, or other changes are made to Equipment (“Modified Equipment”) that is intended to or might cause the Equipment’s performance to deviate from the standard or factory specifications. If Compute North determines that any Equipment has been materially altered or modified without Compute North’s prior written approval (“Non-Compliant Equipment”), it shall be an event of Default. In addition to any other right or remedy it might have, a Default pursuant to this Section shall subject Customer to a Non-Compliant Equipment fee equal to twenty-five percent (25%) of the monthly Fees for such Equipment for each month Equipment was non-compliant. |
| 11.6. | Representations. Customer represents and warrants that (i) it is properly constituted and organized, (ii) it is duly authorized to enter into and perform this Agreement, and (iii) the execution and delivery of this Agreement and its performance of its duties hereunder will not violate the terms of any other agreement to which it is a party or by which it is bound. |
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| 12. | Common Carrier. Compute North and Customer agree that Compute North is acting solely as a common carrier in its capacity of providing the Service hereunder and is not a publisher of any material or information. Furthermore, Compute North has no right or ability to censor materials or information traversed through Compute North’s networks. |
| 13. | Warranty and Disclaimer. COMPUTE NORTH MAKES NO WARRANTIES OR GUARANTEES RELATED TO THE AVAILABILITY OF SERVICES OR THE OPERATING TEMPERATURE OF THE FACILITY. THE SERVICES, THE FACILITY AND ANY ACQUIRED HARDWARE ARE PROVIDED “AS IS.” COMPUTE NORTH DOES NOT PROVIDE MECHANICAL COOLING OR BACKUP POWER AND THE FACILITY IS SUBJECT TO SWINGS IN LOCAL TEMPERATURE, WIND, HUMIDITY AND OTHER CONDITIONS. COMPUTE NORTH MAKES NO WARRANTY WHATSOEVER, AND HEREBY DISCLAIMS ANY AND ALL IMPLIED WARRANTIES, WITH RESPECT TO GOODS AND SERVICES SUBJECT TO THIS AGREEMENT, INCLUDING ANY (A) WARRANTY OF MERCHANTABILITY; (B) WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE; (C) WARRANTY OF NONINFRINGEMENT AND (D) WARRANTY AGAINST INTERFERENCE. COMPUTE NORTH DOES NOT WARRANT THAT (A) THE SERVICE SHALL BE AVAILABLE 24/7 OR FREE FROM INTERRUPTION; (B) THE SERVICE OR ACQUIRED HARDWARE WILL MEET CUSTOMER’S REQUIREMENTS OTHER THAN AS EXPRESSLY SET FORTH HEREIN; OR (C) THE SERVICE OR ACQUIRED HARDWARE WILL PROVIDE ANY FUNCTION NOT EXPRESSLY DESIGNATED AND SET FORTH HEREIN. |
| 14. | Limitation of Liability. |
| 14.1. | Customer understands and acknowledges that, in certain situations, Services and Equipment functionality may be unavailable due to factors outside of Compute North’s control. This includes, but is not limited to force majeure, weather, network failures, pool operator failures, denial of service attacks, currency network outages, hacking or malicious attacks on the crypto networks or exchanges, power outages, or Acts of God. COMPUTE NORTH SHALL HAVE NO OBLIGATION, RESPONSIBILITY, OR LIABILITY FOR ANY OF THE FOLLOWING: (A) ANY INTERRUPTION OR DEFECTS IN THE EQUIPMENT FUNCTIONALITY CAUSED BY FACTORS OUTSIDE OF COMPUTE NORTH’S REASONABLE CONTROL; (B) ANY LOSS, DELETION, OR CORRUPTION OF CUSTOMER’S DATA OR FILES WHATSOEVER; (C) ANY LOST REVENUE TO CUSTOMER DURING OUTAGES, EQUIPMENT FAILURES, ETC.; (D) DAMAGES RESULTING FROM ANY ACTIONS OR INACTIONS OF CUSTOMER OR ANY THIRD PARTY NOT UNDER COMPUTE NORTH’S CONTROL; OR (E) DAMAGES RESULTING FROM EQUIPMENT OR ANY THIRD PARTY EQUIPMENT. |
| 14.2. | IN NO EVENT SHALL COMPUTE NORTH BE LIABLE TO CUSTOMER OR ANY OTHER PERSON, FIRM, OR ENTITY IN ANY RESPECT, INCLUDING, WITHOUT LIMITATION, FOR ANY INDIRECT, CONSEQUENTIAL, SPECIAL, INCIDENTAL OR PUNITIVE DAMAGES, INCLUDING LOSS OF PROFITS OF ANY KIND OR NATURE WHATSOEVER, ARISING OUT OF MISTAKES, NEGLIGENCE, ACCIDENTS, ERRORS, OMISSIONS, INTERRUPTIONS, OR DEFECTS IN TRANSMISSION, OR DELAYS, INCLUDING, BUT NOT LIMITED TO, THOSE THAT MAY BE CAUSED BY REGULATORY OR JUDICIAL AUTHORITIES ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OBLIGATIONS OF COMPUTE NORTH PURSUANT TO THIS AGREEMENT. COMPUTE NORTH’S TOTAL CUMULATIVE LIABILITY UNDER THIS AGREEMENT, WHETHER UNDER CONTRACT LAW, TORT LAW, WARRANTY, OR OTHERWISE, SHALL BE LIMITED TO DIRECT DAMAGES NOT TO EXCEED THE AMOUNTS ACTUALLY RECEIVED BY COMPUTE NORTH FROM CUSTOMER IN THE TWELVE (12) MONTHS PRIOR TO THE DATE OF THE EVENT GIVING RISE TO THE CLAIM. |
| 14.3. | Remedy. Customer’s sole remedy for Compute North’s non-performance of its obligations under this Agreement shall be a refund of any fees paid to Compute North for the then-current service month. Unless applicable law requires a longer period, any action against Compute North in connection with this Agreement must be commenced within one (1) year after the cause of the action has accrued. |
| 14.4. | Insurance loss. Customer agrees to look exclusively to Customer’s insurer to recover for injury or damage in the event of any loss or injury, and releases and waives all right of recovery against Compute North. |
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| 15. | Indemnification. Customer shall indemnify, hold harmless and defend Compute North, its subsidiaries, employees, agents, directors, owners, executives, representatives, and subcontractors from any and all third- party liability, claim, judgment, loss, cost, expense or damage, including attorneys’ fees and legal expenses, arising out of or relating to the Equipment or Customer’s use thereof, or any injuries or damages sustained by any person or property due to any direct or indirect act, omission, negligence or misconduct of Customer, its agents, representatives, employees, contractors and their employees and subcontractors and their employees, including due to a breach of this Agreement by Customer. Customer shall not enter into any settlement or resolution with a third party under this section without Compute North’s prior written consent, which shall not be unreasonably withheld. |
| 16. | Miscellaneous. |
| 16.1. | Lease Agreement. Compute North may lease certain premises in the Facility from the Facility’s owner (“Leaser”) pursuant to a lease agreement (“Lease”). Customer is not a party to or a beneficiary under such Lease, if any, and has no rights thereunder; however, Customer shall be required to adhere to any and all rules of operation established by Leaser for the Facility. Whether owned or leased by Compute North, Customer acknowledges and agrees that it does not have, has not been granted, and will not own or hold any real property interest in the Facility, that it is a licensee and not a tenant, and that it does not have any of the rights, privileges or remedies that a tenant or lessee would have under a real property lease or occupancy agreement. |
| 16.2. | Entire Agreement. This Agreement, including the Order Form and any documents referenced herein, constitutes the parties’ entire understanding regarding its subject and supersedes all prior or contemporaneous communications, agreements and understanding between them relating thereto. Customer acknowledges and agrees that it has not, and will not, rely upon any representations, understandings, or other agreements not specifically set forth in this Agreement. This Agreement shall not be superseded, terminated, modified or amended except by express written agreement of the parties that specifically identifies this Agreement. |
| 16.3. | Waiver, Severability. The waiver of any breach or default does not constitute the waiver of any subsequent breach or default. If any provision of this Agreement is held to be illegal or unenforceable, it shall be deemed amended to conform to the applicable laws or regulations, or, if it cannot be so amended without materially altering the intention of the parties, it shall be stricken and the remainder of this Agreement shall continue in full force and effect. |
| 16.4. | Assignment. Neither this Agreement nor any right or obligation arising under this Agreement may be assigned by Customer in whole or in part, without the prior written consent of Compute North at its sole discretion. Compute North may at any time assign, transfer, delegate or subcontract any or all of its rights or obligations under this Agreement without Customer’s prior written consent. Subject to the restrictions on assignment of this Agreement, this Agreement shall be binding upon and inure to the benefit of the parties, their legal representatives, successors, and assigns. |
| 16.5. | Force Majeure. Neither party shall be liable in any way for delay, failure in performance, loss or damage due to any of the following force majeure conditions: fire, strike, embargo, explosion, power failure, flood, lightning, war, water, electrical storms, labor disputes, civil disturbances, governmental requirements, acts of civil or military authority, acts of God, acts of public enemies, inability to secure replacement parts or materials, transportation facilities, or other causes beyond its reasonable control, whether or not similar to the foregoing. This also includes planned service and maintenance needs. |
| 16.6. | Governing Law. This Agreement shall be governed by and interpreted in accordance with the laws of the State of Minnesota, without giving effect to principals of conflicts of laws. Any action arising out of or relating to this Agreement shall be brought only in the state or federal courts located in the State of Minnesota, and Recipient consent to the exclusive jurisdiction and venue of such courts. An action by a party to enforce any provision of this Agreement shall not relieve the other party from any of its obligations under this Agreement, and no failure to enforce any provision of this Agreement shall constitute a waiver of any future default or breach of that or any other provision. |
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| 16.7. | Relationship of the Parties. The parties agree that their relationship hereunder is in the nature of independent contractors. Neither party shall be deemed to be the agent, partner, joint venturer or employee of the other, and neither shall have any authority to make any agreements or representations on the other’s behalf. Each party shall be solely responsible for the payment of compensation, insurance and taxes of its own personnel, and such personnel are not entitled to the provisions of any employee benefits from the other party. Neither party shall have any authority to make any agreements or representations on the other’s behalf without the other’s written consent. Additionally, Compute North shall not be responsible for any costs and expenses arising from Customer’s performance of its duties and obligations pursuant to this Agreement. |
| 16.8. | Third-Party Beneficiaries. Nothing in this Agreement is intended, nor shall anything herein be construed to confer any rights, legal or equitable, in any person or entity other than the parties hereto and their respective successors and permitted assigns. |
| 16.9. | Construction; Interpretation. Unless the context otherwise requires, words in the singular include the plural, and in the plural include the singular; masculine words include the feminine and neuter; “or” means “either or both” and shall not be construed as exclusive; “including” means “including but not limited to”; “any” and “all” shall not be construed as terms of limitation; and, a reference to a thing (including any right or other intangible asset) includes any part or the whole thereof. Any rule of construction to the effect that ambiguities are to be resolved against the drafting party shall not apply to the interpretation and construction of this Agreement, and this Agreement shall be construed as having been jointly drafted by the parties. The titles and headings for particular paragraphs, sections and subsections of this Agreement have been inserted solely for reference purposes and shall not be used to interpret or construe the terms of this Agreement. |
| 16.10. | Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but which together shall constitute one and the same document. |
IN WITNESS WHEREOF, the parties have executed this Agreement in a manner appropriate to each and with the authority to do so as of the date set forth below.
