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FWAV Fourth Wave Energy

Filed: 14 May 21, 4:28pm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-Q

 

x   Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the quarterly period ended March 31, 2021

 

o  Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934

 

For the transition period _____________to______________

 

Commission File Number 333-207047

 

 

 

 

 

FOURTH WAVE ENERGY, INC.

 

 

(Exact name of registrant as specified in its charter)

 

 

 

 

 

Nevada

  

47-4046237

(State or other jurisdiction of incorporation or organization)

  

(IRS Employer Identification No.)

 

 

 

 

75 E. Santa Clara, 6th Floor

  

  

San Jose, CA

  

95113

(Address of principal executive offices)

  

(Postal or Zip Code)

 

 

 

 

Registrant’s telephone number, including area code:

 

(408) 213-8874

 

 

 

 

 

 

 

 

 

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each classTrading Symbol(s)Name of each exchange on which registered 

 N/AN/AN/A 

 

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) had been subject to such filing requirements for the past 90 days.

Yes                   No  

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).          Yes   No

 

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check One):

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

Indicate by check mark whether the Registrant is a shell company (as defined in Exchange Act Rule 12b-2 of the Exchange Act).              Yes ☐                   No


State the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 43,023,776 shares of $0.001 par value common stock outstanding as of May 14, 2021.


ii


PART I. FINANCIAL INFORMATION

 

Item 1.   Financial Statements

 

Fourth Wave Energy, Inc.

Balance Sheets

(Unaudited)

 

 

 

March 31, 2021

 

December 31,  2020

 

 

 

 

 

ASSETS

 

 

 

Current assets:

 

 

 

 

Cash

 

$             23,075

 

$                   25,786

Prepaid assets

 

176,313

 

264,667

Total current assets

 

199,388

 

290,453

 

 

 

 

 

Deposits

 

25,000

 

25,000

 

 

 

 

 

Total assets

 

$           224,388

 

$                 315,453

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' DEFICIT

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$           285,043

 

$                 657,806

Accounts payable - related party

 

21,837

 

21,837

Notes payable

 

215,900

 

235,900

Convertible notes, net of unamortized discount of $317,106 and $341,856, respectively

637,894

 

608,144

Derivative liability

 

1,521,846

 

676,022

 

 

 

 

 

Total current liabilities

 

2,682,520

 

2,199,709

 

 

 

 

 

Total liabilities

 

2,682,520

 

2,199,709

 

 

 

 

 

STOCKHOLDERS' DEFICIT

 

 

 

Preferred stock, $0.001 par value, 5,0000,000 shares authorized,

 

 

 

 

Series A Preferred stock, $0.001 par value, 1,000 shares authorized

 

 

 

 

   1,000 shares issued and outstanding

 

1

 

1

Common stock, $0.001 par value, 200,000,000 shares authorized,

 

 

 

 

    38,764,776 and 40,647,329 shares issued and outstanding, respectively

 

38,765

 

40,647

Additional paid in capital

 

5,264,382

 

4,379,732

Accumulated deficit

 

(7,761,280)

 

(6,304,636)

Total stockholders' deficit

 

(2,458,132)

 

(1,884,256)

Total liabilities and stockholders' deficit

 

$             224,388

 

$                 315,453

 

The accompanying notes are an integral part of these unaudited financial statements.


1


 

Fourth Wave Energy, Inc.

Statements of Operations

For the three months ended March 31, 2021 and 2020

(Unaudited)

 

 

 

March 31, 2021

 

March 31, 2020

Operating expenses:

 

 

 

General and administrative

$             456,043

 

$        3,203,521

 

 

 

 

Total operating expenses

(456,043)

 

(3,203,521)

 

 

 

 

Other expenses

 

 

 

 Interest expense

(216,784)

 

(85,973)

 Loss on settlement of debt

(76,107)

 

-

 Change in fair value of derivative liability

(707,710)

 

(18,215)

Total other expense

(1,000,601)

 

(104,188)

 

 

 

 

Net loss

$        (1,456,644)

 

$      (3,307,709)

 

 

 

 

Net loss per common share:

 

 

 

Basic and diluted

$                (0.04)

 

$              (0.11)

 

 

 

 

Weighted average common shares outstanding:

 

 

 

Basic and diluted

40,919,803

 

30,321,496

 

 

The accompanying notes are an integral part of these unaudited financial statements.


2


Fourth Wave Energy, Inc.

Statements of Changes in Stockholders’ Deficit

For the three months ended March 31, 2021 and 2020

(Unaudited)

 

 

Series A Preferred

Common Stock

Additional paid-in

Accumulated

 

 

Shares

Amount

Shares

Amount

capital

Deficit

Total

 

 

 

 

 

 

 

 

Balance, December 31, 2020

1,000

$        1

40,647,329

$   40,647

$     4,379,732

$    (6,304,636)

$ (1,884,256)

 

 

 

 

 

 

 

 

Stock based compensation

-   

-   

800,000

800

181,200

-   

182,000

 

 

 

 

 

 

 

 

Common shares issued for conversion of liabilities

-   

-   

100,000

100

9,900

-   

10,000

 

 

 

 

 

 

 

 

Common shares issued for settlement of debt and accrued interest

-   

-   

217,447

218

97,634

-   

97,852

 

