EDGEMODE, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q) #EDGEMODE #MANAGEMENTS #DISCUSSION #ANALYSIS #FINANCIAL #CONDITION #RESULTS #OPERATIONS #form #10Q


The following discussion and analysis should be read in conjunction with our
unaudited condensed consolidated financial statements, and the notes thereto,
and other financial information appearing elsewhere in this Quarterly Report on
Form 10-Q and the audited consolidated financial statements and notes thereto
included in our Annual Report on Form 10-K for the fiscal year ended December
31, 2021
and the annual financial statements of Edgemode, a Wyoming corporation
and our wholly owned subsidiary, filed with the SEC on Form 8-K. The following
discussion and analysis compares our consolidated results of operations for the
three months ended September 30, 2022 (the “2022 Quarter”) with those for the
three months ended September 30, 2021 (the “2021 Quarter”). Additionally, the
nine months ending September 30, 2022 and nine months ending September 30, 2021
are referred to as the “2022 Period” and “2021 Period”) respectively.

Cautionary Note Regarding Forward-Looking Statements

This report contains “forward-looking statements”, as such term is used within
the meaning of the Private Securities Litigation Reform Act of 1995. These
statements include, among other things, statements regarding expanding our
business and our liquidity as well as other statements regarding our future
operations, financial condition and prospects, and business strategies.
Forward-looking statements generally can be identified by words such as
“anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,”
“predicts,” “projects,” “will be,” “will continue,” “will likely result,” and
similar expressions. These forward-looking statements are based on current
expectations and assumptions that are subject to risks and uncertainties, which
could cause our actual results to differ materially and adversely from those
reflected in the forward-looking statements. Factors that could cause or
contribute to such differences include, but are not limited to, our ability to
raise capital to buy the machines we have commitments to purchase and those
discussed under the caption “Risk Factors” in our Form 10-K for the year ended
December 31, 2021 and those discussed in other documents we file with the SEC.
We undertake no obligation to revise or publicly release the results of any
revision to these forward-looking statements, except as required by law. Given
these risks and uncertainties, readers are cautioned not to place undue reliance
on such forward-looking statements.



Business Overview


We are an early-stage cryptocurrency mining Company. Although Edgemode, our new
wholly-owned subsidiary, has historically mined Ethereum, we are now focused on
expanding the operations by mining Bitcoin which we anticipate to begin in the
first half of 2023, subject to financing. Due to the imminent change of Ethereum
(ETH) from Proof of Work (POW) to Proof of stake (POS), the Company is in
negotiations to terminate all rental agreements and future purchase orders
related to Ethereum mining operations.

Critical Accounting Policies and Estimates

We discuss the material accounting policies that are critical in making the
estimates and judgments in our Annual Report on Form 10-K for the fiscal year
ended December 31, 2021, under the caption “Management’s Discussion and
Analysis-Critical Accounting Policies and Estimates”. There has been no material
change in critical accounting policies or estimates during the period covered by
this report.

Recent Accounting Pronouncements

For information on recent accounting pronouncements and impacts, see Note 1 to
the unaudited condensed consolidated financial statements.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2022 COMPARED TO
THE THREE MONTHS ENDED SEPTEMBER 30, 2021

Our revenues for the 2022 Quarter were $1,805 compared to $605,945 for the 2021
Quarter. The reason for the decrease was the decline in the price of Ethereum
during the 2022 Quarter compared to prices during the 2021 Quarter. Also the
Company experienced power outages at our data center in Rouses Point and
returned equipment related to Etherium mining. As we have terminated our rental
agreements as referenced above, we do not anticipate power outages in the future
materially effecting our operations.







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Our cost of revenues for the 2022 Quarter were $6,204 compared to $456,163 for
the 2021 Quarter. The reason for the decrease was a decrease in hosting fees
incurred as a result of the power outages and lower revenues.

Our operating expenses for the 2022 Quarter were $1,162,200 compared to
$2,790,197 for the 2021 Quarter. In the 2022 Quarter, the Company incurred
stock-based compensation expense of $318,000 compared to $2,511,421 for the 2021
Quarter.