| Compute North LLC | Customer: | ||
| By: /s/ Kyle Wenzel | By: Charlie Faulkner | ||
| Name: Kyle Wenzel | Name: Charlie Faulkner | ||
| Its: VP, Sales | Its: CEO |
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Exhibit A – Order Form CNv202011_9 Pg. 1 {921548 4:4 } Customer: EdgeMode Facility : TBD Equipment and Fees: Batch # 001 Order Type ց Ne w Order տ Ren e wa l տ C hang e Order Equipment Quantity Model Unit Efficiency (W/TH) 11,571 Katena K10 Miner (90+TH) 35 Hosting Services Rate (USD) $0.050 / kWh (Anticipated Daily Rate: $46,920.00) Total Monthly Package Fee (per unit) Select @ $3.00 Equipment Term 5 Years Initial Setup Fee $0.00 Pricing Tiers: H osting Services Rate is contingent upon total MW of live miners and will follow the below pricing tiers, with intentions of growing our partnership to 250MW of hosting capacity. Compute North will take commercially reasonable efforts to structure a < $0.049 kWh rate upon 100MW+ deployment. Live MW Hosting Services Rate (USD) 0 – 49.9 $0.050 50+ $0.049 Package Details: Basic Select Premier Core Features Equipment Customer Provided Customer Provided Customer Provided Equipment Managed No Yes Yes Rack Space X X X 240V Power X X X Ambient Air Cooling X X X Redundant Internet Connectivity X X X Physical Security X X X Technical Support Basic Remote Hands X X X Advanced Remote Hands X X SLA Level Network & Power Hashrate Performance Hashrate Performance VPN Access X RMA Processing X X Premium Features Miner Configuration X X Miner Monitoring X X Alert Management and Proactive Response X X Automated Rules - based Reboots X X
Stock Firmware Upgrades X X Compute North Pool (U.S. - based pool) X Pool to Hash Performance Monitoring, Audit, Reconciliation X Discounted Pool Fee X Performance Enhancing Firmware • Overclocking, Underclocking, Auto - tuning, Upgrades • Customer provided (subject to Compute North approval) or • Compute North provided (miner model limited) X Payment and Billing Terms: ☐ Initial Setup Fee : Initial Setup Fee is due upon execution of this Order Form . ☐ Deposits : ▪ Last month of Monthly Service and Select Package Fees (“Initial Deposit”) quantified at $ 1 , 586 , 297 are due September 30 , 2021 . The Initial Deposit will include down payment for the 3 . 3 MW going live January 1 st, 2022 as well as the Select Package fees for initial number of machines . Equipment installation will not begin until received . ▪ $ 1 , 427 , 150 + $ 34 , 713 + $ 120 , 450 + $ 3 , 984 = $ 1 , 586 , 297 ▪ This equates to Last month of Monthly Service + Select Package Fees for month 60 + month at 3 . 3 MW + Select Fees for initial 1 , 328 machines . ▪ Last month value deposit of each new/true up MW volume as well as the Select Package fees for the additional machines will be due four ( 4 ) months in advance of the new volume go live in place of our typical 2 nd month initial deposit . We are providing this based on your scaling volumes . * Sample deposit table for 2021 based on current projections. Deposit amounts will change based on MW needs, additional machine volumes and go live dates. ☐ Monthly Fees: ▪ The Monthly Service Fees are payable based on the actual hashrate performance of the Equipment per miner type per location as a percentage of the anticipated monthly hashrate per miner type . Customer shall pay a minimum service fee monthly in advance equal to seventy percent ( 70 % ) of the Monthly Service Fees (the “Minimum Service Fee”) . ▪ The Minimum Service Fee is nonrefundable . Any Monthly Service Fee owed in excess of the Minimum Service Fee based on the actual hashrate performance of the Equipment will be invoiced monthly in arrears and subject to the hashrate performance adjustment . Customer is not eligible for service credits under Section 6 . 5 of the Master Agreement or otherwise . ▪ Monthly Service Fees and Monthly Package Fees will be invoiced monthly beginning on the date of Installation and are due upon receipt of invoices submitted by Compute North . Late payments will incur interest at the lesser of 1 . 5 % per month ( 18 % annum) or the maximum amount allowed under applicable law . ▪ Pricing is subject to monthly automated ACH payments . Other payment methods may be subject to a service fee . ▪ Order Form signature due by May 31 st , 2021 . CNv202011_9 Pg. 2 {921548 4:4 }
Billing Example Anticipated Daily Rate Period (Days in the Month) Number of Units Expected Total Monthly Service Fees $4.00 30 10 $1200.00 x 70% Monthly Minimum Service Fee $840.00 Billing Example: 96% hashrate performance Billing Example: 105% hashrate performance $1200.00 - $28.80 $1200.00 36.00 Expected Total Monthly Service Fees Hashrate Performance Adjustment ( - 2.4%) Actual Usage $11 7 1.20 Expected Total Monthly Service Fees Hashrate Performance Adjustment (3%) Actual Usage $12 3 6.00 - $840.00 - $840.00 Prepaid Minimum Service Fee Balance Due $33 1 . 20 Prepaid Minimum Service Fee Balance Due $39 6 . 00 Compute North Pool: At Customer’s request, Compute North will enroll and configure Customer in Compute North’s Bitcoin mining pool, which operates on a Full - Pay - Per - Share (FPPS) basis . Customer’s use of Compute North’s mining pool is subject to, and constitutes Customer’s acceptance of, the then - current terms of service posted at https : //mining . luxor . tech/legal/tos , as may be updated from time to time . Compute North shall be entitled to a fee equal to 2 % of Customer’s mining reward from its participation in Compute North’s pool . Customer acknowledges and agrees that Compute North is providing Customer with access to its mining pool for Customer’s convenience on an as - is basis and that Compute North does not make any warranties or guarantees, whether express or implied, regarding the availability or performance thereof . Firmware: Customer acknowledges and agrees that its use of alternate or non - standard firmware may be subject to third - party fees or other charges, which shall be Customer’s sole responsibility . Customer acknowledges and agrees that Compute North’s consent to Customer’s use of alternate or non - standard firmware and its provision of services relating thereto is for Customer’s convenience on an as - is basis, that Customer’s use of alternate or non - standard firmware is at Customer’s sole risk, and that Compute North does not make any warranties or guarantees, whether express or implied, with respect thereto . Risk Factors to Deployment: ☐ Land/Site Acquisition ☐ Regulatory Affairs ☐ Power Purchase Agreement (PPA) ☐ Infrastructure Equipment Availability & Supply Chain Order Type: ☐ For orders designated as “Renewal” or “Change Order” : This Order Form replaces all then - existing order forms under the applicable Agreement between Compute North and Customer for the identified Equipment, with all other order forms remaining in full force and effect . The Previous Orders and Equipment List attached and appended hereto identifies the Equipment that remains subject to a prior order form as of the date of this Order Form . CNv202011_9 Pg. 3 {921548 4:4 }
ց For orders designated a s “New”: This Addendum i s a nd shall b e i n a d ditio n to al l th e n - existin g order forms under the applicable Agreement between Compute North and Customer, which order forms shall remain in full force and effect. The Previous Orders and Equipment List attached and appended hereto identifies the Equipment that remains subject to a prior order form as of the date of this Order Form. Compute North LLC Customer By: By: Name: Charlie Faulkner Its: CEO Name: Kyle Wenzel Its: VP, Sales CNv202011_9 Pg. 4 {921548 4:4 }
Previous Orders and Equipment List CNv202011_9 Pg. 5 {921548 4:4 } Batch # Equipment Type Quantity Facility
Exhibit 10.6
MASTER AGREEMENT
This Master Agreement (the "Agreement"), dated July 20, 2021, is between Trinity Mining Technologies LLC ("Trinity Mining Technologies ") and EdgeMode Inc, ("Customer"). In consideration of the promises set forth below, the parties agree as follows:
| 1. | Services. Subject to the terms and conditions of this Agreement, Trinity Mining Technologies shall provide, and Customer shall pay for, the colocation, managed and other services (the "Service " for Customer's equipment (the "Equipment") identified on the order form attached hereto as Exhibit A, as may be updated in writing and duly signed by Customer and Trinity Mining Technologies from time to time (the "Order Form"). Trinity Mining Technologies shall provide the Services consistent with, and as more fully described in, its customer Handbook. |
| 2. | Colocation Services. |
| 2.1. | Colocation Facility. Trinity Mining Technologies will provide cryptocurrency mining facility, including rack space, electrical power, ambient air cooling, internet connectivity and physical security ("Colocation Services") for the Equipment at the Trinity Mining Technologies facility specified the Order Form (the "Facility") in accordance with the Customer Handbook. |
| 2.2. | Acceptable Use Policy. Customer's receipt of Colocation Services and its use of Equipment under this Agreement is subject to Customer's compliance with Trinity Mining Technologies 's then-current Acceptable Use Policy, incorporated herein, as Trinity Mining Technologies may update from time to time in its sole discretion. |
| 2.3. | Transfer of Equipment. Customer shall provide prompt written notice to Trinity Mining Technologies if it transfers legal title to any Equipment to a third party. In the event of such a transfer, Customer shall remain obligated to pay Trinity Mining Technologies the Monthly Service Fees for the transferred Equipment for the remainder of the term applicable to such Equipment (the "Equipment Term") unless and until such Equipment is placed into service under, and is subject to, a collocation agreement between the acquiring third party and Trinity Mining Technologies , which shall be at Trinity Mining Technologies’s sole discretion. |
| 2.4. | Transfer of Services. Customer may not sublicense, assign, delegate or otherwise transfer its receipt of Colocation Services under this Agreement to any third party without Trinity Mining Technologies 's express written consent, which Trinity Mining Technologies may withhold in its sole discretion. In the event Trinity Mining Technologies gives consent, Customer shall remain fully responsible and liable to Trinity Mining Technologies for the performance of all of Customer's obligations under this Agreement, and under no circumstances shall Trinity Mining Technologies be deemed to be providing any Colocation Services to any third party for Customer or on its behalf. |
| 3. | Managed Services. |
| 3.1 | Managed Services. Trinity Mining Technologies will provide managed services for the Equipment as elected on the Order Form ("Managed Services"). Trinity Mining Technologies will provide Managed Services in a professional and workmanlike manner consistent with the Customer Handbook. If Customer does not elect Managed Services, Customer shall be solely responsible for configuring and maintaining the Equipment remotely via VPN. | |
| 3.2 | Third-Party Management. Customer shall notify Trinity Mining Technologies if it engages a third party to provide services on its behalf with respect to the Equipment. Customer shall be fully responsible and liable to Trinity Mining Technologies under this Agreement for any acts or omissions by and third-party service provider acting for or on its behalf.. |
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| 4. | Term and Termination. |
| 4.1. | Term. This Agreement shall be effective as of the date on which it has been executed by both Trinity Mining Technologies and Customer (the "Effective Date"), and shall remain in effect for the remainder of any Equipment Term set forth on the Order Form. The Equipment Term for the Equipment shall commence as of the date Trinity Mining Technologies notifies Customer in writing that such Equipment has been received and turned on by Trinity Mining Technologies . |
| 4.2. | Equipment Return. Upon Customer's written request, and provided Customer has paid all amounts then due and owing under this Agreement, Trinity Mining Technologies shall decommission and return the corresponding Equipment to Customer upon the expiration of an Equipment Term as provided in Section 10-4. |
| 4.3. | Termination for Cause. Trinity Mining Technologies may terminate this Agreement for cause immediately upon written notice to Customer if Customer: (a) fails to make any payment(s) due pursuant to this Agreement; (b) violates, or fails to perform or fulfill any covenant or provision of this Agreement, and any such matter is not cured within ten (10) days after written notice from Trinity Mining Technologies; (c) enters into bankruptcy, dissolution, financial failure or insolvency; or (d) enters into an assignment, sale or merger with a third party, unless approved in writing in advance by Trinity Mining Technologies (each, a "Default"). |
| 5. | Fees and Payment. |
| 5.1. | Initial Fees. The Initial Setup Fees and Initial Deposit set forth on the Order Form and any Hardware Deposit shall be due and payable as of the date on which Trinity Mining Technologies and Customer have both executed the Order Form. |
| 5.2. | Monthly Fees. On the first day of every month during the Term of this Agreement, Customer shall pay Trinity Mining Technologies the Monthly Service Fees and Monthly Package Fees (collectively,the "Fees") set forth on the Order Form. Trinity Mining Technologies reserves the right to adjust the Monthly Service Fees if the configuration or performance of the Equipment differs materially from that stated on the Order Form, as reasonably determined by Trinity Mining Technologies. |
| 5.3. | Taxes. All amounts payable by Customer under this Agreement are exclusive of, and Customer shall solely be responsible for paying, all taxes, duties and fees, including federal, state and local taxes on manufacture, sales, gross income, receipts, occupation and use, not based on Trinity Mining Technologies's income that arise out of this Agreement. | |
| 5.4 | Payment Method. All payments due and owing under this Agreement shall be made through automated clearing house ("ACH") transfers by Trinity Mining Technologies from an account established by Customer at a United States bank designated by Customer (the "Payment Account"). Customer hereby agrees to execute and deliver to Trinity Mining Technologies or its ACH payment agent an authorization agreement authorizing Trinity Mining Technologies to initiate ACH transfers from the Payment Account to Trinity Mining Technologies in the amounts required or permitted under this Agreement. For as long as this Agreement remains effective, Customer shall be responsible for all costs, expenses or other fees and charges incurred by Trinity Mining Technologies as a result of any failed or returned ACH transfers, whether resulting from insufficient sums being available in the Payment Account or otherwise. Any other payment method must be pre-authorized by Trinity Mining Technologies and will be subject to a fee. |
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| 6. | Network and Access. |
| 6.1. | Network. Trinity Mining Technologies will provide a minimum of 100 mbps of local network connectivity to each piece of Equipment on a single Ethernet segment. Customer may elect to use Trinity Mining Technologies's standard firewall and Dynamic Host Configuration Protocol ("DHCP") services by notifying Trinity Mining Technologies in writing. Customer is solely responsible for all network and device security, including providing an appropriate firewall and managing passwords. Customer acknowledges and agrees that Trinity Mining Technologies may monitor Customer's network usage and traffic and Customer hereby authorizes Trinity Mining Technologies to access, collect and use data relating to the Equipment and Customer's use thereof. |
| 6.2. | Access. Only those persons specifically authorized by Trinity Mining Technologies in writing may access the Facility. Trinity Mining Technologies may deny or suspend Customer's access to the Equipment based on Trinity Mining Technologies's then-current Security Policies and Procedures, which include, but are not limited to: |
| 6.2.1. | All access into the Facility must be supervised by a Trinity Mining Technologies representative; |
| 6.2.2. | Customer shall provide one (1) day' written notice to Trinity Mining Technologies prior to any maintenance or repair of the Equipment; |
| 6.2.3. | Customer shall perform Equipment maintenance and repairs during normal business hours (Monday-Friday, 7AM - 6PM Central Time); | |
| 6.2.4 | Customer may request immediate or after-hour access to the Facility to perform emergency maintenance. Trinity Mining Technologies will make every reasonable attempt to accommodate Customer's after-hour emergency access requests. |
Customer shall be solely responsible for any damage or loss caused by anyone acting for or on its behalf while at the Facility.