 

 

 

 

 

 

 

Common shares issued for cash

-   

-   

1,700,000

1,700

202,300

-   

204,000

 

 

 

 

 

 

 

 

Returned common shares and liability extinguishment related to GeoSolar

-   

-   

(4,700,000)

(4,700)

384,550

-   

379,850

 

 

 

 

 

 

 

 

Extinguishment of derivative liability due to conversion

-   

-   

-   

-   

9,066

-   

9,066

 

 

 

 

 

 

 

 

Net loss

-   

-   

-   

-   

-   

(1,456,644)

(1,456,644)

 

 

 

 

 

 

 

 

Balance, March 31, 2021

1,000

$         1

38,764,776

$      38,765

$     5,264,382

$    (7,761,280)

$     (2,458,132)

 

 

 

 

 

 

 

 

Balance, December 31, 2019

-   

$         -   

29,288,163

$      29,288

$       348,680

$    (1,220,155)

$       (842,187)

 

 

 

 

 

 

 

 

Stock based compensation

1,000

1

6,200,000

6,200

2,908,254

-   

2,914,455

 

 

 

 

 

 

 

 

Net loss

-   

-   

-   

-   

-   

(3,307,709)

(3,307,709)

 

 

 

 

 

 

 

 

Balance, March 31, 2020

1,000

$         1

35,488,163

$      35,488

$     3,256,934

$    (4,527,864)

$   (1,235,441)

 

The accompanying notes are an integral part of these unaudited financial statements.


3


Fourth Wave Energy, Inc.

Statements of Cash Flows

For the three months ended March 31, 2021 and 2020

(Unaudited)

 

 

March 31, 2021

 

March 31, 2020

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

Net loss

$       (1,456,644)

 

$       (3,307,709)

Adjustment to reconcile net loss to cash used in operating activities:

 

 

 

Stock based compensation

182,000

 

2,914,455

Amortization of debt discount

171,930

 

79,967

Loss on change in derivative liability

707,710

 

18,215

Loss on settlement of liabilities

76,107

 

-

Net change in:

 

 

 

 Prepaid assets

88,354

 

2,676

 Accounts payable and accrued expenses

8,832

 

140,588

 Accounts payable - related party

-

 

(33,710)

 

 

 

 

CASH FLOWS USED IN OPERATING ACTIVITIES

(221,711)

 

(185,518)

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

Proceeds from sale of common stock

204,000

 

-

Proceeds from convertible notes

150,000

 

199,000

Payments on convertible notes

(135,000)

 

-

Payments on notes payable

-

 

(3,000)

 

 

 

 

CASH FLOWS PROVIDED BY FINANCING ACTIVITIES

219,000

 

196,000

 

 

 

 

NET CHANGE IN CASH

(2,711)

 

10,482

Cash, beginning of period

25,786

 

1,691

Cash, end of period

$               23,075

 

$               12,173

 

 

 

 

SUPPLEMENTAL CASH FLOW INFORMATION

 

 

 

 

 

 

 

Cash paid on interest expenses

$                        -

 

$                        -

Cash paid for income taxes

$                        -

 

$                        -

 

 

 

 

NON-CASH TRANSACTIONS

 

 

 

Debt discount created by derivative liability

$            147,180

 

$            116,686

Common shares issued for conversion of liabilities

$              10,000

 

$                        -

Common shares issued for settlement of debt and accrued interest

$                21,745

 

$                        -

Extinguishment of liability related to Geosolar

$             379,850

 

$                        -

Extinguishment of derivative liability due to conversion

$                 9,066

 

$                        -

 

The accompanying notes are an integral part of these unaudited financial statements.


4


 

 

 

Fourth Wave Energy, Inc.

Notes to the Financial Statements

March 31, 2021

(Unaudited)

 

 

Note 1. Basis of Presentation 

 

The accompanying unaudited interim financial statements of Fourth Wave Energy, Inc. (“we”, “our”, “Fourth Wave” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s Annual Report filed with the SEC on Form 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for our interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements that would substantially duplicate the disclosure contained in the audited financial statements for fiscal 2020, as reported in the Form 10-K of the Company, have been omitted.

 

On March 20, 2020, shareholders owning a majority of the Company's outstanding shares of common stock amended the Company's Articles of Incorporation to change the name of the Company from Pierre Corp. to Fourth Wave Energy, Inc.

 

In connection with the acquisition of Fourth Wave, Inc. (“FWAV”) in March 2020, the Company entered into consulting agreements with certain founders of FWAV. The consulting agreements require the Company to collectively pay $379,850 in consulting fees during the terms of the consulting agreements. In March 2021 the Company agreed to sell the FWAV technologies and business plan to GeoSolar Technologies, Inc. (“GST”) in exchange for 10,000,000 common shares of GST. In exchange, the consultants agreed to release the Company from any liability for any consulting fees owed to the them by the Company and return a portion of the common shares they held. During the three months ended March 31, 2021, 4,700,000 shares of the Company's common stock were returned to the Company and cancelled.