Our other expenses for the 2022 Quarter were $15,616 compared to $21,221 for the
2021 Quarter. The reason for the decrease was increased loss on cryptocurrencies
due to increased transactions and changes in market prices, offset by a decrease
in interest expense from the termination of the loans.

RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022 COMPARED TO
THE NINE MONTHS ENDED SEPTEMBER 30, 2021

Our revenues for the 2022 Period was $438,042 compared to $1,145,466 for the
2021 Period. The reason for the decrease was the decline in the price of
Ethereum during the 2022 Period compared to prices during the 2021 Period, in
addition to the power outages at our data center in disclosed above.

Our cost of revenues for the 2022 Period was $812,882 compared to $935,273 for
the 2021 Period. The reason for the decrease was a decrease in hosting fees
incurred as a result of the power outages and lower revenues

Our operating expenses for the 2022 Period was $27,999,172 compared to
$3,095,141 for the 2021 Period. In the 2022 Period, the Company incurred
stock-based compensation expense of $24,582,181 compared to $2,518,171 for the
2021 Period. In addition, the Company began operations in March of 2021 for
initial operations versus having a full nine months of operations for the 2022
Period.

Our other expenses for the 2022 Period was $253,356 compared to $181,917 for the
2021 Period. The reason for the increase was increased loss on cryptocurrencies
due to increased transactions and changes in market prices, offset by a decrease
in interest expense from the termination of the loans.

LIQUIDITY AND CAPITAL RESOURCES

As of November 14, 2022, the Company had approximately $20,000 of cash. Our
liquidity is primarily derived from selling the crypto that we mine, and debt
and equity investments from accredited investors. To grow the business and help
fund operations for the next 12 months, the Company is seeking to raise $60
million
in equity capital through private placements. The Company has signed a
non-binding term sheet for a $400 million debt facility. We can provide no
assurances that any such financings will be completed or successful, nor will
they be on terms that we can agree on.

The Company has signed $66 million in hardware purchase orders. Assuming we
close on the $400 million debt facility, the debt facility will be used in order
to make payments on these purchase orders. There are no assurances the purchase
will be completed.

If we fail to raise sufficient additional funds, we will be required to suspend
or cease our operations.

The Company has terminated the agreements for approximately $2.2 million of debt
for equipment that the Company was using for mining and returned the equipment
to the vendor to settle the outstanding liabilities, which is still being
negotiated with the vendor. 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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Summary of cash flows



                                                         September 30,     September 30,
                                                             2022              2021
Net cash (used) in operating activities                  $  (2,060,941 )   $    (737,980 )
Net cash provided by investing activities                $     942,534     $      45,672
Net cash provided by financing activities                $   1,097,963     $   2,109,415




During the 2022 Period and 2021 Period, our sources and uses of cash were as
follows:




Operating Activities



During the 2022 Period, cash used in operating activities of $2,060,941
primarily resulted from its net loss of $28,627,368, offset by stock-based
compensation of $24,582,181, impairment of equipment of $748,269 and loss on
cryptocurrency transactions of $186,716.

During the 2021 Period, cash used in operating activities of $737,980 primarily
resulted from its net loss of $3,066,865 offset by stock-based compensation of
$2,518,171 and loss on cryptocurrency transactions of $20,708.



Investing Activities


Cash provided by investing activities in the 2022 Period of $942,534 resulted
from the $743,513 cash acquired from the reverse merger acquisition and the
proceeds of $509.997 from sale of cryptocurrency assets, offset by the purchase
of equipment of $370,976.

Cash provided by investing activities in the 2021 Period of $45,672 resulted
from proceeds of $734,873 from the sale of cryptocurrency assets, offset by the
purchase of equipment of $697,201.



Financing Activities


In the 2022 Period, cash provided by financing activities of $1,097,963
consisted of $724,865 in net proceeds from the issuance of common shares,
$380,000 in proceeds from the issuance of notes payable, and $201,250 of
proceeds from the issuance of Series B preferred shares, offset by payments on
equipment notes payable of $208,152.

In the 2021 Period, cash provided by financing activities of $2,109,415
consisted of $1,807,574 in net proceeds from the sale of common shares, $334,980
in net proceeds from the sale of preferred shares, and $830,000 in proceeds from
notes payable, offset by payments on equipment notes payable of $861,564.







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