| 6.3. | Hazardous Conditions. If, in the reasonable discretion of Trinity Mining Technologies , any hazardous conditions arise on, from, or affecting the Facility, whether caused by Customer or a third party, Trinity Mining Technologies is hereby authorized to suspend service under this Agreement without subjecting Trinity Mining Technologies to any liability. | |
| 6.4 | Demand Response/Load Resource Participation Program. Customer acknowledges and understands that Trinity Mining Technologies participates in various Demand Response/Load Resource Participation Programs ("LRP Program") at its facilities. As set forth in the Customer Handbook, the LRP Program provides the local grid operator with the capability to shut off the power load serving Trinity Mining Technologies customers in response to emergency load situations. Customer agrees that the Fees reflect Trinity Mining Technologies 's participation in the LRP Program and that Trinity Mining Technologies shall have no liability to Customer for any actions or omissions due to or resulting from its participation in the LRP Program. |
| 7. | Removals and Relocation of Equipment. |
| 7.1. | Relocation. Trinity Mining Technologies may require Customer to relocate the Equipment within the facility or to another Trinity Mining Technologies facility upon twenty (20) days' prior written notice to Customer, provided that the site of relocation shall afford comparable environmental conditions for the Equipment and comparable accessibility to the Equipment. Notwithstanding the foregoing, Trinity Mining Technologies shall not arbitrarily or capriciously require Customer to relocate the Equipment. If the Equipment is relocated according to this Section, the reasonable costs of relocating the Equipment and improving the Facility to which the Equipment will be relocated shall be borne by Trinity Mining Technologies . |
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| 7.2. | Interference. If at any time the Equipment causes unacceptable interference to existing or prospective Trinity Mining Technologies customers or their Equipment in Trinity Mining Technologies's reasonable opinion, Trinity Mining Technologies may require Customer to remove or relocate the Equipment at Customer's sole expense. If Customer is unable to cure such interference by relocating the Equipment, Trinity Mining Technologies may terminate this Agreement without further obligation to Customer under this Agreement. |
| 7.3. | Emergency. In the event of an emergency, as determined in Trinity Mining Technologies's reasonable discretion, Trinity Mining Technologies may rearrange, remove, or relocate the Equipment without any liability to Trinity Mining Technologies . Notwithstanding the foregoing, in the case of emergency, Trinity Mining Technologies shall provide Customer, to the extent practicable, reasonable notice prior to rearranging, removing, or relocating the Equipment. | |
| 7.4 | Equipment Return. Provided that Customer has paid all amounts then due and owing under this Agreement, Trinity Mining Technologies shall decommission and make the corresponding Equipment available to Customer for pickup at, or shipment from, the Facility within five (s) business days of Customer's written request. Customer shall be responsible for packing and removing the Equipment from the Facility at its sole cost, expense and risk within seven (7) business days of the date on which Trinity Mining Technologies notifies Customer that the Equipment is available for return. If Customer does not remove the Equipment as provided herein, Customer agrees that legal title to the Equipment shall transfer to Trinity Mining Technologies . Customer shall remain liable to Trinity Mining Technologies for all amounts due for the remainder of the applicable Equipment Term for such Equipment, if any. |
| 8. | Customer Responsibilities. |
| 8.1. | Compliance with Laws. Customer's use of the Facility and the Equipment located at the Facility must at all times conform to all applicable laws, including international laws, the laws of the United States of America, the laws of the states in which Customer is doing business, and the laws of the city, county and state where the Facility is located. |
| 8.2. | Licenses and Permits. Customer shall be responsible for obtaining any licenses, permits, consents, and approvals from any federal, state or local government that may be necessary to install, possess, own, or operate the Equipment. |
| 8.3. | Insurance. Customer acknowledges that Trinity Mining Technologies is not an insurer and Equipment is not covered by any insurance policy held by Trinity Mining Technologies . Customer is solely responsible for obtaining insurance coverage for the Equipment. Customer shall have commercial general liability insurance for both bodily injury and property damage. |
| 8.4. | Equipment in Good Working Order. Except with respect to Acquired Hardware, Customer shall be responsible for delivering the Equipment to the Facility in good working order and suitable for use in the Facility. Customer shall be responsible for any and all costs associated with the troubleshooting and repair of Equipment received in non-working order, including parts and labor at Trinity Mining Technologies 's then-current rates. Trinity Mining Technologies is not responsible in any way for installation delays or loss of profits as a result of Equipment deemed not to be in good working order upon arrival at Facility. |
| 8.5. | Representations. Customer represents and warrants that (i) it is properly constituted and organized, (ii) it is duly authorized to enter into and perform this Agreement, and (iii) the execution and delivery of this Agreement and its performance of its duties hereunder will not violate the terms of any other agreement to which it is a party or by which it is bound. |
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| 9. | Common Carrier. Trinity Mining Technologies and Customer agree that Trinity Mining Technologies is acting solely as a common carrier in its capacity of providing the Service hereunder and is not a publisher of any material or information. Furthermore, Trinity Mining Technologies has no right or ability to censor materials or information traversed through Trinity Mining Technologies's networks. |
| 10. | Limitation of Liability. |
| 10.1. | Customer understands and acknowledges that, in certain situations, Services and Equipment functionality may be unavailable due to factors outside of Trinity Mining Technologies 's control. This includes, but is not limited to force majeure, weather, network failures, pool operator failures, denial of service attacks, currency network outages, hacking or malicious attacks on the crypto networks or exchanges, power outages, or Acts of God. TRINITY MINING TECHNOLOGIES SHALL HAVE NO OBLIGATION, RESPONSIBILITY, OR LIABILITY FOR ANY OF THE FOLLOWING: (A) ANY INTERRUPTION OR DEFECTS IN THE EQUIPMENT FUNCTIONALITY CAUSED BY FACTORS OUTSIDE OF TRINITY MINING TECHNOLOGIES'S REASONABLE CONTROL; (B) ANY LOSS, DELETION, OR CORRUPTION OF CUSTOMER'S DATA OR FILES WHATSOEVER; (C) ANY LOST REVENUE TO CUSTOMER DURING OUTAGES, EQUIPMENT FAILURES, ETC.; (D) DAMAGES RESULTING FROM ANY ACTIONS OR INACTIONS OF CUSTOMER OR ANY THIRD PARTY NOT UNDER TRINITY MINING TECHNOLOGIES'S CONTROL; OR (E) DAMAGES RESULTING FROM EQUIPMENT OR ANY THIRD PARTY EQUIPMENT. |
| 10.2. | IN NO EVENT SHALL TRINITY MINING TECHNOLOGIES BE LIABLE TO CUSTOMER OR ANY OTHER PERSON, FIRM, OR ENTITY IN ANY RESPECT, INCLUDING, WITHOUT LIMITATION, FOR ANY INDIRECT, CONSEQUENTIAL, SPECIAL, INCIDENTAL OR PUNITIVE DAMAGES, INCLUDING LOSS OF PROFITS OF ANY KIND OR NATURE WHATSOEVER, ARISING OUT OF MISTAKES, NEGLIGENCE, ACCIDENTS, ERRORS, OMISSIONS, INTERRUPTIONS, OR DEFECTS IN TRANSMISSION, OR DELAYS, INCLUDING, BUT NOT LIMITED TO, THOSE THAT MAY BE CAUSED BY REGULATORY OR JUDICIAL AUTHORITIES ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OBLIGATIONS OF TRINITY MINING TECHNOLOGIES PURSUANT TO THIS AGREEMENT. TRINITY MINING TECHNOLOGIES 'S TOTAL CUMULATIVE LIABILITY UNDER THIS AGREEMENT, WHETHER UNDER CONTRACT LAW, TORT LAW, WARRANTY, OR OTHERWISE, SHALL BE LIMITED TO DIRECT DAMAGES NOT TO EXCEED THE AMOUNTS ACTUALLY RECEIVED BY TRINITY MINING TECHNOLOGIES FROM CUSTOMER IN THE TWELVE (12) MONTHS PRIOR TO THE DATE OF THE EVENT GIVING RISE TO THE CLAIM. |
| 10.3. | Remedy. Customer's sole remedy for Trinity Mining Technologies's non-performance of its obligations under this Agreement shall be a refund of any fees paid to Trinity Mining Technologies for the then-current service month. Unless applicable law requires a longer period, any action against Trinity Mining Technologies in connection with this Agreement must be commenced within one (1) year after the cause of the action has accrued. |
| 10.4. | Insurance loss. Customer agrees to look exclusively to Customer's insurer to recover for injury or damage in the event of any loss or injury, and releases and waives all right of recovery against Trinity Mining Technologies . |
| 11. | Indemnification. Customer shall indemnify, hold harmless and defend Trinity Mining Technologies employees, agents, directors, owners, executives, representatives, and subcontractors from any and all third-party liability, claim,judgment, loss, cost, expense or damage, including attorneys' fees and legal expenses, arising out of or relating to the Equipment or Customer's use thereof, or any injuries or damages sustained by any person or property due to any direct or indirect act, omission, negligence or misconduct of Customer, its agents, representatives, employees, contractors and their employees and subcontractors and their employees, including due to a breach of this Agreement by Customer. Customer shall not enter into any settlement or resolution with a third party under this section without Trinity Mining Technologies's prior written consent, which shall not be unreasonably withheld. |
| 5 |
| 12. | Miscellaneous. |
| 12.1. | Entire Agreement. This Agreement, including the Order Form and any documents referenced herein, constitutes the parties' entire understanding regarding its subject and supersedes all prior or contemporaneous communications, agreements and understanding between them relating thereto. Customer acknowledges and agrees that it has not, and will not, rely upon any representations, understandings, or other agreements not specifically set forth in this Agreement. This Agreement shall not be superseded, terminated, modified or amended except by express written agreement of the parties that specifically identifies this Agreement. |
| 12.2. | Creditworthiness. Customer solvency and ability to fund necessary security deposits and capital expenditures associated with the commitment to utilize such power is a requirement by Trinity Mining Technologies and associated power purchase agreement. Entire agreement and terms set forth herein are subject to verification and validation of customer's credit worthiness and ability to fulfill its' monthly hosting obligation as a tenant in a Trinity Mining Technologies data center. If Trinity deems the customer does not have the ability to fulfill the obligations as a paying customer for the power capacity requested, at their sole discretion, this agreement can be considered null and void. |
| 12.3. | Site specific. Trinity Mining Technologies reserves the right to locate the customer at any hosting facility that has the necessary power capacity needs of the customer, whether directly owned or indirectly involved in said site. | |
| 12.4 | Trinity Mining Technologies. Trinity Mining Technologies maintains the ability to |
| 12.5. | Waiver, Severability. The waiver of any breach or default does not constitute the waiver of any subsequent breach or default. If any provision of this Agreement is held to be illegal or unenforceable, it shall be deemed amended to conform to the applicable laws or regulations, or, if it cannot be so amended without materially altering the intention of the parties, it shall be stricken and the remainder of this Agreement shall continue in full force and effect. |
| 12.6. | Assignment. Neither this Agreement nor any right or obligation arising under this Agreement may be assigned by Customer in whole or in part, without the prior written consent of Trinity Mining Technologies at its sole discretion. Trinity Mining Technologies may at any time assign, transfer, delegate or subcontract any or an of its rights or obligations under this Agreement without Customer's prior written consent. Subject to the restrictions on assignment of this Agreement, this Agreement shall be binding upon and inure to the benefit of the parties, their legal representatives, successors, and assigns. |
| 12.7. | Force Majeure. Neither party shall be liable in any way for delay,failure in performance, loss or damage due to any of the following force majeure conditions: fire, strike, embargo explosion, power failure, flood, lightning, war, water, electrical storms, labor disputes, civil disturbances, governmental requirements, acts of civil or military authority, acts of God acts of public enemies, inability to secure replacement parts or materials, transportation facilities, or other causes beyond its reasonable control, whether or not similar to the foregoing. This also includes planned service and maintenance needs. |
| 12.8. | Governing Law. This Agreement shall be governed by and interpreted in accordance with the laws of the State of Minnesota, without giving effect to principals of conflicts of laws. Any action arising out of or relating to this Agreement shall be brought only in the state or federal courts located in the State of Minnesota, and Recipient consent to the exclusive jurisdiction and venue of such courts. An action by a party to enforce any provision of this Agreement shall not relieve the other party from any of its obligations under this Agreement, and no failure to enforce any provision of this Agreement shall constitute a waiver of any future default or breach of that or any other provision. |
| 6 |
| 12.9. | Relationship of the Parties. The parties agree that their relationship hereunder is in the nature of independent contractors. Neither party shall be deemed to be the agent, partner, joint venturer or employee of the other, and neither shall have any authority to make any agreements or representations on the other's behalf. Each party shall be solely responsible for the payment of compensation, insurance and truces of its own personnel, and such personnel are not entitled to the provisions of any employee benefits from the other party. Neither party shall have any authority to make any agreements or representations on the other's behalf without the other's written consent. Additionally, Trinity Mining Technologies shall not be responsible for any costs and expenses arising from Customer's performance of its duties and obligations pursuant to this Agreement. |
| 12.10. | Third-Party Beneficiaries. Nothing in this Agreement is intended, nor shall anything herein be construed to confer any rights, legal or equitable, in any person or entity other than the parties hereto and their respective successors and permitted assigns. |
| 12.11. | Construction: Interpretation. Unless the context otherwise requires, words in the singular include the plural, and in the plural include the singular; masculine words include the feminine and neuter; "or" means "either or both" and shall not be construed as exclusive; "including" means "including but not limited to"; "any" and "all" shall not be construed as terms of limitation; and, a reference to a thing (including any right or other intangible as set) includes any part or the whole thereof. Any rule of construction to the effect that ambiguities are to be resolved against the drafting party shall not apply to the interpretation and construction of this Agreement, and this Agreement shall be construed as having been jointly drafted by the parties. The titles and headings for particular paragraphs, sections and subsections of this Agreement have been inserted solely for reference purposes and shall not be used to interpret or construe the terms of this Agreement. |
| 12.12. | Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but which together shall constitute one and the same document. |
IN WITNESS WHEREOF, the parties have executed this Agreement in a manner appropriate to each and with the authority to do so as of the date set forth below.
| Trinity Mining Team | Customer: | ||
| By: /s/ Parker Handlow | By: /s/ Simon Wajcenberg | ||
| Name: Parker Handlow | Name: Simon Wajcenberg | ||
| Its: Manager | Its: Director |
| 7 |
Document Ref: RXU7R - FDPBZ - FN5HR - BUBRP Page 1 of 10
Document Ref: RXU7R - FDPBZ - FN5HR - BUBRP Page 2 of 10
Simon Wajcenberg Director Document Ref: RXU7R - FDPBZ - FN5HR - BUBRP Page 10 of 10
Signature Certificate Document Ref.: RXU7R - FDPBZ - FN5HR - BUBRP Document signed by: Simon Wajcenberg E - mail: sw@northblock.io Signed via link IP: 65.166.245.203 Date: 09 Aug 2021 17:26:39 UTC Document completed by all parties on: 09 Aug 2021 17:26:39 UTC Page 1 of 1 Signed with PandaDoc.com PandaDoc is a document workflow and certified eSignature solution trusted by 25,000+ companies worldwide.