 

In March 2020 the Director General of the World Health Organization declared COVID-19 a pandemic. We are still assessing the impact COVID-19 may have on our business, but there can be no assurance that this analysis will enable us to avoid part or all of any impact from the spread of COVID-19 or its consequences, including downturns in business sentiment generally.  The extent to which the COVID-19 pandemic and global efforts to contain its spread will impact our operations will depend on future developments, which are highly uncertain and cannot be predicted at this time, and include the duration, severity and scope of the pandemic and the actions taken to contain or treat the COVID-19 pandemic.

 

Significant Accounting Policies

 

Fair Value of Financial Instruments

 

The carrying value of short-term instruments, including cash, accounts payable and short-term notes approximate fair value due to the relatively short period to maturity for these instruments.

 

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs. The Company utilizes a three-level valuation hierarchy for disclosures of fair value measurements, defined as follows:

 

Level 1: inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets

 

Level 2: inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liabilities, either directly or indirectly, for substantially the full term of the financial instruments.

 

Level 3: inputs to the valuation methodology are unobservable and significant to the fair value

 


5


Fair Value Measurements

 

The Company’s assets and liabilities recorded at fair value have been categorized based upon a fair value hierarchy.

 

The following table presents information about the Company’s liabilities measured at fair value on a recurring basis and the Company’s estimated level within the fair value hierarchy of those assets and liabilities as of March 31, 2021 and December 31, 2020:

 

Fair value measured at March 31, 2021

 

 

Total carrying

value

at March 31, 2021

 

Quoted prices in active

markets

(Level 1)

 

Significant other

observable

inputs

(Level 2)

 

Significant

Unobservable

inputs

(Level 3)

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities

 

$

1,521,846

 

$

-

 

$

-

 

$

1,521,846

 

 

Fair value measured at December 31, 2020

 

 

Total carrying

value

at December 31,

2020

 

Quoted prices in active

markets

(Level 1)

 

Significant other

observable

inputs

(Level 2)

 

Significant

Unobservable

inputs

(Level 3)

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities

 

$

676,022

 

$

-

 

$

-

 

$

676,022

 

There were no transfers between Level 1, 2 or 3 during the period.

 

The table below presents the change in the fair value of the derivative liability during the three months ended March 31, 2021:

 

 

 

Fair value as of December 31, 2020

$     676,022

Fair value on the date of issuance recorded as a debt discount

147,180

Fair value on the date of issuance recorded as a loss on derivatives

213,495

Extinguishment of liability to equity due to conversions

(9,066)

Extinguishment of liability to payoff of debt

(513,961)

Loss on change in fair value of derivatives

1,008,176

Fair value as of March 31, 2021

$ 1,521,846

 

Convertible debt

 

The Company records a beneficial conversion feature related to the issuance of convertible debt that have conversion features at fixed or adjustable rates. The beneficial conversion feature for the convertible instruments is recognized and measured by allocating a portion of the proceeds as an increase in additional paid-in capital and as a reduction to the carrying amount of the convertible instrument equal to the intrinsic value of the conversion features. The beneficial conversion feature will be accreted by recording additional noncash interest expense over the expected life of the convertible notes.

  

Beneficial Conversion Features

 

If the conversion feature of conventional convertible debt provides for a rate of conversion that is below market value, this feature is characterized as a beneficial conversion feature (“BCF”). A BCF is recorded by the Company as a debt discount pursuant to ASC Topic 470-20 “Debt with Conversion and Other Options.” In those circumstances, the convertible debt is recorded net of the discount related to the BCF and the Company amortizes the discount to interest expense over the life of the debt using the effective interest method.


6


Derivative Financial Instruments

 

Fair value accounting requires bifurcation of embedded derivative instruments such as conversion features in convertible debt or equity instruments and measurement of their fair value for accounting purposes. In assessing the convertible debt instruments, management determines if the convertible debt host instrument is conventional convertible debt and further if there is a beneficial conversion feature requiring measurement. If the instrument is not considered conventional convertible debt under ASC 470, the Company will continue its evaluation process of these instruments as derivative financial instruments under ASC 815. The Company applies the guidance in ASC 815-40-35-12 to determine the order in which each convertible instrument would be evaluated for derivative classification.

 

Once determined, derivative liabilities are adjusted to reflect fair value at each reporting period end, with any increase or decrease in the fair value being recorded in results of operations as an adjustment to fair value of derivatives.

 

Recent Accounting Pronouncements

 

The Company does not believe that any recently issued effective pronouncements, or pronouncements issued but not yet effective, if adopted, would have a material effect on the accompanying financial statements.

 

Reclassification

 

Certain reclassifications may have been made to our prior year’s financial statements to conform to our current year presentation. These reclassifications had no effect on our previously reported results of operations or accumulated deficit.

 

Note 2.Going Concern 

 

These financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which assumes that the Company will be able to meet its obligations and continue its operations for its next fiscal year. Realization values may be substantially different from carrying values as shown and these financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going concern. At March 31, 2021 the Company had not yet achieved profitable operations and expects to incur further losses in the development of its business, all of which raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management has no formal plan in place to address this concern but considers that the Company will be able to obtain additional funds by equity financing and/or related party advances, however there is no assurance of additional funding being available.

 

Note 3.Related Party Transactions 

 

Effective April 30, 2019, the Company agreed to increase compensation to the President of the Company to $11,500 per month for management services if funds are available or to accrue such amount if funds are not available.  The agreement is verbal and can be cancelled at any time. In addition, the President of the Company advances cash to fund operations and periodically pays expenses on behalf of the Company subject to reimbursement.  

