Edgemode, Inc. - Annual Report: 2019 (Form 10-K)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
q Annual Report Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934
For the year ended December 31, 2019
q Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from __________ 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 St., 6th Floor |
|
|
San Jose, CA |
| 95113 |
(Address of principal executive offices) |
| (Postal or Zip Code) |
|
|
|
Registrant’s telephone number, including area code: |
| (818) 855-8199 |
Pierre Corp.
|
|
|
| (Former name, former address and former fiscal year, if changed since last report |
|
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol
Name of each exchange on which registered
N/A
N/A
N/A
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes q No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes q No x
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) has been subject to such filing requirements for the past 90 days.
Yes x No q
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes x No q
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “non-accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
q
Accelerated filer
q
Non-accelerated filer
x
Smaller reporting company
x
Emerging growth company
q
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 q
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes q No x
The aggregate market value of the voting and non-voting common equity held by non-affiliates as of June 30, 2019 was approximately $19,875,000.
State the number of shares outstanding of each of the registrant’s classes of common equity, as of the latest practicable date. There were 35,488,163 shares of common stock outstanding as of April 10, 2020.
Forward-Looking Statements
Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements.” These forward-looking statements generally are identified by the words “believes,” “projects,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.
ITEM 1.
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.
Low Voltage, Solar Powered, Energy Efficient Buildings
Solar Energy Overview
Solar power is energy from the sun that is converted into thermal or electrical energy. Solar energy is the cleanest and most abundant renewable energy source available. Solar technologies can harness this energy for a variety of uses, including generating electricity, providing light or a comfortable interior environment, and heating water for domestic, commercial, or industrial use.
There are three main ways to harness solar energy: photovoltaics, solar heating and cooling, and concentrating solar power. Photovoltaics generate electricity directly from sunlight via an electronic process and can be used to power anything from small electronics such as calculators and road signs up to homes and large commercial businesses. Solar heating and cooling (SHC) and concentrating solar power (CSP) applications both use the heat generated by the sun to provide space or water heating in the case of SHC systems, or to run traditional electricity-generating turbines in the case of CSP power plants.
Solar energy is a very flexible energy technology: it can be built as distributed generation (located at or near the point of use) or as a central-station, utility-scale solar power plant (similar to traditional power plants). Both of these methods can also store the energy they produce for distribution after the sun sets, using new solar and storage technologies.
In the last decade alone, solar has experienced an average annual growth rate of 48%. Thanks to strong federal policies like the solar Investment Tax Credit, rapidly declining costs, and increasing demand across the private and public sector for clean electricity, there are now nearly 78 gigawatts (GW) of solar capacity installed nationwide, enough to power 14.5 million homes.
The cost to install solar has dropped by more than 70% over the last decade, leading the industry to expand into new markets and deploy thousands of systems nationwide. Prices as of Q4 2019 are at their lowest levels in history across all market segments. An average-sized residential system has dropped from a pre-incentive price of $40,000 in 2010 to roughly $18,000 today.
Solar has ranked first or second in new electric capacity additions in each of the last years. In 2019, 40% of all new electric capacity added to the grid came from solar, the largest such share in history. Solar’s increasing competitiveness against other technologies has allowed it to quickly increase its share of total U.S. electrical generation - from just 0.1% in 2010 to more than 2.5% today.
1
Homeowners and businesses are increasingly demanding solar systems that are paired with battery storage. While this pairing is still relatively new, the growth over the next five years is expected to be significant. By 2025, more than 25% of all behind-the-meter solar systems will be paired with storage, compared to under 5% in 2019.
The residential solar market experienced a record year in 2019 as costs continued to fall and solar expanded into more state markets. While California had its strongest year ever due to the emergence of solar + storage as a remedy for disruptive power shutoffs, emerging markets also enjoyed strong growth. Future growth is expected across the country as prices continue to fall and combined solar + storage systems become increasingly viable.
Major U.S. corporations, including Apple, Amazon, Target, and Walmart are investing in solar and renewable energy at an incredible rate. Through 2018, the top corporate solar users in America have installed more than 7,000 megawatt of capacity across more than 35,000 different facilities across the country.
Fourth Wave Energy
On March 16, 2020 we acquired all of the outstanding shares of Fourth Wave Energy, Inc. for 6,200,000 restricted shares of our common stock.