SA au capital de 1 596 908.70€ - Siret : 48378434400028 – Code NAF : 7022Z – N Σ de TVA : FR50483784344 2CRSI | www.2crsi.com | contact@2crsi.com | 32 rue Jacobi - Netter, 67200 Strasbourg | Tél : +33 (0) 3 68 41 10 60 Qty Brand P/N Unit Price total Pre - payment 36 Octopus server including 8 x Nvidia RTX 2CRSI Octopus 1.13H $ 2,800.00 $ 100,800.00 1 Motherboard Single socket 1151 Intel® i7/i5/i3/Pentium/Celeron GbE port with RJ45 connector 1 Intel ® Pentium® Processor G4400 (2 - cores, 3MB Cache, 3.3GHz, 54W) 1 x 8 GB DDR4 unbuffured 1 SSD - 32GB - SATA 5 GPU CUDA Cores: 3072 / Tensor Cores: 384 / RT Cores: 48 / 16 GB GDDR6 with ECC 3 GPU CUDA Cores: 8704 / Tensor Cores: 272 / RT Cores: 68 / 10 GB GDDR6 with ECC 1 Assembly and initial tests 1 Rack + network + Internet connection + cables + cabling INTEL NVIDIA NVIDIA PENTIUM G4400 QUADRO RTX5000 QUADRO RTX3080 24 month $ 435.00 $ 15,660.00 puissance de calcul 490.50 MH/s 17658.00 MH/s powe r comsumption 1300.00 W 46.80 kW expected revenue 24m (8th July 21)* $ 26,104.80 $ 939,772.80 rentability of your pre - payment in 77.23 days Additionnal costs : hosting in Nanterre : $150 per MWh + monthly $100 per kW (expected until mid - April) hosting in USA : $50 per MWh + monthly $50 per kW (expected from mid - April) Validity : 8/07/2021 Leadtime : the NVIDIA RTX servers can be ready in 2 or 3 weeks 32 rue Jacobi - Netter - 67200 Strasbourg - France 2crsi.fr Proforma N ƒ PI10708 - 01 DATE : 07/02/2021 Sales representative : Fred RASSAM Mobile : +1 707 874 8759 E - Mail : fra@2crsi.com Project manager : Andrei Nadai Mobile : +33 783 18 65 22 E - Mail : an@2crsi.com Please go ahead 07 / 08 / 2021 Document Ref: PTJGE - MPAWU - X48YV - GUQLC Page 1 of 1
Signature Certificate Document Ref.: PTJGE - MPAWU - X48YV - GUQLC Document signed by: Simon Wajcenberg E - mail: sw@northblock.io Signed via link IP: 31.49.147.193 Date: 08 Jul 2021 07:44:56 UTC Document completed by all parties on: 08 Jul 2021 07:44:56 UTC Page 1 of 1 Signed with PandaDoc.com PandaDoc is a document workflow and certified eSignature solution trusted by 25,000+ companies worldwide.
SA au capital de 1 596 908.70€ - Siret : 48378434400028 – Code NAF : 7022Z – N Σ de TVA : FR50483784344 2CRSI | www.2crsi.com | contact@2crsi.com | 32 rue Jacobi - Netter, 67200 Strasbourg | Tél : +33 (0) 3 68 41 10 60 * estimation from https://whattomine.com/ with difficulty for revenue "average last 24h" Additionnal costs : hosting in Nanterre : $150 per MWh + monthly $100 per kW (expected until mid - April) hosting in USA : $50 per MWh + monthly $50 per kW (expected from mid - April) Validity : 25/03/2021 Leadtime : VEGA servers will be ready in few days in USA, and the NVIDIA RTX servers can be ready in 2 or 3 weeks Qty 648 Brand P/N Un i t Pr i ce total For each server with RTX, you will able to get two with AMD VEGA 10XT Pre - payment 72 Octopus server including 8 x AMD VEGA 10XT 2CRSI Octopus 1.13H $ 2,744.00 $ 197,568.00 1 Motherboard Single socket 1151 Intel® i7/i5/i3/Pentium/Celeron GbE port with RJ45 connector 1 Intel ® Pentium® Processor G4400 (2 - cores, 3MB Cache, 3.3GHz, 54W) 1 x 8 GB DDR4 unbuffured 1 SSD - 32GB - SATA 8 GPU Radeon VEGA 10XT 8GB HBM2 1 Assembly and initial tests 1 Rack + network + Internet connection + cables + cabling INT E L AMD PENTIUM G4400 RADEON VEGA 10XT 24 month $ 344.00 $ 24,768.00 computing power 390.00 MH/s 28080.00 MH/s power comsumption 1774.00 W 127.73 kW expected revenue 24m (on 3/25/2021)* $ 27,703.50 ########### rentability of your pre - payment in 53.49 days Pre - payment 36 Octopus server including 8 x Nvidia RTX 2CRSI Octopus 1.13H $ 2,840.00 $ 102,240.00 1 Motherboard Single socket 1151 Intel® i7/i5/i3/Pentium/Celeron GbE port with RJ45 connector 1 Intel ® Pentium® Processor G4400 (2 - cores, 3MB Cache, 3.3GHz, 54W) 1 x 8 GB DDR4 unbuffured 1 SSD - 32GB - SATA 6 GPU CUDA Cores: 3072 / Tensor Cores: 384 / RT Cores: 48 / 16 GB GDDR6 with EC 2 GPU CUDA Cores: 5888 / Tensor Cores: 184 / RT Cores: 46 / 8GB GDDR6 1 Assembly and initial tests 1 Rack + network + Internet connection + cables + cabling INTEL NVI D I A NVI D I A PENTIUM G4400 QUADRO RTX5000 Geforce RTX3070 24 month $ 410.00 $ 14,760.00 puissance de calcul 342.00 MH/s 12312.00 MH/s power comsumption 1200.00 W 43.20 kW expected revenue 24m (on 3/25/2021)* $ 24,221.40 $ 871,970.40 rentability of your pre - payment in 63.32 days 32 rue Jacobi - Ne/er - 67200 Strasbourg - France 2crsi.fr Proforma N ƒ PI10325 - 01 DATE : 25/03/2021 Sales representative : Fred RASSAM Mobile : +1 707 874 8759 E - Mail : fra@2crsi.com Project manager : Andrei Nadai Mobile : +33 783 18 65 22 E - Mail : an@2crsi.com Order Approved 2021 - 03 - 26 Document Ref: AXH8R - NWQMT - DMESL - 8NOK8 Page 1 of 1
Signature Certificate Document Ref.: AXH8R - NWQMT - DMESL - 8NOK8 Document signed by: Charlie Faulkner E - mail: cha rli e@edgemode .io Signed via link IP: 2.122.235.5 Date: 26 Mar 2021 11:00:56 UTC Document completed by all parties on: 26 Mar 2021 11:00:56 UTC Page 1 of 1 Signed with PandaDoc.com PandaDoc is the document platform that boosts your company's revenue by accelerating the way it transacts.
SA au capital de 1 596 908.70€ - Siret : 48378434400028 – Code NAF : 7022Z – N Σ de TVA : FR50483784344 2CRSI | www.2crsi.com | contact@2crsi.com | 32 rue Jacobi - Netter, 67200 Strasbourg | Tél : +33 (0) 3 68 41 10 60 Qty 324 Brand P/N Unit Price total For each server with 9 x RTX5000, you will able to get one with 8 x AMD VEGA 10XT Pre - payment 36 Octopus server including 8 x AMD VEGA 10XT 2CRSI Octopus 1.13H $ 3,350.00 $ 120,600.00 1 Motherboard Single socket 1151 Intel® i7/i5/i3/Pentium/Celeron 2 GbE port with RJ45 connector 1 Management port IPMI 2.0 + iKVM 1 Intel ® Pentium® Processor G4400 (2 - cores, 3MB Cache, 3.3GHz, 54W) 1 x 8 GB DDR4 with unbuffered ECC 1 SSD - 32GB - SATA 8 GPU Radeon VEGA 10XT 8GB HBM2 1 Assembly and initial tests 1 Rack + network + Internet connection + cables + cabling Supermicro Aspeed INTEL AMD X11SSM - F AST2500 PENTIUM G4400 RADEON VEGA 10XT leasing per month, 24 months $ 320.00 $ 11,520.00 computing power 392.00 MH/s 14112.00 MH/s power comsumption 1774.00 W 63.86 kW expected revenue 24m (on 2/19/2021) $ 36,864.00 $ 1,327,104.00 rentability of your pre - payment in 49.07 days Pre - payment 36 Octopus server including 9 x Nvidia Quadro RTX5000 2CRSI Octopus 1.13H $ 2,200.00 $ 79,200.00 1 Motherboard Single socket 1151 Intel® i7/i5/i3/Pentium/Celeron 2 GbE port with RJ45 connector 1 Management port IPMI 2.0 + iKVM 1 Intel ® Pentium® Processor G4400 (2 - cores, 3MB Cache, 3.3GHz, 54W) 1 x 8 GB DDR4 with unbuffered ECC 1 SSD - 32GB - SATA 9 GPU CUDA Cores: 3072 / Tensor Cores: 384 / RT Cores: 48 / 16 GB GDDR6 with ECC 1 Assembly and initial tests 1 Rack + network + Internet connection + cables + cabling Supermicro Aspeed INTEL NVIDIA X11SSM - F AST2500 PENTIUM G4400 QUADRO RTX5000 leasing per month, 24 months $ 590.00 $ 21,240.00 computing power 334.80 MH/s 12052.80 MH/s power comsumption 1250.00 W 45.00 kW expected revenue 24m (on 2/19/2021) $ 30,480.00 $ 1,097,280.00 rentability of your pre - payment in 38.98 days Additionnal costs : hosting in Nanterre : $150 per MWh + monthly $100 per kW (expected until begin April) hosting in USA : $50 per MWh + monthly $50 per kW (expected from begin April) Validity : end of februar 2021 32 rue Jacobi - Netter - 67200 Strasbourg - France 2crsi.fr Proforma N ƒ PI10219 - 01 DATE : 19/02/2021 Sales representative : Fred RASSAM Mobile : +1 707 874 8759 E - Mail : fra@2crsi.com Project manager : Andrei Nadai Mobile : +33 783 18 65 22 E - Mail : an@2crsi.com OK for Order Signed on behalf of EdgeMode Inc Simon Wajcenberg Director Document Ref: V6MK9 - ONZEV - EQNQ5 - YRPPA Page 1 of 1
Signature Certificate Document Ref.: V6MK9 - ONZEV - EQNQ5 - YRPPA Document signed by: Simon Wajcenberg Verified E - mail: sw@no rt hb l ock .io I P : 86 . 141 . 42 . 5 8 Date: 19 Feb 2021 09:47:23 UTC Document completed by all parties on: 19 Feb 2021 09:47:23 UTC Page 1 of 1 Signed with PandaDoc.com PandaDoc is the document platform that boosts your company's revenue by accelerating the way it transacts.
Exhibit 10.7
| 1 |
| 2 |
| 3 |
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
Fourth Wave Energy, Inc.
We hereby consent to the inclusion of our report dated January 28, 2022 relating to the financial statements of EdgeMode as of December 31, 2020 and the period from inception (March 9, 2020) to December 31, 2020 in the Current Report on Form 8-K filed by Fourth Wave Energy, Inc. on February 4, 2022, and to all references to our firm included therein.