 

Fees earned during the period are as follows:

 

 

Three months ended

March 31, 2021

Three months ended

March 31, 2020

 

 

 

 

 

Prior period balance

$     21,837

$     104,623

 

Management fees

      34,500

       34,500

 

Management fee advances

7,060      

      355

 

Expenses paid on behalf of Company

1,600

1,529

 

Repayments

      (43,160)

      (70,094)

 

End of period balance

$     21,837

$     70,913

 

 

 

 


7


 

Note 4.  Notes Payable  

 

Notes Payable

 

On January 15, 2020, the Company converted $20,000 in advances from a third party into a promissory note. The unsecured note bears an interest rate of 8% and matures on January 15, 2021. On February 16, 2021, the Company settled the $20,000 promissory note and $1,745 of accrued interest and issued 217,447 shares of common stock as consideration for the debt settlement. As a result, the Company recognized a loss on settlement of debt of $76,107.

As of March 31, 2021 and December 31, 2020 the combined advances and notes payable totaled $215,900 and $235,900, respectively.

 

 

Note 5.Convertible Notes Payable and Derivative Liability 

 

On June 4, 2019, the Company borrowed $55,000 from an unrelated third party. The loan is evidenced by an unsecured note which had an original issuance discount of $5,000 which will be amortized over the life of the note. The loan bears interest at a rate of 10% and is due and payable on March 4, 2020 and is currently past due. If a default notice is received the interest rate will be 20%. At any time on or before December 1, 2019 the Company may prepay the loan by paying the lender the outstanding loan principal and accrued interest plus premiums ranging from 20% to 40%. After December 1, 2019, the Company may not repay the loan without the consent of the lender. At any time after December 1, 2019, the unpaid principal is convertible into shares of the Company’s common stock at the conversion price. The conversion price is 65% of the lowest trading price of the Company’s common stock during the 20 consecutive trading days immediately prior to the date of conversion. Due to the variable conversion feature the note conversion feature was bifurcated from the note and recorded as a derivative liability. The day one derivative liability was $33,615 which was recorded as a discount on the note payable. As of March 31, 2021, the balance on the loan, net of unamortized discount of $0, was $55,000.

 

On September 9, 2019, the Company borrowed $30,000 from an unrelated third party. The loan is evidenced by an unsecured note which had an original issuance discount of $2,500 plus an additional $2,500 to pay for transaction fees of the lender, which will be amortized over the life of the note. The loan bears interest at a rate of 9% and is due and payable on March 9, 2020 and is currently past due. If a default notice is received the interest rate will be 18%. The Company may prepay the loan by paying the lender the outstanding loan principal and accrued interest plus premiums ranging from 5% to 25% and accrued interest. The unpaid principal is convertible into shares of the Company’s common stock at the conversion price. The conversion price is 50% of the lowest trading price of the Company’s common stock during the 20 consecutive trading days immediately prior to the date of conversion. Due to the variable conversion feature the note conversion feature was bifurcated from the note and recorded as a derivative liability. The day one derivative liability was $31,581, of which $20,291 was recorded as a day one loss on the derivative liability and an additional $11,290 was recorded as a discount on the notes payable. In addition, the note holder was issued 25,000 shares of common stock with a relative fair value of $13,710 which was recorded as a debt discount and will be amortized over the life of the note. On February 11, 2021, the Company repaid $30,000 in principal, $3,854 in accrued interest and $11,146 additional interest expense on the convertible note payable. As of March 31, 2021, the balance on the loan, net of unamortized discount of $0, was $0.

 

On November 14, 2019, the Company entered into a debt agreement to borrow $85,000. The unsecured note had an original issuance discount of $20,000, which will be amortized over the life of the note. The loan bears interest at a rate of 9% and is due and payable on May 14, 2020 and is currently past due. If a default notice is received the interest rate will be 18%. The Company may prepay the loan by paying the lender the outstanding loan principal and accrued interest plus premiums ranging from 5% to 25% and accrued interest. The unpaid principal is convertible into shares of the Company’s common stock at the conversion price. The conversion price is 50% of the lowest trading price of the Company’s common stock during the 20 consecutive trading days immediately prior to the date of conversion. Due to the variable conversion feature the note conversion feature was bifurcated from the note and recorded as a derivative liability. The day one derivative liability was $89,071, of which $24,071 was recorded as a day one loss on the derivative liability and an additional $65,000 was recorded as a discount on the convertible notes payable. As of March 31, 2021, the balance on the loan, net of unamortized discount of $0, was $85,000.