Fourth Wave has designed an energy system which is based on combining solar power and other energy efficient technologies into one fully integrated system. The Fourth Wave energy system is designed to significantly reduce energy consumption and associated carbon emissions in residences and commercial buildings.
The Fourth Wave energy system is:
·
powered by solar photovoltaics and is managed with direct current advanced energy management controls
·
uses:
°
advanced battery storage systems;
°
efficient HVAC via ground-source energy;
°
LED lighting; and
°
solar energy for hot water heating.
·
can be customized for new building construction and to retrofit existing structures.
Fourth Wave plans to build five pilot projects, including one in its office/warehouse in San Jose and one in Dallas and use these pilot projects as showcases for its technology.
A depiction of Fourth Wave’s energy system for residences and commercial buildings is attached.
In connection with this acquisition we entered into consulting agreements with certain founders of Fourth Wave. The consulting agreements require us to collectively pay $385,000 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 is for a twelve month period and expires in the spring of 2021.
We plan to sign a non-binding Letter of Intent with GEOS Neighborhood, LLC (“GEOS”) to build energy efficient homes/townhomes on approximately 8 acres of undeveloped land in Arvada, Colorado.
The basic terms of the Letter of Intent are described below:
·
We will purchase the property from GEOS for $4,500,000. The purchase price will be used to pay debt secured by the property. We will also pay GEOS $30,000 for each lot on which we plan to construct a home or townhome. Payment of $30,000 will be due at commencement of construction.
·
The property is approved for 90 homes/townhomes. We will pay for the infrastructure necessary for the project, including utilities, grading, roads, gutters, street lighting and city fees for the 90
2
sites at a cost not to exceed $5 million. This work may be phased if agreed to by us and GEOS. We and GEOS will agree to the final design and marketing plan for the 90 homes/townhomes.
·
We will build 22 homes/townhomes as the first phase of the project. Additional homes/townhomes will be built based on market demand. We will pay the construction cost of the homes/townhomes and will receive all profits from their sale.
The completion of the transaction with GEOS is subject to a number of conditions, including the execution of a definitive agreement with GEOS.
As of March 31, 2020, Fourth Wave was in the development stage and had not generated any revenue.
Other Information
As of March 31, 2020, we had one employee.
Our offices are located at 75 E. Santa Clara St., 6th Floor, San Jose, CA, 95113.
3
![[f191231pierreform10k002.gif]](https://www.sec.gov/Archives/edgar/data/0001652958/000127351120000063/f191231pierreform10k002.gif)
4
![[f191231pierreform10k004.gif]](https://www.sec.gov/Archives/edgar/data/0001652958/000127351120000063/f191231pierreform10k004.gif)
5
ITEM 1A.
Not applicable.
ITEM 2.
None.
ITEM 3.
None.
ITEM 4.
Not applicable.
PART II
ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock is quoted on the Over-the-Counter Market under the symbol “PIRE”.
Prior to May 30, 2019 there was no market for our common stock.
The following table summarizes the high and low historical closing prices of our common stock for the periods indicated:
Fiscal Year Ended December 31, 2019
High
Low
Second Quarter
$1.50
$1.50
Third Quarter
$1.50
$1.01
Fourth Quarter
$1.01
$0.74
Holders of our common stock are entitled to receive dividends as may be declared by the Board of Directors. The Board of Directors is not restricted from paying any dividends but is not obligated to declare a dividend. No cash dividends have ever been declared and it is not anticipated that cash dividends will ever be paid.
Our Articles of Incorporation authorize our Board of Directors to issue up to 5,000,000 shares of preferred stock. The provisions in the Articles of Incorporation relating to the preferred stock allow directors to 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 common stock. The issuance of preferred stock with these rights may make the removal of management difficult even if the removal would be considered beneficial to shareholders generally and will have the effect of limiting shareholder participation in certain transactions such as mergers or tender offers if these transactions are not favored by our management. As of the date of this filing, 1,000 preferred shares were outstanding.
ITEM 6.
SELECTED FINANCIAL DATA
Not applicable.
6
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
We are currently in the development stage and have not earned any revenues.
Results of Operations
Operating expenses for the years ended December 31, 2019 and 2018 were $416,174 and $198,901, respectively, and were comprised of principally legal and accounting costs and management fees. Operating expenses during the year ended December 31, 2019 increased due to increased activity within the company. This was largely due to the company starting a new business plan.