/s/ M&K CPAS, PLLC
Houston, Texas
February 4, 2022
Exhibit 99.1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders of EdgeMode
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of EdgeMode (the Company) for the year ended December 31 2020, and the related consolidated statements of operations, stockholders’ deficit, and cash flows for the period of March 9, 2020 (inception) to December 31 2020, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company for the period of March 9, 2020 (inception) to December 31 2020, and the results of its operations and its cash flows for the period of March 9, 2020 (inception) to December 31 2020, in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company suffered a net loss from operations and has a net capital deficiency, which raises substantial doubt about its ability to continue as a going concern. Management's plans regarding those 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 financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s 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 audit to obtain reasonable assurance about whether the 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 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 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 financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the 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 financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
As discussed in Note 3 to the financial statements, the Company had a going concern due to operations beginning in 2020 and incurred a cumulative net loss since their inception which resulted in stockholders’ deficiency.
Auditing management’s evaluation of a going concern can be a significant judgment given the fact that the Company uses management estimates on future revenues and expenses which are not able to be substantiated.
To evaluate the appropriateness of the going concern, we examined and evaluate the financial information that was the initial cause along with management’s plans to mitigate the going concern and management’s disclosure on going concern.
/s/ M&K CPAS, PLLC
We have served as the Company’s auditor since 2021.
Houston, TX
January 28, 2022
| 1 |
EdgeMode
Balance Sheet
| December 31, 2020 | ||||
| ASSETS | ||||
| Current assets: | ||||
| Cash | $ | 62,435 | ||
| Total current assets | 62,435 | |||
| Equipment, net | 318,500 | |||
| Total assets | $ | 380,935 | ||
| LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||
| Current liabilities: | ||||
| Accounts payable and accrued expenses | $ | 20,000 | ||
| Total current liabilities | 20,000 | |||
| Total liabilities | 20,000 | |||
| Commitments and contingencies | – | |||
| Stockholders' equity: | ||||
| Preferred shares, 300,000 shares authorized, No Par Value; no shares issued and outstanding | – | |||
| Common shares, 3,000,000 shares authorized, No Par Value; 1,166,652 shares issued and outstanding | 436,311 | |||
| Accumulated deficit | (75,376 | ) | ||
| Stockholders' equity | 360,935 | |||
| Total liabilities and stockholders' equity | $ | 380,935 | ||
See accompanying notes to the financial statements.
| 2 |
EdgeMode
Statements of Operations
| For the period of | ||||
| March 9, 2020 (inception) to | ||||
| December 31, 2020 | ||||
| Operating expenses: | ||||
| General and administrative expenses | $ | 75,376 | ||
| Total operating expenses | 75,376 | |||
| Loss from operations | (75,376 | ) | ||
| Loss before provision for income taxes | (75,376 | ) | ||
| Provision for income taxes | – | |||
| Net loss | $ | (75,376 | ) | |
| Loss per common share - basic and diluted | $ | (0.07 | ) | |
| Weighted average shares outstanding - basic and diluted | 1,133,874 | |||
See accompanying notes to the financial statements.
| 3 |
EdgeMode
Statements of Stockholders’ Equity
For the period of March 9, 2020 (Inception) to December 31, 2020
| Common | Total | |||||||||||||||
| Common | Stock | Accumulated | Stockholders' | |||||||||||||
| Shares | Amount | Deficit | Deficit | |||||||||||||
| Shares issued to founders upon inception | 1,000,000 | $ | – | $ | – | $ | – | |||||||||
| Shares issued in exchange for cash | 27,522 | 62,499 | – | 62,499 | ||||||||||||
| Shares issued in exchange for assets | 139,130 | 318,500 | – | 318,500 | ||||||||||||
| Stock based compensation | – | 55,312 | – | 55,312 | ||||||||||||
| Net loss | – | – | (75,376 | ) | (75,376 | ) | ||||||||||
| Balance December 31, 2021 | 1,166,652 | 436,311 | (75,376 | ) | 360,935 | |||||||||||
See accompanying notes to the financial statements.
| 4 |
EdgeMode
Statements of Cash Flows
| For the period of | ||||
| March 9, 2020 (inception) to | ||||
| December 31, 2020 | ||||
| Operating Activities: | ||||
| Net loss | $ | (75,376 | ) | |
| Adjustments to reconcile net loss to net cash used in operating activities | ||||
| Stock based compensation | 55,312 | |||
| Changes in operating assets and liabilities: | ||||
| Accounts payable and accrued expenses | 20,000 | |||
| Net cash used in operating activities | (64 | ) | ||
| Financing Activities: | ||||
| Proceeds from issuance of common shares | 62,499 | |||
| Net cash provided by financing activities | 62,499 | |||
| Net change in cash | 62,435 | |||
| Cash - beginning of period | – | |||
| Cash - end of period | $ | 62,435 | ||
| Supplemental Disclosures: | ||||
| Interest paid | $ | – | ||
| Income taxes paid | $ | – | ||
| Supplemental Disclosures of Noncash Financing Information: | ||||
| Shares issued for assets | $ | 318,500 | ||
See accompanying notes to the financial statements.
| 5 |
EdgeMode
Notes to Financial Statements
As of December 31, 2020
NOTE 1 – Nature of Operations
EDGEMODE (which may be referred to as the “Company”, “we,” “us,” or “our”) is a corporation organized under the laws of Wyoming. The Company was originally incorporated as EdgeMode LLC on March 9, 2020 and then converted EdgeMode as of June 17, 2020. The Company is engaged in the cryptocurrency sector, mainly in digital currency mining and high-performance computing.
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.
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.
Fixed Assets
Equipment is recorded at cost. Expenditures for renewals and improvements that significantly add to the productive capacity or extend the useful life of an asset are capitalized. Expenditures for maintenance and repairs are expensed. When equipment is retired or sold, the cost and related accumulated depreciation are eliminated from the accounts and the resultant gain or loss is reflected in income.
Depreciation is provided using the straight-line method, based on useful lives of the assets which range from three to fifteen years.
The Company reviews the carrying value of property and equipment for impairment whenever events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value, an impairment loss is recognized equal to an amount by which the carrying value exceeds the fair value of the assets. The factors considered by management in performing this assessment include current operating results, trends and prospects, the manner in which the property is used, and the effects of obsolescence, demand, competition, and other economic factors.
| 6 |
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. |
The Company has no assets or liabilities valued using level 1, level 2, or level 3 inputs as of December 31, 2020.
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.
| 7 |
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 fractional share of the fixed cryptocurrency award the mining pool operator receives (less digital asset transaction fees to the mining pool operator which are recorded as a component of cost of revenues), for successfully adding a block to the blockchain. The terms of the agreement provides that neither party can dispute settlement terms after thirty-five days following settlement. The Company’s fractional 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 consideration is constrained until the mining pool operator successfully places a block (by being the first to solve an algorithm) and the Company receives confirmation of the consideration it will receive, 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. There is currently no specific definitive guidance under GAAP or alternative accounting framework for the accounting for cryptocurrencies recognized as revenue or held, and management has exercised significant judgment in determining the appropriate accounting treatment. In the event authoritative guidance is enacted by the FASB, the Company may be required to change its policies, which could have an effect on the Company’s consolidated financial position and results from operations.
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.
The Company accounts for equity-based transactions with non-employees under the provisions of ASC Topic No. 505-50, “Equity-Based Payments to Non-Employees” (“Topic No. 505-50”). Topic No. 505-50 establishes that equity-based payment transactions with non-employees shall be measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable.
Advertising
The Company expenses advertising costs as they are incurred.
Recent Accounting Pronouncements
There are no recently issued accounting pronouncements that the Company has yet to adopt that are expected to have a material effect on its financial position, results of operations, or cash flows.
| 8 |
NOTE 3 – Going Concern
These financial statements are prepared on a going concern basis. The Company began operation in 2020 and incurred a cumulative loss since inception. The Company’s ability to continue is dependent upon management’s plan to raise additional funds and achieve profitable operations. These matters raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary if the Company is not able to continue as a going concern.
NOTE 4 – Fixed Assets
During the year ended December 31, 2020 the Company issued 139,130 common shares in exchange for fixed assets valued at $318,500 based on the fair value of the assets purchased from an entity controlled by Roger Dixon, who was a director of the Company at the time of the transaction. As of December 31, 2020 the assets had not yet been placed in service as the company was still awaiting physical delivery of the assets.
NOTE 5 – Equity
The Company has authorized 3,000,000 shares, no par value and has issued 1,166,652 shares of common stock. All of the common shares have the same voting rights and liquidation preferences. The Company has also authorized 300,000 shares of preferred stock, no par value. No preferred shares are issued as of this date.
During the period from March 9, 2020 (inception) to December 31, 2020, the company issued 1,000,000 shares to the founders.
During the period from March 9, 2020 (inception) to December 31, 2020, the Company issued 27,522 common shares for cash proceeds of $62,499.
During the period from March 9, 2020 (inception) to December 31, 2020, the Company issued 139,130 common shares in exchange for fixed assets valued at $318,500.
During the period from March 9, 2020 (inception) to December 31, 2020, the Company issued an option to purchase 48,519 common shares in exchange for services valued at $110,623. The options have an exercise price of $0.00, vest 50% immediately and the remaining 50% on a quarterly basis through April 2, 2022 and have a contractual term of 10 years. The company expensed $55,312 as of December 31, 2020 and the company will expense the remaining $55,311 over the remaining vesting period. Subsequent to December 31, 2020, the Company accelerated the vesting terms to allow the holder to exercise the option immediately.
NOTE 6 – Related Party Transactions
As of December 31, 2020, the Company has accrued $20,000 for officer compensation.
During the period from March 9, 2020 (inception) to December 31, 2020, the Company issued 1,000,000 shares to the founders.
During the year ended December 31, 2020 the Company issued 139,130 common shares in exchange for fixed assets valued at $318,500 based on the fair value of the assets purchased from an entity controlled by Roger Dixon, who was a director of the Company at the time of the transaction.
NOTE 7 – Income Tax Provision
Deferred taxes are determined by applying the provisions of enacted tax laws and rates for the jurisdictions in which the Company operates to the estimated future tax effects of the differences between the tax basis of assets and liabilities and their reported amounts in the Company's financial statements. A valuation allowance is established to reduce deferred tax assets if it is more likely than not that the related tax benefits will not be realized.
| 9 |
The statutory tax rate for 2020 was 21%. The provision for income taxes is different from that which would be obtained by applying the statutory federal income tax rate to income before income taxes.
The Company's cumulative net operating loss carry forward is trivial as of December 31, 2020 due to limited operations.
Management currently believes that since the Company has a history of losses it is more likely than not that the deferred tax regarding the loss carry forwards and other temporary differences will not be realized in the foreseeable future.
The Company has recorded no liability for income taxes associated with unrecognized tax benefits at the date of adoption and has not recorded any liability associated with unrecognized tax benefits during 2020. Accordingly, the Company has not recorded any interest or penalty in regard to any unrecognized benefit.
NOTE 8 – Commitments and Contingencies
Legal Contingencies
There are no material pending legal proceedings to which we are a party or to which any of our property is subject, nor are there any such proceedings known to be contemplated by governmental authorities. None of our directors, officers or affiliates is involved in a proceeding adverse to our business or has a material interest adverse to our business.
NOTE 9 – Subsequent Events
Subsequent events have been evaluated subsequent to the consolidated balance sheet date of September 30, 2021 through January 28, 2022, the date these condensed consolidated financial statements were available for issuance.
Subsequent to December 31, 2020 the company issued 125,001 preferred shares for total cash proceeds of $382,480. In connection with the fundraising the company paid $47,500 in advisory fees to a related party. In addition, the company issued 2,206 preferred shares with a total fair value of $6,750 for services.
Subsequent to December 31, 2020 the company issued 300,119 common shares for total cash proceeds of $2,943,551. In connection with the fundraising the company paid $277,250 in advisory fees, of which $268,500 were paid to a related party, for net cash proceeds of $2,666,301,301. In addition, the Company issued 2,242 common shares as compensation to a unrelated third party as compensation for services.
Subsequent to December 31, 2020, the company issued 412,411 options to purchase common shares in exchange for services with a fair value of $3,325,353. Of those issued, 137,473 options were cancelled and the total remaining outstanding options, 323,457 total, were exercised into shares of common stock.
Subsequent to December 31, 2020, the Company purchased equipment necessary to perform the planned mining activities with a value of $2,441,591. The company financed the purchase of these assets with the vendor which required down payments of $600,408, with the remaining portion of the balance to be paid in 24 monthly payments.
On September 30, 2021, the Company entered into a note payable agreement for proceeds of $750,000 to assist in securing hosting facilities. The note bears interest at 16% per annum and is due and payable on March 31, 2022.
On October 21, 2021, the Company entered into a note payable agreement for proceeds of $100,000 to assist in securing hosting facilities from Fourth Wave. The note bears interest at 16% per annum and is due and payable on April 21, 2022.
On December 2, 2021, the Company entered into an agreement and plan for merger with Fourth Wave Energy, Inc. (“Fourth Wave”), whereby at closing Fourth Wave with merge with and into the Company, with Company remaining as the surviving entity. In the merger, the shares of common stock of the Company will be exchanged for shares of Fourth Wave, that will, upon issuance, represent 80% of Fourth Wave’s outstanding common stock on a fully diluted basis.