 

On January 23, 2020, the Company entered into an agreement for up to $120,000 in debt financing. The unsecured note had an original issuance discount of $10,500, which will be amortized over the life of the note. The loan bears interest at a rate of 10% and each tranche is due and payable twelve months from the date funded. The Company may prepay the loan by paying the lender the outstanding loan principal and accrued interest plus premiums ranging from 5% to 25% and accrued interest. The unpaid principal is convertible into shares of the Company’s common stock at the conversion price. The conversion price is 45% of the lowest trading price of the Company’s common stock during the 25 consecutive trading days immediately prior to


8


the date of conversion. On January 23, 2020, the Company received $40,000 with original issuance discount of $5,000 from the first tranche of the note. On August 12, 2020, the Company received $20,000 with original issuance discount of $4,150 from the second tranche of the note. In addition, the note holder was issued 45,777 common stock warrants with a fair value of $6,249 which was recorded as a day one loss on the derivative liability. Due to the variable conversion feature the note conversion feature was bifurcated from the note and recorded as a derivative liability. The first tranche day one derivative liability was $50,164, of which $15,164 was recorded as a day one loss on the derivative liability and an additional $35,000 was recorded as a discount on the notes payable. The second tranche day one derivative liability was $18,135, of which $2,285 was recorded as a day one loss on the derivative liability and an additional $15,850 was recorded as a discount on the notes payable. During the year ended December 31, 2020, $6,538 of the unsecured convertible note principal and $3,000 of interest was converted into 325,000 shares of common stock, of which 125,000 shares at a conversion price of $0.02275 per share and 175,000 shares at $0.035 per share. On November 20, 2020, the Company paid $33,463 in principal payments, $2,765 of accrued expense and $50,772 of additional interest expense on the note. On January 15, 2021, the Company repaid $20,000 in principal, $882 in accrued interest and $12,118 additional interest expense on the convertible note payable. As of March 31, 2021, the balance on the loan, net of unamortized discount of $0, was $0.

 

In 2020, the Company issued convertible notes in the principal amount of $285,000.  The notes are unsecured, have a six-month maturity, bear interest at 8% per year, and are due and payable at various dates from April through June 2021. At the option of the holder, the notes can be converted into shares of the Company’s common stock.  The number of shares of the Company’s common stock which will be issued upon any conversion will be determined by dividing the amount to be converted by $0.10. Due to the other variable convertible notes, these fixed convertible notes are treated as derivatives due to possibility of insufficient shares available at conversion to settle the notes. The day one derivative liability was $254,317, of which $10,317 was recorded as a day one loss on the derivative liability and an additional $244,000 was recorded as a discount on the convertible notes payable. On January 15, 2021, the Company converted a $10,000 promissory note into 100,000 shares of common stock at a conversion price of $0.10. As of March 31, 2021, the balance on the loans, net of unamortized discount of $137,590, was $137,410.

 

On August 6, 2020, the Company issued a note in the principal amount of $390,000 for payment of investor relations services. The investor relations services are for a period of one year and recorded as a prepaid asset with a balance of $162,500 as of March 31, 2021. The note does not bear interest, is unsecured and is due and payable on August 6, 2023. At the option of the holder, the note is convertible into shares of the Company's common stock. The unpaid principal is convertible into shares of the Company’s common stock at the conversion price. The conversion price shall be the lesser of $0.40 or 85% of the trading price of the Company’s common stock on the day immediately preceding the date of conversion. Due to the variable conversion feature the note conversion feature was bifurcated from the note and recorded as a derivative liability. The day one derivative liability was $158,542, which was recorded as a discount on the convertible notes payable and will be amortized over the life of the note. As of March 31, 2021, the balance on the loan, net of unamortized discount of $55,598 was $334,402.

 

On November 17, 2020, the Company entered into a debt agreement to borrow $85,000. The unsecured note had an original issuance discount of $3,500, which will be amortized over the life of the note. The loan bears interest at a rate of 8% and is due and payable on November 17, 2021. The unpaid principal is convertible into shares of the Company’s common stock at the conversion price. The conversion price is 65% of the average two lowest trading price of the Company’s common stock during the 15 consecutive trading days immediately prior to the date of conversion. Due to the variable conversion feature the note conversion feature was bifurcated from the note and recorded as a derivative liability. The day one derivative liability was $130,303, of which $48,803 was recorded as a day one loss on the derivative liability and an additional $81,500 was recorded as a discount on the convertible notes payable On February 3, 2021, the Company repaid $85,000 in principal, $1,453 in accrued interest and $21,590 additional interest expense on the convertible note payable. As of March 31, 2021, the balance on the loan, net of unamortized discount of $0, was $0.

 

During the three months ended March 31, 2021, the Company issued convertible notes in the principal amount of $150,000.  The notes are unsecured, have a six-month maturity, bear interest at 8% per year, and are due and payable at various dates from July through August 2021. At the option of the holder, the notes can be converted into shares of the Company’s common stock.  The number of shares of the Company’s common stock which will be issued upon any conversion will be determined by dividing the amount to be converted by $0.10. Due to the other variable convertible notes, these fixed convertible notes are treated as derivatives due to possibility of insufficient shares available at conversion to settle the notes. The day one derivative liability was $360,675, of which $213,495 was recorded as a day one loss on the derivative liability and an additional $147,180 was recorded as a discount on the convertible notes payable. As of March 31, 2021, the balance on the loans, net of unamortized discount of $123,918, was $26,082.

 

As of March 31, 2021, the total derivative liability on the above notes was adjusted to a fair value of $1,521,846. During the three months ended March 31, 2021, $171,930 of the discount was amortized leaving an unamortized balance of $317,106. The fair value of the conversion option was estimated using the Black-Scholes option pricing model and the following assumptions


9


during the period: fair value of stock $0.188 - $0.48, volatility of 43.17% - 58.56% based on a comparable company peer group, expected term of 0.50 - 5.00 years, risk-free rate of 0.05% - 0.92% and a dividend yield of 0%.