Liquidity and Capital Resources
We have financed our cash requirements from the sale of common stock and by loans from non-affiliated third parties and related parties. As of December 31, 2019, $332,900 had been loaned to the Company by related and unrelated parties. The loans are unsecured, non-interest bearing and are payable on demand. Additionally, during the year ended December 31, 2019, the Company received $165,000 in proceeds from convertible notes.
Our sources and (uses) of cash for the years ended December 31, 2019 and 2018 were:
|
| 2019 | 2018 |
| Cash used in operations | (247,494) | (172,927) |
| Sale of common stock | - | 186,700 |
| Proceeds from sale of convertible notes | 165,000 | - |
| Proceeds from sale of notes payable, related party | 3,000 | 20,012 |
| Proceeds from sale of notes payable | 79,900 | 20,000 |
| Repayments on notes payable, related party | - | (52,500) |
We do not anticipate receiving cash flow from operations in the near future to satisfy our ongoing capital requirements. We are seeking financing in the form of equity capital in order to provide the necessary working capital. Our ability to meet our obligations and continue to operate as a going concern is highly dependent on our ability to obtain additional financing. We cannot predict whether this additional financing will be in the form of equity or debt, or be in another form. We may not be able to obtain the necessary additional capital on a timely basis, on acceptable terms, or at all. In any of these events, we may be unable to implement our current plans which circumstances would have a material adverse effect on our business, prospects, financial conditions and results of operations.
Our estimated capital requirements for the twelve months ending December 31, 2019 are:
| Description | Amount |
|
|
|
| Salaries | $ 240,000 |
| Consulting fees | 385,000 |
| Other general and administrative expenses, including research and development, legal and accounting, marketing, travel and entertainment, and rent. | 975,000 |
| Purchase of property in Colorado and infrastructure costs | 9,500,000 |
| Construction of homes/townhomes | (1) |
(1)
Cost will depend on the size and design of the units.
Unit
Size
Home
2,135 to 2,729 square feet
Duplex
2,694 square feet
Townhouse
1,058 to 1,827 square feet
7
The estimated construction cost of all units will be $180 per square foot.
Due to our continuing losses from business operations, the independent auditor’s report dated April 15, 2020, includes a “going concern” opinion relating to the fact that our continuation is dependent upon obtaining additional working capital either through revenues or through outside financing.
See Note 9 to the financial statements included as part of this report for recent financing transactions.
Impact of the Coronavirus
Our business could be disrupted and materially adversely affected by the recent outbreak of COVID-19. As a result of measures imposed by the governments in affected regions, businesses and schools have temporarily closed due to quarantines intended to contain this outbreak. The spread of COVID-19 from China to other countries has resulted in the Director General of the World Health Organization declaring COVID-19 a pandemic on March 11, 2020. International stock markets have reflected the uncertainty associated with the slow-down in the world economies. The significant declines in the Dow Industrial Average were also largely attributed to the effects of COVID-19. 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-019 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.
Critical Accounting Policies
See Note 2 to the December 31, 2019 financial statements included as part of this report for a discussion of our Significant Accounting Policies.
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
8
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
F-1 | Report of Independent Registered Public Accounting Firm |
F-2 | Balance Sheets as of December 31, 2019 and 2018; |
F-3 | Statements of Operations for the years ended December 31, 2019 and 2018 |
F-4 | Statement of Stockholders’ Deficit for the years ended December 31, 2019 and 2018; |
F-5 | Statements of Cash Flows for years ended December 31, 2019 and 2018; |
F-6 | Notes to Financial Statements |
9
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of
Fourth Wave Energy, Inc.
(formerly Pierre Corp.)
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Fourth Wave Energy, Inc. (formerly Pierre Corp.) (the “Company”) as of December 31, 2019 and 2018, and the related statements of operations, stockholders’’ deficit, and cash flows for the years then ended, 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 as of December 31, 2019 and 2018, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Going Concern Matter
The accompanying 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 has suffered recurring losses from operations and has a net capital deficiency that raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 3. The 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.
/s/ MaloneBailey, LLP
www.malonebailey.com
We have served as the Company's auditor since 2019.
Houston, Texas
April 15, 2020
F-1
Fourth Wave Energy, Inc.