On December 10, 2021, the Company entered into a note payable agreement for proceeds of $770,000 to assist in securing hosting facilities from Fourth Wave. The note bears interest at 16% per annum and is due and payable on June 10, 2022.
| 10 |
Exhibit 99.2
EdgeMode
Balance Sheet
(Unaudited)
| September 30, 2021 | December 31, 2020 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | 1,479,542 | $ | 62,435 | ||||
| Prepaid expenses and other current assets | 30,670 | – | ||||||
| Total current assets | 1,510,212 | 62,435 | ||||||
| Intangible assets - cryptocurrencies | 206,392 | – | ||||||
| Equipment, net | 3,192,536 | 318,500 | ||||||
| Total assets | $ | 4,909,140 | $ | 380,935 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | 445,806 | $ | 20,000 | ||||
| Accrued dividends | 31,069 | – | ||||||
| Equipment notes payable | 955,034 | – | ||||||
| Notes payable | 831,192 | – | ||||||
| Total current liabilities | 2,263,101 | 20,000 | ||||||
| Equipment notes payable, net of current | 605,347 | – | ||||||
| Total liabilities | 2,868,448 | 20,000 | ||||||
| Commitments and contingencies | ||||||||
| Preferred shares, 300,000 shares authorized, No par value; 127,207 and zero shares issued and outstanding, September 30, 2021 and December 31, 2020, respectively. | 341,730 | – | ||||||
| Stockholders' equity: | ||||||||
| Common shares, 3,000,000 shares authorized, No par value; 1,497,950 and 1,166,652 shares issued and outstanding, September 30, 2021 and December 31, 2020, respectively | 4,842,725 | 436,311 | ||||||
| Accumulated deficit | (3,143,763 | ) | (75,376 | ) | ||||
| Stockholders' equity | 1,698,962 | 360,935 | ||||||
| Total liabilities and stockholders' equity | $ | 4,909,140 | $ | 380,935 | ||||
See accompanying notes to the unaudited financial statements.
| 1 |
EdgeMode
Statements of Operations
(Unaudited)
Nine months ended September 30, 2021 | For the period of March 9, 2020 (inception) to September 30, 2020 | |||||||
| Revenue | $ | 1,175,013 | $ | – | ||||
| Cost of Revenue | 935,273 | – | ||||||
| Gross Profit | 239,740 | – | ||||||
| Operating expenses: | ||||||||
| General and administrative expenses | 3,095,141 | 48 | ||||||
| Total operating expenses | 3,095,141 | 48 | ||||||
| Loss from operations | (2,855,401 | ) | (48 | ) | ||||
| Other expense: | ||||||||
| Interest expense | (126,276 | ) | – | |||||
| Other expense | (55,641 | ) | – | |||||
| Total other expense, net | (181,917 | ) | – | |||||
| Loss before provision for income taxes | (3,037,318 | ) | (48 | ) | ||||
| Provision for income taxes | – | – | ||||||
| Net loss | (3,037,318 | ) | (48 | ) | ||||
| Preferred Dividends | (31,069 | ) | – | |||||
| Net loss to common shareholders | $ | (3,068,387 | ) | $ | (48 | ) | ||
| Loss per common share - basic and diluted | $ | (2.30 | ) | $ | (0.00 | ) | ||
| Weighted average shares outstanding - basic and diluted | 1,332,146 | 1,119,406 | ||||||
See accompanying notes to the unaudited financial statements.
| 2 |
EdgeMode
Statements of Stockholders’ Equity (Deficit)
For the nine months ended September 30, 2021 and For the period of March 9, 2020 (Inception) to September 30, 2020
(Unaudited)
| Mezzanine Equity | ||||||||||||||||||||||||
| Preferred | Common | Total | ||||||||||||||||||||||
| Preferred | Stock | Common | Stock | Accumulated | Stockholders' | |||||||||||||||||||
| Shares | Amount | Shares | Amount | Deficit | Deficit | |||||||||||||||||||
| Balance December 31, 2020 | – | $ | – | 1,166,652 | $ | 436,311 | $ | (75,376 | ) | $ | 360,935 | |||||||||||||
| Common Shares issued in exchange for cash | – | – | 250,507 | 1,807,574 | – | 1,807,574 | ||||||||||||||||||
| Common Shares issued in exchange for cryptocurrency | – | – | 8,013 | 87,419 | – | 87,419 | ||||||||||||||||||
| Preferred Shares issued in exchange for cash | 125,001 | 334,980 | – | – | – | – | ||||||||||||||||||
| Common shares issued for conversion of options | – | – | 72,778 | – | – | – | ||||||||||||||||||
| Stock-based compensation | 2,206 | 6,750 | – | 2,511,421 | – | 2,511,421 | ||||||||||||||||||
| Preferred dividends | – | – | – | – | (31,069 | ) | (31,069 | ) | ||||||||||||||||
| Net loss | – | – | – | – | (3,037,318 | ) | (3,037,318 | ) | ||||||||||||||||
| Balance September 30, 2021 | 127,207 | $ | 341,730 | 1,497,950 | $ | 4,842,725 | $ | (3,143,763 | ) | $ | 1,698,962 | |||||||||||||
| Shares issued to founders upon inception | – | $ | – | 1,000,000 | $ | – | $ | – | $ | – | ||||||||||||||
| Shares issued in exchange for cash | – | – | 24,222 | 54,975 | – | 54,975 | ||||||||||||||||||
| Shares issued in exchange for assets | – | – | 139,130 | 318,500 | – | 318,500 | ||||||||||||||||||
| Net loss | – | – | – | – | (48 | ) | (48 | ) | ||||||||||||||||
| Balance September 30, 2020 | – | $ | – | 1,163,352 | $ | 373,475 | $ | (48 | ) | $ | 373,427 | |||||||||||||
See accompanying notes to the unaudited financial statements.
| 3 |
EdgeMode
Statements of Cash Flows
(Unaudited)
| For the nine months ended September 30, 2021 | For the period of September 30, 2020 | |||||||
| Operating Activities: | ||||||||
| Net loss | $ | (3,037,318 | ) | $ | (48 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation | 522,282 | – | ||||||
| Stock-based compensation | 2,518,171 | – | ||||||
| Loss on disposal of fixed assets | 34,933 | – | ||||||
| Loss on cryptocurrency transactions | 20,708 | – | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses and other current assets | (30,670 | ) | – | |||||
| Cryptocurrency assets | (440,140 | ) | – | |||||
| Accounts payable and accrued expenses | 425,806 | – | ||||||
| Lease liabilities | (16,879 | ) | – | |||||
| Net cash provided by (used in) operating activities | (3,107 | ) | (48 | ) | ||||
| Investing Activities: | ||||||||
| Purchase of equipment | (697,201 | ) | – | |||||
| Proceeds from sale of equipment | 8,000 | – | ||||||
| Net cash used in investing activities | (689,201 | ) | – | |||||
| Financing Activities: | ||||||||
| Proceeds from issuance of common shares, net of offering costs | 1,807,574 | 54,975 | ||||||
| Proceeds from issuance of preferred shares, net of offering costs | 334,980 | – | ||||||
| Payments on equipment notes payable | (861,564 | ) | – | |||||
| Proceeds from notes payable | 830,000 | – | ||||||
| Payments on notes payable | (1,575 | ) | – | |||||
| Net cash provided by financing activities | 2,109,415 | 54,975 | ||||||
| Net change in cash | 1,417,107 | 54,927 | ||||||
| Cash - beginning of period | 62,435 | – | ||||||
| Cash - end of period | $ | 1,479,542 | $ | 54,927 | ||||
| Supplemental Disclosures: | ||||||||
| Interest paid | $ | 126,276 | $ | – | ||||
| Income taxes paid | $ | – | $ | – | ||||
| Supplemental Disclosures of Noncash Financing Information: | ||||||||
| Shares issued for cryptocurrency assets | $ | 87,419 | $ | – | ||||
| Equipment financed with notes payable | $ | 2,441,591 | $ | – | ||||
| Accrued dividends | $ | 31,069 | $ | – | ||||
| Equipment purchased with cryptocurrency assets | $ | 363,008 | $ | – | ||||
| Equipment sold in exchange for cyrptocurrency assets | $ | 62,549 | $ | – | ||||
See accompanying notes to the unaudited financial statements.
| 4 |
EdgeMode
Unaudited Notes to Financial Statements
For the Nine Months Ended September 30, 2021
NOTE 1 – Nature of Operations
EDGEMODE (which may be referred to as the “Company”, “we,” “us,” or “our”) is a corporation organized under the laws of Wyoming. The Company was originally incorporated as EdgeMode LLC on March 9, 2020 and then converted EdgeMode as of June 17, 2020. The Company is engaged in the cryptocurrency sector, mainly in digital currency mining and high-performance computing.
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 financial statements and related disclosures as of September 30, 2021 and for the nine months ended September 30, 2021 and 2020 are unaudited, pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with US GAAP have been condensed or omitted pursuant to such rules and regulations. In our opinion, these unaudited financial statements include all adjustments (consisting only of normal recurring adjustments) necessary for the fair statement of the results for the interim periods. These unaudited financial statements should be read in conjunction with the audited financial statements of the Company for the year ended December 31, 2020 which are included elsewhere in this prospectus. The results of operations for the nine months ended September 30, 2021 are not necessarily indicative of the results to be expected for the full year ended December 31, 2021.
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.
Concentration of Credit Risk
Periodically, the Company may carry cash balances at financial institutions in excess of the federally insured limit of $250,000. As of September 30, 2021, the Company had $1,229,542 in excess of the FDIC insurance limit. The Company has not experienced losses on these accounts and management believes, based upon the quality of the financial institutions, that the credit risk with regard to these deposits is not significant.
Long-Lived Assets – Cryptocurrencies
We account for our cryptocurrencies, intangible assets and long-term license agreement in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Subtopic 350-30, General Intangibles Other Than Goodwill, and ASC Subtopic 360-10-05, Accounting for the Impairment or Disposal of Long-Lived Assets. ASC Subtopic 350-30 requires assets to be measured based on the fair value of the consideration given or the fair value of the assets (or net assets) acquired, whichever is more clearly evident and, thus, more reliably measurable. Our cryptocurrencies are deemed to have an indefinite useful life; therefore amounts are not amortized, but rather are assessed for impairment as further discussed in our impairment policy. Under ASC Subtopic 350-30 any intangible asset with a useful life is required to be amortized over that life and the useful life is to be evaluated every reporting period to determine whether events or circumstances warrant a revision to the remaining period of amortization. If the estimate of useful life is changed the remaining carrying amount of the intangible asset is amortized prospectively over the revised remaining useful life. Costs of internally developing, maintaining, or restoring intangible assets are recognized as an expense when incurred.
| 5 |
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. |
The Company has no assets or liabilities valued using level 1, level 2, or level 3 inputs as of September 30, 2021.
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.
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 fractional share of the fixed cryptocurrency award the mining pool operator receives (less digital asset transaction fees to the mining pool operator which are recorded as a component of cost of revenues), for successfully adding a block to the blockchain. The terms of the agreement provides that neither party can dispute settlement terms after thirty-five days following settlement. The Company’s fractional 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 consideration is constrained until the mining pool operator successfully places a block (by being the first to solve an algorithm) and the Company receives confirmation of the consideration it will receive, 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. There is currently no specific definitive guidance under GAAP or alternative accounting framework for the accounting for cryptocurrencies recognized as revenue or held, and management has exercised significant judgment in determining the appropriate accounting treatment. In the event authoritative guidance is enacted by the FASB, the Company may be required to change its policies, which could have an effect on the Company’s consolidated financial position and results from operations.
| 6 |
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.
The Company accounts for equity-based transactions with non-employees under the provisions of ASC Topic No. 505-50, “Equity-Based Payments to Non-Employees” (“Topic No. 505-50”). Topic No. 505-50 establishes that equity-based payment transactions with non-employees shall be measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable.
Recent Accounting Pronouncements
There are no recently issued accounting pronouncements that the Company has yet to adopt that are expected to have a material effect on its financial position, results of operations, or cash flows.
NOTE 3 – Going Concern
These financial statements are prepared on a going concern basis. The Company began operation in 2020 and incurred a cumulative loss since inception. The Company’s ability to continue is dependent upon management’s plan to raise additional funds and achieve profitable operations. These matters raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary if the Company is not able to continue as a going concern.
NOTE 4 – Related Party Transactions
During the nine months ended September 30, 2021, in connection with the equity fundraisings the company paid $47,500 in advisory fees in relation to the preferred share fundraising and $118,500 in fees in relation to the common share fundraising. The fees were paid to an entity that is controlled by Simon Wajcenberg and Charles Faulkner, who are each directors of the Company.
NOTE 5 – Fixed Assets
Fixed assets are stated at cost and depreciated using the straight-line method over their estimated useful lives. When retired or otherwise disposed, the carrying value and accumulated depreciation of the fixed asset is removed from its respective accounts and the net difference less any amount realized from disposition, is reflected in earnings. Expenditures for maintenance and repairs which do not extend the useful lives of the related assets are expensed as incurred.