 

Note 6.Equity  

 

Common Stock

 

On January 28, 2021, the Company entered into a purchase agreement with an investor, Tysadco Partners LLC, (the “Investor”) providing for the purchase of up to $10,000,000 of the Company’s common stock (“the Equity Line”) over a 24-month-term that commenced on January 28, 2021.  In February 2021, the Investor purchased 1,700,000 restricted shares of the Company’s common stock for $204,000 ($0.12 per share).  There are no registration rights with respect to these shares.

 

On December 1, 2020, the Company entered into a three month consulting agreement for investor relation services. Upon signing the agreement, the Company agrees to compensate the Consultant a monthly fee of $10,000 plus 400,000 shares of common stock. In December 2020, 400,000 shares of common stock were issued for services. The shares were valued at $0.23, the closing price of the Company’s stock on December 1, 2020. During the three months ended March 31, 2021, the Company issued the remaining 800,000 shares related to the agreement and recognized $182,000 of expense.

 

During the three months ended March 31, 2021, the Company issued 100,000 shares of common stock upon the conversion of a $10,000 promissory note. See Note 5.

 

On February 16, 2021, the Company settled a $20,000 promissory note and $1,745 of accrued interest and issued 217,447 shares of common stock as consideration for the debt settlement. See Note 4.

 

During the three months ended March 31, 2021, 4,700,000 shares of the Company's common stock were returned to the Company and cancelled. See Note 1.

 

Preferred Stock

 

On March 26, 2020, the Company designated 1,000 shares of its original 5,000,000 authorized shares of Preferred Stock as Series A Preferred Stock (“Series A”) with a $0.001 par value. Each Series A Preferred share entitles the holder to vote on all matters submitted to a vote of our shareholders or with respect to actions that may be taken by written consent. The 1,000 shares of Series A shares have the voting power of 250% of the outstanding common shares at the time of any vote.  The holders of the Series A shares are entitled to receive, when, as and if declared by the Board of Directors out of funds legally available, annual dividends payable in cash on the 31st day of December in each year, commencing on December 3l, 2020 at the rate of $0.10 per share per year.

 

Stock Warrants

 

The following table summarizes the stock warrant activity for the three months ended March 31, 2021:

 

 

 

Weight-Average

 

Warrants

Exercise Price Per Share

Outstanding, December 31, 2020

1,142,857

$      0.035

Granted due to reset provision

 -

 

Exercised

-

 

Forfeited

-

 

Expired

-

 

Outstanding, March 31, 2021

 1,142,857

$       0.035

 

As of March 31, 2021, the outstanding stock warrants have a weighted average remaining term of 4.35 years and an intrinsic value of $325,714.


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Note 7.Subsequent Events 

 

On April 6, 2021, the Company converted $180,900 of promissory notes into 1,809,000 shares of common stock at a conversion price of $0.10.

 

On April 16, 2021, Tysadco Partners LLC purchased 1,700,000 restricted shares of the Company’s common stock for $204,000 at a value of $0.12 per share. The Company issued Tysadco Partners LLC an additional 500,000 shares of its common stock to Tysadco as consideration for providing the Company with the Equity Line referred to in Note 6.  There are no registration rights with respect to these shares.

 

On May 13, 2021, the Company converted a $25,000 promissory note into 250,000 shares of common stock at a conversion price of $0.10.


11


 

Item 2. Management’s Discussion and Analysis of Financial Conditions and Results of Operations  

 

The following discussion and analysis by our management of our financial condition and results of operations should be read in conjunction with our unaudited condensed interim financial statements and the accompanying related notes included in this quarterly report and our audited financial statements and related notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the Securities and Exchange Commission.

 

Cautionary Statement Regarding Forward-Looking Statements

 

This report may contain forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act, and we intend that such forward-looking statements be subject to the safe harbors created thereby. These forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. Any such forward-looking statements would be contained principally in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Forward-looking statements include information concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, industry environment, potential growth opportunities and the effects of regulation. Forward-looking statements include all statements that are not historical facts and can be identified by terms such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “hopes,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would” or similar expressions.

 

Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our management’s beliefs and assumptions only as of the date of this report. You should read this report and the documents that we reference in this report, completely and with the understanding that our actual future results may be materially different from what we expect. Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

 

In March 2020 the Director General of the World Health Organization declared COVID-19 a pandemic. We are still assessing the impact COVID-19 may have on our business, but there can be no assurance that this analysis will enable us to avoid part or all of any impact from the spread of COVID-19 or its consequences, including downturns in business sentiment generally.  The extent to which the COVID-19 pandemic and global efforts to contain its spread will impact our operations will depend on future developments, which are highly uncertain and cannot be predicted at this time, and include the duration, severity and scope of the pandemic and the actions taken to contain or treat the COVID-19 pandemic.

 

Overview

 

Unless otherwise indicated or the context otherwise requires, all references in this Form 10-Q to “we,” “us,” “our,” “our company,” “Fourth Wave” or the “Company” refer to Fourth Wave, Inc.

 

We were incorporated in Nevada on January 21, 2011.  Since our incorporation, we have attempted to become involved in a number of business ventures, all of which were unsuccessful and which we have abandoned.