(formerly Pierre Corp.)
Balance Sheets
| December 31, 2019 |
| December 31, |
|
|
|
|
ASSETS |
|
|
|
Current assets: |
|
|
|
Cash | $ 1,691 |
| $ 1,285 |
Prepaid assets | 24,018 |
| 5,700 |
Total current assets | 25,709 |
| 6,985 |
Total assets | $ 25,709 |
| $ 6,985 |
|
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIT |
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
Accounts payable and accrued expenses | $ 128,519 |
| $ 111,528 |
Accounts payable - related party | 104,623 |
| 68,341 |
Notes payable | 323,900 |
| 244,000 |
Notes payable - related party | 9,000 |
| 6,000 |
Convertible notes, net of unamortized discount of $83,441 and $0, respectively | 116,559 |
| - |
Derivative liability | 185,295 |
| - |
|
|
|
|
Total current liabilities | 867,896 |
| 429,869 |
Total liabilities | 867,896 |
| 429,869 |
|
|
|
|
STOCKHOLDERS' DEFICIT |
|
|
|
|
|
|
|
Preferred stock, $0.001 par value, 5,000,000 shares authorized, |
|
|
|
none issued and outstanding | - |
| - |
Common stock, $0.001 par value, 200,000,000 shares authorized, |
|
|
|
29,288,163 and 29,051,800 shares issued and outstanding at |
|
|
|
December 31, 2019 and December 31, 2018, respectively | 29,288 |
| 29,052 |
Additional paid in capital | 348,680 |
| 189,048 |
Accumulated deficit | (1,220,155) |
| (640,984) |
Total stockholders' deficit | (842,187) |
| (422,884) |
Total liabilities and stockholders' deficit | $ 25,709 |
| $ 6,985 |
The accompanying notes are an integral part of these financial statements.
F-2
Fourth Wave Energy, Inc.
(formerly Pierre Corp.)
Statements of Operations
For the years ended December 31, 2019 and 2018
| Year ended |
| Year ended |
|
| December 31, 2019 |
| December 31, 2018 |
|
Operating expenses: |
|
|
|
|
Depreciation | $ - |
| $ 1,184 |
|
General and administration | 416,174 |
| 197,717 |
|
|
|
|
|
|
Total operating expenses | (416,174) |
| (198,901) |
|
|
|
|
|
|
Amortization of debt discount | (100,174) |
| - |
|
Interest expense | (6,183) |
| - |
|
Change in fair value of derivative liability | (56,640) |
| - |
|
Total other expense | (162,997) |
| - |
|
|
|
|
|
|
Net loss | $ (579,171) |
| $ (198,901) |
|
|
|
|
|
|
Net loss per common share: |
|
|
|
|
Basic and diluted | $ (0.02) |
| $ (0.01) |
|
|
|
|
|
|
Weighted average common shares outstanding: |
|
|
|
|
Basic and diluted | 29,091,310 |
| 29,051,800 |
|
The accompanying notes are an integral part of these financial statements.
F-3
Fourth Wave Energy, Inc.
(formerly Pierre Corp.)
Statements of Changes in Stockholders’ Deficit
For the years ended December 31, 2019 and 2018
| Common Stock |
| Additional paid-in |
| Accumulated |
|
| ||
| Shares |
| Amount |
| capital |
| Deficit |
| Total |
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2017 | 28,305,000 |
| $28,305 |
| $ 3,095 |
| $ (442,083) |
| $(410,683) |
|
|
|
|
|
|
|
|
|
|
Sale of common stock | 746,800 |
| 747 |
| 185,953 |
| - |
| 186,700 |
|
|
|
|
|
|
|
|
|
|
Net loss | - |
| - |
| - |
| (198,901) |
| (198,901) |
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2018 | 29,051,800 |
| 29,052 |
| 189,048 |
| (640,984) |
| (422,884) |
|
|
|
|
|
|
|
|
|
|
Common shares issued with convertible note | 50,000 |
| 50 |
| 19,910 |
| - |
| 19,960 |
|
|
|
|
|
|
|
|
|
|
Common stock issued for services | 186,363 |
| 186 |
| 139,722 |
| - |
| 139,908 |
|
|
|
|
|
|
|
|
|
|
Net loss | - |
| - |
| - |
| (579,171) |
| (579,171) |
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2019 | 29,288,163 |
| $29,288 |
| $ 348,680 |
| $(1,220,155) |
| $(842,187) |
The accompanying notes are an integral part of these financial statements.