As of September 30, 2021 and December 31, 2020 fixed assets were made up of the following:
| Estimated Useful Life | September 30, | December 31, | ||||||||
| (years) | 2021 | 2020 | ||||||||
| Cryptomining equipment | 2-5 years | $ | 3,714,818 | $ | 318,500 | |||||
| 3,714,818 | 318,500 | |||||||||
| Accumulated depreciation | (522,282 | ) | – | |||||||
| Net book value | $ | 3,192,536 | $ | 318,500 | ||||||
| 7 |
Total depreciation expense for the nine months ended September 30, 2021, was $522,282.
NOTE 6 – Equity
The Company has authorized 3,000,000 shares, with no par value, and has issued 1,166,652 shares of common stock. All of the common shares have the same voting rights and liquidation preferences. The Company has also authorized 300,000 shares of preferred stock with no par value.
Preferred Shares
The Company is authorized to issue 300,000 shares of preferred stock with no par value per share, of which 261,438 have been designated as Series Seed Preferred Stock (“Series Seed Preferred”), with the remaining shares available for designation from time to time by the Board. As of September 30, 2021, there were 127,201 shares of Series Seed Preferred issued and outstanding. The Board of Directors is authorized to determine any number of series into which the undesignated shares of preferred stock may be divided and to determine the rights, preferences, privileges and restrictions granted to any series of the preferred stock. The Series Seed Preferred have the following characteristics:
| ● | The shares of Series Seed Preferred are entitled to dividends when, as and if declared by the Board at a rate of 12% per annum on the Original Issue Price. Such dividends shall be cumulative, compounded annually, whether or not earned or declared. |
| ● | Upon the liquidation of the Company, the shares of Series Seed Preferred are entitled to receive, prior to any distribution to the holders of common stock, 200% of the purchase price per share of Series Seed Preferred plus all accrued but unpaid dividends. |
| ● | The Series Seed Preferred plus accrued but unpaid dividends thereon can be converted into common stock, at a conversion rate of $3.06, at any time after the date of issuance. The Series Seed Preferred shares shall automatically be converted into common shares immediately prior to the closing of a firm commitment underwritten initial public offering pursuant to an effective registration statement under the Securities Act of 1933, provided that the offering price per share is not less than $7.12 and the aggregate gross proceeds to the corporation are not less than $10,000,000, or upon the affirmative vote of the holders of a majority of the outstanding shares of Series A Preferred. |
| ● | Each share of Series Seed Preferred will carry a number of votes equal to the number of shares of common stock into which such Series Seed Preferred may then be converted. The Series A Preferred generally will vote together with the common stock and not as a separate class. |
| ● | Pursuant to the Securities Purchase Agreements, holders of Series A Preferred are entitled to unlimited “piggyback” registration rights on registrations by the Company, subject to pro rata cutback at any underwriter’s discretion. |
Due to the liquidation premium that would require the Company to redeem the shares in cash at an amount two times the initial investment, the Company accounts for the Series A Preferred Stock as temporary equity in accordance with ASC 480. The Series A Preferred Stock is accounted for at redemption value.
During the nine months ended September 30, 2021, the Company issued 125,001 preferred shares for total cash considerations of $382,480. In connection with the fundraising the company paid $47,500 in advisory fees to a related party for net cash proceeds of $334,980.
During the nine months ended September 30, 2021, the Company issued 2,206 preferred shares for total fair value of $6,750 for services.
For the nine months ended September 30, 2021, total dividends applicable to Preferred Shares were $31,069. The Company did not declare or pay any dividends during the nine months ended September 30, 2021. Although no dividends have been declared, the cumulative total of preferred shares dividends due to these stockholders upon declaration was $31,069 as of September 30, 2021.
| 8 |
Common shares
During the nine months ended September 30, 2021, the company issued 257,341 common shares for cash proceeds of $1,997,239. In connection with the fundraising the company paid $127,250 in advisory fees, of which $118,500 were paid to a related party, for net cash and cryptocurrency proceeds of $1,894,993.
Common stock options
During the nine months ended September 30, 2021, the Company issued options to purchase 412,411 common shares in exchange for services valued at $3,325,353 using the black-scholes option pricing model. The options have exercise prices ranging from $0.00-$6.18, vesting terms that include immediate vesting, annual vesting, and performance based vesting. 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 expensed $2,511,421 during the nine months ended September 30, 2021, with $849,996 of value being forfeited upon termination of a consulting agreement, and the remaining $19,247 will be expensed over the remaining vesting period.
The following table summarizes the stock option activity for the nine months ended September 30, 2021:
| Options | Weighted-Average Exercise Price Per Share | |||||||
| Outstanding, December 31, 2020 | 48,519 | $ | 0.00 | |||||
| Granted | 412,411 | $ | 1.10 | |||||
| Exercised | (72,778 | ) | $ | 0.00 | ||||
| Forfeited | (137,473 | ) | $ | 0.00 | ||||
| Expired | – | $ | – | |||||
| Outstanding and expected to vest, September 30, 2021 | 250,679 | $ | 1.82 | |||||
As of September 30, 2021, the Company had 167,387 stock option that were exercisable with a weighted average exercise price of $2.22. The weighted average remaining life of all outstanding stock options was 8.7 years as of September 30, 2021. 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 September 30, 2021, the intrinsic value for the options vested and outstanding was $3,294,238 and $5,034,262, respectively.
NOTE 7 – Notes Payable
On August 20, 2021 the Company entered into a Letter of Intent with Fourth Wave Energy, Inc. (“Fourth Wave”). Pursuant to the Letter of Intent, the Company will, at the closing, have all of the issued and outstanding shares of the Company acquired for that number of shares of the Fourth Wave's common stock which, at closing, will represent 80% of the Fourth Wave's outstanding shares of common stock. The Letter of Intent with Fourth wave is non-binding and may be terminated by either party. The acquisition by Fourth Wave is subject to a number of conditions, including the execution of a definitive agreement between the parties. On September 30, 2021, the Company entered into a note payable agreement for proceeds of $750,000 to assist in securing hosting facilities. The note bears interest at 16% per annum and is due and payable on March 31, 2022.
On June 15, 2021, the Company entered into two note payable agreements for total proceeds of $80,000 to assist in securing hosting facilities from BlockFi Lending LLC. The note bears interest at 9.75% per annum and is due and payable on June 16, 2022. The Company is required to maintain a collateral balance equal to 70% of the outstanding principal balance with the lender. A total of $102,734 is held as collateral in restricted wallets, managed directly by the lender.
| 9 |
NOTE 8 – Equipment Notes Payable
In February 2021, the Company entered into a financing agreement whereby the company agreed to purchase assets related to its crypto mining operations. The financing agreement required a down payment of $199,800 and 24 equal monthly payments of $32,760. The company used a 15% discount rate to determine the net present value of the loan value of $871,519. The balance of the loan as of September 30, 2021 is $502,315.
In May 2021, the Company entered into a financing agreement whereby the company agreed to purchase assets related to its crypto mining operations. The financing agreement required a down payment of $299,808, the first month payment of $79,056 and 23 equal monthly payments of $39,528. The company used a 15% discount rate to determine the net present value of the loan value of $1,148,237. The balance of the loan as of September 30, 2021 is $740,665.
In July 2021, the Company entered into a financing agreement whereby the company agreed to purchase assets related to its crypto mining operations. The financing agreement required a down payment of $100,800 and 24 equal monthly payments of $15,660. The company used a 15% discount rate to determine the net present value of the loan value of $421,835. The balance of the loan as of September 30, 2021 is $334,281.
NOTE 9 – Commitments and Contingencies
Legal Contingencies
There are no material pending legal proceedings to which we are a party or to which any of our property is subject, nor are there any such proceedings known to be contemplated by governmental authorities. None of our directors, officers or affiliates is involved in a proceeding adverse to our business or has a material interest adverse to our business.
NOTE 10 – Subsequent Events
Subsequent events have been evaluated subsequent to the consolidated balance sheet date of September 30, 2021 through January 28, 2021, the date these condensed consolidated financial statements were available for issuance.
Subsequent to September 30, 2021, the company issued 41,599 common shares for total cash proceeds of $921,308. In connection with the fundraising the company paid $150,000 in advisory fees to a related party, for net cash proceeds of $771,308. In addition, the Company issued 2,242 common shares as compensation to a unrelated third party as compensation for services.
Subsequent to September 30, 2021, outstanding options of 250,679, were exercised into shares of common stock.
On October 21, 2021, the Company entered into a note payable agreement for proceeds of $100,000 to assist in securing hosting facilities from Fourth Wave. The note bears interest at 16% per annum and is due and payable on April 21, 2022.
On December 2, 2021, the Company entered into an agreement and plan for merger with Fourth Wave Energy, Inc. (“Fourth Wave”), whereby at closing Fourth Wave with merge with and into the Company, with Company remaining as the surviving entity. In the merger, the shares of common stock of the Company will be exchanged for shares of Fourth Wave, that will, upon issuance, represent 80% of Fourth Wave’s outstanding common stock on a fully diluted basis.
On December 10, 2021, the Company entered into a note payable agreement for proceeds of $770,000 to assist in securing hosting facilities from Fourth Wave. The note bears interest at 16% per annum and is due and payable on June 10, 2022.
| 10 |
Exhibit 99.3
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
On January 31, 2022, Fourth Wave Energy, Inc., (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 (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
The unaudited pro forma consolidated financial information is presented to illustrate the estimated effects of the pending merger between the Company and EdgeMode based on the historical financial position and results of operations of the Company and EdgeMode. It is presented as follows:
| · | The unaudited pro forma consolidated balance sheet as of September 30, 2021 was prepared based on (i) the historical unaudited consolidated balance sheet of the Company as of September 30, 2021 and (ii) the historical unaudited consolidated balance sheet of EdgeMode as of September 30, 2021. | |
| · | The unaudited pro forma consolidated statement of operations for the nine months ended September 30, 2021 was prepared based on (i) the historical unaudited consolidated statement of operations of the Company for the three months ended September 30, 2021 and (ii) the historical unaudited consolidated statement of operations of EdgeMode for the three months ended September 30, 2021. | |
| · | The unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 2020 was prepared based on (i) the historical audited consolidated statement of operations of the Company for the year ended December 31, 2020 and (ii) the historical audited consolidated statement of operations of EdgeMode for the period between inception (March 9, 2020) and December 31, 2020. |
The unaudited pro forma combined condensed financial statements were prepared using the acquisition method of accounting as outlined in Financial Accounting Standards Board Accounting Standards Codification ("ASC") 805, Business Combinations, with EdgeMode considered the acquiring company. Based on the acquisition method of accounting, the consideration transferred by EdgeMode is based on number or equity interests (e.g., shares) EdgeMode issued to give the shareholders of the Company the same percentage of equity interest in the combined entity that resulted from the reverse merger. Consolidated statements immediately following the reverse merger are a continuation of the financial statements of EdgeMode ("accounting acquirer") retroactively adjusted to reflect the Company’s ("accounting acquire") legal capital.
The acquisition of a private operating company by a nonoperating public shell corporation typically results in the owners and management of the private company having actual or effective voting and operating control of the combined company. A public shell reverse acquisition is viewed as a capital transaction in substance, rather than a business combination. As a result, it should be accounted for as a reverse recapitalization equivalent to the issuance of stock by the private company for the net monetary assets of the shell corporation accompanied by a recapitalization. This accounting treatment is similar to that resulting from a reverse acquisition, except that no goodwill or other intangible assets should be recorded.
Assumptions underlying the pro forma adjustments are described in the accompanying notes, which should be read in conjunction with the unaudited pro forma consolidated financial information. The unaudited pro forma consolidated balance sheet data gives effect to the merger as if it had occurred on September 30, 2021. The unaudited pro forma consolidated statements of operations data for the nine months ended September 30, 2021 and the year ended December 31, 2020 gives effect to the merger as if it had occurred on January 1, 2020.
| 1 |
The unaudited pro forma consolidated financial information has been presented for informational purposes only and is not necessarily indicative of what the combined company’s financial position or results of operations actually would have been had the merger been completed as of the dates indicated. In addition, the unaudited pro forma consolidated financial information does not purport to project the future financial position or operating results of the combined company. The historical consolidated financial information has been adjusted in the accompanying unaudited pro forma consolidated financial information to give effect to unaudited pro forma events that are directly attributable to the merger, factually supportable and, with respect to the unaudited pro forma consolidated statement of operations, expected to have a continuing impact on the results of operations of the combined company. The accompanying unaudited pro forma consolidated statement of operations does not include any pro forma adjustments to reflect certain expected financial benefits of the merger, such as tax savings, cost synergies or revenue synergies, or the anticipated costs to achieve those benefits, including the cost of integration activities, or restructuring actions which may be achievable or the impact of any non-recurring activity and one-time transaction related costs.