 

Residential Energy Efficiency and Renewable Energy Overview

 

Homes and buildings use energy for heating, cooling, hot water, and electrification. A number of factors determine how much energy is required to deliver these services including the age of the structure, type of construction, heating, ventilation, and air conditioning (HVAC) equipment used and its condition, lighting, appliances, and electronics used. Different types of energy are used for these end-uses, which is often based on regional energy production and availability, historical construction preferences, and local legislation. Energy sources include, but are not limited to natural gas, heating oil, utility electricity, and on-site renewable energy generation.

 

Based on home conditions and energy sources, energy efficiency improvements are often the lowest way to reduce ongoing utility and maintenance costs. Energy efficiency improvements often result in improved living comfort, for example enhanced heating, cooling, lighting, and air quality. Energy efficiency upgrades have an up-front cost but are designed to reduce ongoing utility and maintenance costs. Upgrades also often result in increased home values.


12


Homes and commercial buildings consume 40% of the energy used in the United States. Most homeowners could save between 15-25% of their utility bills by addressing wasted energy from drafts, air leaks, and outdated heating and cooling systems. Typical energy efficiency upgrades include sealing air leaks, adding insulation, installing more efficiency windows, doors, and skylights, installing and properly setting programmable thermostats, sealing ducts, tuning or upgrading heating and cooling systems, installing energy efficiency hot water heaters, upgrading household appliances and electronics, and installing energy efficient lighting.

 

Improvements in electric heat exchanger (also known as heat pump) technology have increased their usage across the country. Different types of heat pump technologies exist. Some transfer energy from water sources and others directly from the air. Water source heat pumps are often connected to geothermal systems, also known as ground source heating and cooling. Since geothermal technologies rely on transferring energy from the earth instead of creating energy, they are widely considered the most efficient heating and cooling system.

 

On-site renewable energy generation has been improving greatly for years with gains in performance and reductions in cost. The most typical type of on-site generation is photovoltaics, also known as solar energy. Panels are typically installed on a roof-mounted configuration or on an adjacent ground-mounted system. Inverters capture the solar energy and transform it into electricity. Most residential systems are tied to the existing electrical utility grid for back-up and resiliency when solar energy is not being generated.

 

There are many trade-offs when determining the most appropriate energy generation systems for residences. Upfront cost, maintenance, replacement cost, environmental and health impacts much all be considered. Environmental health and greenhouse gas emissions associated with the production of utility electricity is a regional consideration based on how energy is produced and distributed in different regions. How utility-scale electricity is generated can make a large different in associated emissions. On-site renewable energy has a significantly lower carbon footprint than most utility-scale generation, though many utilities are transitioning to cleaner sources such as solar and wind as they move away from coal-fired power plants.

 

Indoor air quality in a home can also be impacted by the type of HVAC system installed. Unless fresh outdoor is brought into through an intake system before being distributed, air will be recirculated within a home, which can compromise air quality. The use of natural gas for cooking and clothes dryers can also adversely impact indoor air quality. Typically, electrified HVAC, cooking, and clothes dryers offer the highest quality indoor air quality, but there are many factors including air infiltration, sealing, and opening of windows and doors that will impact conditions. The use of building materials, paints, and stains with high levels of volatile organic compounds can also contribute to degraded indoor air quality.

 

Homeowners must weight all factors when it comes to heating, cooling, and electrification of their homes. Choosing systems that minimize the use of fossil fuels and maximize airflow will often lead to the best indoor air quality.

 

Fourth Wave Energy

 

On March 16, 2020 we acquired all of the outstanding shares of Fourth Wave Energy, Inc. (“FWI”) for 6,200,000 restricted shares of our common stock.

 

FWI has designed an energy system which is based on combining solar power and other energy efficient technologies into one fully integrated system.  The FWI energy system is designed to significantly reduce energy consumption and associated carbon emissions in residences and commercial buildings.

 

In connection with this acquisition we entered into consulting agreements with certain founders of FWI.  The consulting agreements required us to collectively pay $379,500 in consulting fees during the terms of the consulting agreements, all but one of which expire between May 31 and June 30, 2020.  One consulting agreement was for a twelve month period and expired in March of 2021.

 

DeSol Power Tile

 

On August 18, 2020 we entered into a non-binding Letter of Intent to acquire DeSol Power Tiles, LLC for $900,000 in cash and shares of our common stock having a value of $100,000.

 

DeSol Power Tiles is based in Atlanta, Georgia and has developed solar panels which act as the actual roof of a building.

 


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Although traditional solar panels provide financial benefits to their owners and solar systems help the environment, they are not aesthetically pleasing to look at. Some communities and subdivisions even have rules against installing them.

 

The DeSol solar roof system integrates design and functionality. The patented system uses roof tiles, not solar panels, so it won’t affect the aesthetic or architectural appeal of the roof. With a simple, flat design, based on the classic Nordic style, DeSol roof tiles will complement the home with a beautiful, completely sealed, walkable surface that covers the entire roof.  

 

The DeSol solar roof system captures sunlight and the inverter converts the sunlight into electric current that can be used in the home. An electric panel in the home feeds the energy from the inverter to the home’s electric circuits. The electric meter monitors energy usage, so excess power can be sent to the utility company, giving the homeowner energy credits.