F-4
Fourth Wave Energy, Inc.
(formerly Pierre Corp.)
Statements of Cash Flows
For the years ended December 31, 2019 and 2018
| Year ended |
| Year ended |
| December 31, 2019 |
| December 31, 2018 |
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
Net loss | $ (579,171) |
| $ (198,901) |
Adjustment to reconcile net loss to |
|
|
|
cash used in operating activities: |
|
|
|
Stock based compensation | 139,908 |
| - |
Depreciation expense | - |
| 1,184 |
Amortization of debt discount | 100,174 |
| - |
Loss on change in derivative liability | 56,640 |
| - |
Net change in: |
|
|
|
Prepaid assets | (18,318) |
| (5,700) |
Accounts payable | 16,991 |
| 10,149 |
Accounts payable - related party | 36,282 |
| 20,341 |
|
|
|
|
CASH FLOWS USED IN OPERATING ACTIVITIES | (247,494) |
| (172,927) |
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
Sale of common stock | - |
| 186,700 |
Proceeds from convertible notes | 165,000 |
| - |
Proceeds from notes payable, related party | 3,000 |
| 20,012 |
Payments from notes payable, related party | - |
| (52,500) |
Proceeds from notes payable | 79,900 |
| 20,000 |
|
|
|
|
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES | 247,900 |
| 174,212 |
|
|
|
|
NET CHANGE IN CASH | 406 |
| 1,285 |
Cash, beginning of period | 1,285 |
| - |
Cash, end of period | $ 1,691 |
| $ 1,285 |
|
|
|
|
SUPPLEMENTAL CASH FLOW INFORMATION |
|
|
|
|
|
|
|
Cash paid on interest expenses | $ - |
| $ - |
Cash paid for income taxes | $ - |
| $ - |
|
|
|
|
NON-CASH TRANSACTIONS |
|
|
|
Common stock issued with convertible notes | $ 19,960 |
| $ - |
Debt discount created by derivative liability | $ 128,655 |
| $ - |
The accompanying notes are an integral part of these financial statements.
F-5
Fourth Wave Energy, Inc.
(Formerly Pierre Corp.)
Notes to the Financial Statements
December 31, 2019 and 2018
Note 1.
Basis of Presentation
General
Fourth Wave Energy, Inc. (formerly Pierre Corp.) (the “Company”) was incorporated in Nevada on January 21, 2011. Since its incorporation, the Company has attempted to become involved in a number of business ventures, all of which were unsuccessful and which it has abandoned.
On March 16, 2020 we acquired all of the outstanding shares of Fourth Wave Energy, Inc. for 6,200,000 restricted shares of our common stock. 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. Fourth Wave has designed an energy system which is based on combining solar power and other energy efficient technologies into one fully integrated system. The Fourth Wave energy system is designed to significantly reduce energy consumption and associated carbon emissions in residences and commercial buildings. Fourth Wave plans to build five pilot projects as showcases for its technology.
Prior to the change of business strategy to Fourth Wave the Company decided to become involved in the marijuana industry. The Company planned to own and operate medical and adult marijuana cultivation facilities, manufacturing facilities and dispensaries in California.
On October 15, 2018 a shareholder 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 Wadena Corp. to Pierre Corp.
·
reverse split the Company’s outstanding shares of common stock on a 5-for-1 basis. All per share disclosures retroactively reflect post-split shares.
The Company’s activities are subject to significant risks and uncertainties including failure to secure additional funding to properly execute the Company’s business plan.
Note 2.
Summary of Significant Accounting Policies
The financial statements have, in management's opinion, been properly prepared within the framework of the significant accounting policies summarized below:
Use of Estimates
In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original purchase maturity of three months or less to be cash equivalents.
Property and Equipment
Property and equipment is carried at cost less accumulated depreciation. Depreciation is provided principally on the straight-line method over the useful lives as follows:
Furniture and fixtures
7 years
Equipment
5 years
F-6
Fair Value of Financial Instruments
The carrying value of short-term instruments, including cash, accounts payable and accrued expenses, and short-term notes approximate fair value due to the relatively short period to maturity for these instruments. The long-term debt approximate fair value since the related rates of interest approximate current market rates.