The unaudited pro forma consolidated financial information has been compiled in a manner consistent with the accounting policies adopted by EdgeMode. Upon completion of the merger, the combined company will perform a detailed review of the Company’s accounting policies and will conform the combined company policies. The combined company may identify additional differences between the accounting policies of the two companies that, when conformed, could have a material impact on the consolidated financial statements of the combined company. Transactions between Edgemode and the Company during the periods presented in the unaudited pro forma consolidated financial information have been eliminate.
| 2 |
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 2021
| Historical as of September 30, 2021 | Merger | Combined as of September 30, | ||||||||||||||
| Fourth Wave | EdgeMode | Adjustments | 2021 | |||||||||||||
| Assets | ||||||||||||||||
| Current Assets | ||||||||||||||||
| Cash | $ | 113,555 | $ | 1,479,542 | 3,140,000 | (1) | $ | 4,733,097 | ||||||||
| Prepaid expenses and other current assets | 66,250 | 30,670 | 96,920 | |||||||||||||
| Notes receivable, net | 750,000 | – | (750,000 | ) | (3) | – | ||||||||||
| Total current assets | 929,805 | 1,510,212 | 2,390,000 | 4,830,017 | ||||||||||||
| Deferred offering cost | 123,545 | – | 123,545 | |||||||||||||
| Deposits | 25,000 | – | 25,000 | |||||||||||||
| Intangible assets - cryptocurrencies | – | 206,392 | 206,392 | |||||||||||||
| Equipment, net | – | 3,192,536 | 3,192,536 | |||||||||||||
| Goodwill | – | – | – | |||||||||||||
| Total non-current assets | 148,545 | 3,398,928 | – | 3,547,473 | ||||||||||||
| Total assets | $ | 1,078,350 | $ | 4,909,140 | $ | 2,390,000 | $ | 8,377,490 | ||||||||
| Liabilities and Stockholders' Deficit | ||||||||||||||||
| Current Liabilities | ||||||||||||||||
| Accounts payable and accrued expenses | 319,592 | 445,806 | 15,508 | (2) | 780,906 | |||||||||||
| Accounts payable and accrued expenses, related parties | 3,011 | – | 3,011 | |||||||||||||
| Notes payable | 35,000 | 831,192 | (750,000 | ) | (3) | 116,192 | ||||||||||
| Convertible notes, net | 1,135,992 | – | (1,135,992 | ) | (1), (6) | – | ||||||||||
| Equipment notes payable | – | 955,034 | 955,034 | |||||||||||||
| Derivative liability | 813,490 | – | (813,490 | ) | (6) | – | ||||||||||
| Accrued dividends | – | 31,069 | 31,069 | |||||||||||||
| Total current liabilities | 2,307,085 | 2,263,101 | (2,683,974 | ) | 1,886,212 | |||||||||||
| Equipment notes payable, net of current | – | 605,347 | 605,347 | |||||||||||||
| Total liabilities | 2,307,085 | 2,868,448 | (2,683,974 | ) | 2,491,559 | |||||||||||
| Stockholders' equity | ||||||||||||||||
| Series A Preferred stock, $0.001 par value, 1,000 shares authorized 1,000 shares issued and outstanding | 1 | – | (1 | ) | (5) | – | ||||||||||
| Common stock, $0.001 par value, 200,000,000 shares authorized, | 47,710 | – | 320,867 | (1) | 368,577 | |||||||||||
| – | ||||||||||||||||
| Preferred shares, 300,000 shares authorized, No par value; 127,207 and Zero shares issued and outstanding, September 30, 2021 and December 31, 2020, respectively. | – | 341,730 | (341,730 | ) | (4), (6) | – | ||||||||||
| Common shares, 3,000,000 shares authorized, No par value; 1,497,950 and 1,166,652 shares issued and outstanding, September 30, 2021 and December 31, 2020, respectively | – | 4,842,725 | (4,842,725 | ) | (4), (5) | – | ||||||||||
| Additional paid in capital | 7,190,579 | – | 1,528,777 | (4), (6) | 8,719,356 | |||||||||||
| Accumulated deficit | (8,467,025 | ) | (3,143,763 | ) | 8,408,786 | (2), (4) | (3,202,002 | ) | ||||||||
| Total stockholders' equity | (1,228,735 | ) | 2,040,692 | 5,073,974 | 5,885,931 | |||||||||||
| Total liabilities and stockholders' equity | $ | 1,078,350 | $ | 4,909,140 | $ | 2,390,000 | $ | 8,377,490 | ||||||||
See accompanying notes to the unaudited pro forma consolidated financial information.
| 3 |
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
| Historical for the nine months ended September 30, 2021 | Merger | Combined September 30, | ||||||||||||||
| FourthWave | Edgemode | Adjustments | 2021 | |||||||||||||
| Revenue | $ | – | $ | 1,175,013 | $ | – | $ | 1,175,013 | ||||||||
| Cost of revenues | – | 935,273 | – | 935,273 | ||||||||||||
| Gross profit | – | 239,740 | – | 239,740 | ||||||||||||
| Operating Expenses | ||||||||||||||||
| General and administrative | 75,376 | 3,095,141 | – | 3,170,517 | ||||||||||||
| Total operating expenses | 75,376 | 3,095,141 | – | 3,170,517 | ||||||||||||
| Operating Income/(Loss) | (75,376 | ) | (2,855,401 | ) | – | (2,930,777 | ) | |||||||||
| Other Income/(Expense) | ||||||||||||||||
| Interest expense | (598,722 | ) | (126,276 | ) | 598,722 | (1) | (126,276 | ) | ||||||||
| Loss on settlement of debt | (365,547 | ) | – | – | (365,547 | ) | ||||||||||
| Change in fair value of derivative liability | (342,221 | ) | – | 342,221 | (1) | – | ||||||||||
| Other Income/(Expense) | – | (55,641 | ) | – | (55,641 | ) | ||||||||||
| Total other income/(expense) | (1,306,490 | ) | (181,917 | ) | 940,943 | (547,464 | ) | |||||||||
| Net Income/(Loss) | (1,381,866 | ) | (3,037,318 | ) | 940,943 | (3,351,965 | ) | |||||||||
| Preferred Dividends | – | (31,069 | ) | 31,069 | (2) | – | ||||||||||
| Net loss to common shareholders | $ | (1,381,866 | ) | $ | (3,068,387 | ) | $ | 972,012 | $ | (3,478,241 | ) | |||||
| Weighted average shares outstanding - basic and diluted | 44,166,917 | 1,332,146 | – | 347,562,565 | ||||||||||||
| Basic and diluted net loss per share | $ | (0.03 | ) | $ | (2.30 | ) | $ | – | $ | (0.01 | ) | |||||
See accompanying notes to the unaudited pro forma consolidated financial information.
| 4 |
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2020
Historical for the year ended December 31, 2020 | Merger | Combined December 31, |
||||||||||||||
| FourthWave | Edgemode | Adjustments | 2020 | |||||||||||||
| Revenue | $ | – | $ | – | $ | – | $ | – | ||||||||
| Cost of revenues | – | – | – | – | ||||||||||||
| Gross profit | – | – | – | – | ||||||||||||
| Operating Expenses | ||||||||||||||||
| General and administrative | 4,494,039 | 75,376 | – | 4,569,415 | ||||||||||||
| Total operating expenses | 4,494,039 | 75,376 | – | 4,569,415 | ||||||||||||
| Operating Income/(Loss) | (4,494,039 | ) | (75,376 | ) | – | (4,569,415 | ) | |||||||||
| Other Income/(Expense) | ||||||||||||||||
| Interest expense | (460,738 | ) | – | 460,738 | (1) | – | ||||||||||
| Loss on settlement of debt | (32,900 | ) | – | – | (32,900 | ) | ||||||||||
| Change in fair value of derivative liability | (96,804 | ) | – | 96,804 | (1) | – | ||||||||||
| Other Income/(Expense) | – | – | – | – | ||||||||||||
| Total other income/(expense) | (590,442 | ) | – | 557,542 | (32,900 | ) | ||||||||||
| Net Income/(Loss) | $ | (5,084,481 | ) | $ | (75,376 | ) | $ | 557,542 | $ | (4,602,315 | ) | |||||
| Weighted average shares outstanding - basic and diluted | 35,412,848 | 1,133,874 | – | 338,808,496 | ||||||||||||
| Basic and diluted net loss per share | $ | (0.14 | ) | $ | (0.07 | ) | $ | – | $ | (0.01 | ) | |||||
See accompanying notes to the unaudited pro forma consolidated financial information.
| 5 |
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
1. Description of the Merger
On January 31, 2022, Fourth Wave Energy, Inc., (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 (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.
2. Basis of Presentation
The historical consolidated financial statements have been adjusted in the unaudited pro forma condensed financial statements to give effect to the pro forma events that are (i) directly attributable to the reverse merger transaction between the Company ("accounting acquirer") and Cannabis Leaf Incorporated ("accounting acquire"), (ii) factually supportable, and (iii) with respect to the unaudited pro forma condensed statement of operations, expected to have a continuing impact on the results following the reverse merger.
The merger will be treated as a business combination for accounting purposes, with EdgeMode as the deemed accounting acquirer and the Company as the deemed accounting acquiree. Therefore, the historical basis of EdgeMode’s assets and liabilities will not be remeasured as a result of the merger. In identifying EdgeMode as the acquiring entity, the companies considered the structure of the merger, relative outstanding share ownership at closing and the composition of the combined company’s board of directors and senior management.
The unaudited pro forma consolidated balance sheet data gives effect to the merger as if it had occurred on September 30, 2021. The unaudited pro forma consolidated statement of operations data gives effect to the merger as if it had occurred on January 1, 2020.
The unaudited pro forma consolidated financial information is presented solely for informational purposes and is not necessarily indicative of the combined results of operations or financial position that might have been achieved for the periods or dates indicated, nor is it necessarily indicative of the future results of the combined company. The unaudited pro forma consolidated financial information has not been adjusted to give effect to certain expected financial benefits of the merger, such as tax savings, cost synergies or revenue synergies, or the anticipated costs to achieve these benefits, including the cost of integration activities. The unaudited pro forma consolidated financial information does not reflect possible adjustments related to restructuring or integration activities that have yet to be determined or transaction or other costs following the combination that are not expected to have a continuing impact on the business of the combined company. Further, one-time transaction-related expenses anticipated to be incurred prior to, or concurrent with, the closing of the merger are not included in the unaudited pro forma consolidated statement of operations. However, the impact of such transaction expenses is reflected in the unaudited pro forma consolidated balance sheet as a decrease to accumulated deficit and as an increase to accrued expenses.
3. Accounting Policies
The unaudited pro forma consolidated financial information has been compiled in a manner consistent with the accounting policies of EdgeMode. Following the merger, the combined company will conduct a review of accounting policies of the Company in an effort to determine if differences in accounting policies require further reclassification of results of operations or reclassification of assets or liabilities to conform to EdgeMode’s accounting policies and classifications. As a result of that review, the combined company may identify differences among the accounting policies of the companies that, when conformed, could have a material impact on the unaudited pro forma condensed consolidated financial information.
| 6 |
4. Unaudited Pro Forma Consolidated Balance Sheet Adjustments
The following provides explanations of the various adjustments to the unaudited pro forma condensed consolidated balance sheet:
| 1. | Represents adjustment related to the private placement offering as described in the “Merger Agreement” whereby the company raised convertible debt, which is then automatically converted into equity upon the merger. Some cash proceeds were used to repay other convertible debts | |
| 2. | Represents $58,239 of transaction expenses expected to be incurred in connection with the merger, which are recorded as an increase to Account Payable and Accumulated Deficit. |
| 3. | Elimination of the $750,000 promissory notes issued by the EdgeMode for advances made by the Company through September 30, 2021 pursuant to the exchange agreement. | |
| 4. | Represents the recapitalization of EdgeMode through the contribution of the share capital in EdgeMode to the Company, and the issuance of 302.963,525 shares of common stock, which represents 80% of the post-closing shares outstanding on a fully diluted basis as of the merger date, and the elimination of the historical accumulated deficit of the Company, the accounting acquiree. | |
| 5. | Represents the automatic conversion of the Company’s Series A Preferred Stock into common stock upon the merger. | |
| 6. | Represents the automatic conversion of all outstanding convertible debt and accrued interest, along with the elimination of the associated derivative liability. |
5. Unaudited Pro Forma Consolidated Statement of Operations Adjustments
The following provides explanations of the various adjustments to the unaudited pro forma condensed consolidated statement of operations:
| 1. | Represents interest expense of $598,722 and loss on derivative liability of $342,221 for the nine months ended September 30, 2021 and $460,738 and 96,804 for the year ended December 31, 2020 from the conversion of notes payable as if it had occurred on January 1, 2020 | |
| 2. | Represents preferred dividends of $31,069 for the nine months ended September 30, 2021 from the conversion of preferred shares as if it had occurred on January 1, 2020. |
| 7 |
6. Loss per Share
The unaudited pro forma weighted average number of basic and diluted shares outstanding for the nine months ended September 30, 2021 and the year ended December 31, 2020, is calculated as follows:
For the Nine Months Ended | For the Year Ended | ||||||||
| September 30, 2021 | December 31, 2020 | ||||||||
| Weighted average Company shares at September 30, 2021 and December 31, 2020 | 44,166,917 | 35,412,848 | |||||||
| EdgeMode weighted average shares outstanding as if the merger occurred on January 1, 2020 | 302,963,525 | 302,963,525 | |||||||
| Company preferred shares converted weighted average shares outstanding as if the merger occurred on January 1, 2020 | 1,000 | 1,000 | |||||||
| Company convertible debt weighted average shares outstanding as if the merger occurred on January 1, 2020 | 431,123 | 431,123 | |||||||
| Adjusted weighted average shares as of September 30, 2021 and December 31, 2020 - basic and dilutive | 347,562,565 | 338,808,496 | |||||||
| Net Loss attributable to common shareholders - basic and dilutive | $ | (3,478,241 | ) | $ | (4,602,315 | ) | |||
| Pro forma net loss per common share - basic and dilutive | $ | (0.01 | ) | $ | (0.01 | ) | |||
| 8 |