 

A solar roof installation from DeSol Power Tiles is 100% passive. Unlike wind energy systems or heat pumps, there are no moving parts that require technical service or maintenance, which is the main reason for the 30-year performance guarantee which is offered by DeSol Power Tiles.

 

For more information concerning DeSol Power Tile visit its website at https://www.desolpowertiles.com/.

 

The acquisition of DeSol Power Tile is subject to a number of conditions, including the execution of a definitive agreement between the parties. As of this filing, the Company had not entered into a definitive agreement to acquire DeSol Power Tile LLC.

 

Spin-Off

 

We plan to concentrate on the sale of solar panel roofs and no longer plans to pursue the GSP System. As a result, on March 10, 2021, we transferred all of the rights to the GeoSolar Plus System (“GSP”) to GeoSolar Technologies, Inc. ("GST") in exchange for 10,000,000 shares of GST's common stock. We plan to distribute ("Spin-Off") these shares to our shareholders on the basis of one share of GST's common stock for each four shares held by each of our shareholders.

 

GST also assumed all liabilities of $379,850 associated with the consulting agreements previously signed by us. 

 

The Spin-Off is subject to the effectiveness of a registration statement that GST will file with the Securities and Exchange Commission. The date for determining which of our shareholders will receive shares of GST in the Spin-Off (the "Record Date") will be determined shortly before the effective date of GST's registration statement.  

 

Critical Accounting Policies

 

Use of Estimates and Assumptions

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities, and (ii) the reported amount of expenses recognized during the periods presented. Adjustments made with respect to the use of estimates often relate to improved information not previously available. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of financial statements; accordingly, actual results could differ from these estimates.

 

These estimates and assumptions also affect the reported amounts of costs and expenses during the reporting period.  Management evaluates these estimates and assumptions on a regular basis.  Actual results could differ from those estimates.

 

Results of Operations for the three months ended March 31, 2021, compared to three months ended March 31, 2020.

 

During the three months ended March 31, 2021 general and administrative expenses were $456,043 compared to $3,203,521 in 2020. The $2,747,478 decrease is due to the decrease in stock based compensation during the three months ended March 31, 2021.

 

During the three months ended March 31, 2021 other expenses was $1,000,601 compared to $104,188 in 2020. The $896,413 increase in other expenses are the result of amortization of discounts, derivative liability expense, interest and loss on conversion of debt.

 

Net loss for the three months ended March 31, 2021 and 2020, was $1,456,644 and $3,307,709, respectively.


14


 

Liquidity and Capital Resources

 

Our sources and (uses) of cash for the three months ended March 31, 2021 and 2020 were:

 

 

2021

 

2020

 

 

 

 

 

 

Cash used in operations

 

$

(221,711

)

 

$

(185,518)

 

Payments on notes payable

 

$

-

 

 

$

(3,000)

 

Payments on convertible notes payable

 

$

(135,000)

 

 

$

-

 

Proceeds from convertible notes payable

 

$

150,000

 

 

$

199,000

 

Proceeds from sale of common stock

 

$

204,000

 

 

$

-

 

 

Going Concern

 

The unaudited financial statements accompanying the report have been prepared on a going concern basis, which assumes that our company will be able to meet our obligations and continue our operations for our next fiscal year. Realization values may be substantially different from carrying values as shown and the financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should we be unable to continue as a going concern. At March 31, 2021, we have had no revenue and have not yet achieved profitable operations and expect to incur further losses in the development of our business, all of which raise substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent upon our ability to generate future profitable operations and/or to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due. Management has no formal plan in place to address this concern but considers that we will be able to obtain additional funds by equity financing and/or related party advances, however there is no assurance of additional funding being available.

 

There is no assurance that we will be able to obtain further funds required for our continued operations. We are pursuing various financing alternatives to meet our immediate and long-term financial requirements. There can be no assurance that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to obtain the additional financing on a timely basis, we will be forced to scale down or perhaps even cease the operation of our business

 

Item 4.  Controls and Procedures 

 

Evaluation of Disclosure Controls and Procedures

 

Under the direction and with the participation of the Company’s management, including the Company’s Chief Executive and Chief Financial Officer, the Company has conducted an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures as of March 31, 2021. The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in its periodic reports with the Securities and Exchange Commission is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and regulations, and that such information is accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. The Company’s disclosure controls and procedures are designed to provide a reasonable level of assurance of reaching its desired disclosure control objectives. Based on the evaluation, the Chief Executive and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were not effective as of March 31, 2021.

 

Changes in Internal Control over Financial Reporting

 

There was no change in the Company’s internal control over financial reporting that occurred during the three months ended March 31, 2021 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.


15


PART II

OTHER INFORMATION

 

 

 

Item 6. Exhibits 

 

 

 

 

Exhibit

Number

 

Description

 

 

31.1

Certification pursuant to Section 302 of the Sarbanex-Oxley Act of 2002

31.2

Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32

Certification pursuant to Section 906 of the Sarbanes-Oxley Act.  


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SIGNATURES

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.  

 

 

DATED:   May 14, 2021FOURTH WAVE ENERGY, INC.  

 

 

By: /s/ J. Jacob Isaacs  

J. Jacob Isaacs, Principal Executive, Financial and Accounting Officer


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