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 and minimize the use of unobservable 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 liability, 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
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 December 31, 2019 and December 31, 2018:
Fair value measured at December 31, 2019 | ||||||||||||
|
| Total carrying value at December 31, 2019 |
| Quoted prices in active markets (Level 1) |
| Significant other observable inputs (Level 2) |
| Significant Unobservable inputs (Level 3) | ||||
|
|
|
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities |
| $ | 185,295 |
| $ | - |
| $ | - |
| $ | 185,295 |
Fair value measured at December 31, 2018 | ||||||||||||
|
| Total carrying value at December 31, 2018 |
| Quoted prices in active markets (Level 1) |
| Significant other observable inputs (Level 2) |
| Significant Unobservable inputs (Level 3) | ||||
|
|
|
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities |
| $ | - |
| $ | - |
| $ | - |
| $ | - |
There were no transfers between Level 1, 2 or 3 during the periods.
The table below presents the change in the fair value of the derivative liability during the year ended December 31, 2019:
|
|
Fair value as of December 31, 2018 | $ - |
Fair value on the date of issuance recorded as a debt discount | 128,655 |
Fair value on the date of issuance recorded as a loss on derivatives | 56,280 |
Gain on change in fair value of derivatives | 360 |
Fair value as of December 31, 2019 | $ 185,295 |
F-7
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 47020 “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.
Convertible debt
The Company records a beneficial conversion feature related to the issuance of convertible debts 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.
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.
Income Taxes
The Company uses the assets and liability method of accounting for income taxes. Under the assets and liability method deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
Basic and Diluted Loss Per Share
Basic loss per common share is computed by dividing net loss available to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted loss per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents. In periods when losses are reported, the weighted-average number of common shares outstanding excludes common stock equivalents, because their inclusion would be anti-dilutive. As of December 31, 2019, the Company’s potentially dilutive shares, which were not included in the calculation of net loss per share, included notes convertible to 506,237 common shares. As of December 31, 2018, Company had no potentially dilutive shares or options.
Recent Accounting Pronouncements
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (ASU 2016-02). Under ASU No. 2016-2, an entity is required to recognize right-of-use assets and lease liabilities (“ROU”) on its balance sheet and disclose key information about leasing arrangements. ASU No. 2016-02 offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. For public companies, The Company adopted this standard on January 1, 2019 using the modified retrospective method. The new standard provides a number of optional practical expedients in transition. The Company elected the ‘package of practical expedients’, which permitted the Company not to reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct costs; and all of the new standard’s available transition practical expedients.
F-8
The new standard also provides practical expedients for a company’s ongoing accounting. The Company elected the short-term lease recognition exemption for its leases. For those leases with a lease term of 12 months or less, the Company will not recognize ROU assets or lease liabilities. The Company also made an accounting policy election to combine lease and non-lease components of operating leases for all asset classes. The adoption of this new standard did not impact the Company.
In June 2018, the FASB issued ASU No. 2018-07, Compensation Stock Compensation (Topic 718) - Improvements to Nonemployee Share-Based Payment Accounting, which aligns the accounting for share-based payment awards issued to employees and nonemployees. Under ASU No. 2018-07, the existing employee guidance will apply to nonemployee share-based transactions (as long as the transaction is not effectively a form of financing), with the exception of specific guidance related to the attribution of compensation cost. The cost of nonemployee awards will continue to be recorded as if the grantor had paid cash for the goods or services. In addition, the contractual term will be able to be used in lieu of an expected term in the option-pricing model for nonemployee awards. The Company adopted the provisions of the guidance on January 1, 2019 with no material impact on the Company’s consolidated financial statements and disclosures.
The Company does not believe that any other recently issued effective pronouncements, or pronouncements issued but not yet effective, if adopted, would have a material effect on the accompanying financial statements.
Note 3.
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 December 31, 2019, 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 4.
Related Party Transactions
During the year ended December 31, 2019, Robert Sawatsky, who was previously the President and CEO of the Company, advanced $3,000 to the Company. During the year ended December 31, 2018, the Company repaid a note payable, net of receipts, in the amount of $32,488 to the former Director and President of the Company. As of December 31, 2019 and 2018, the note payable totaled $9,000 and $6,000 respectively. The advances are unsecured, non-interest bearing, have no specific terms for repayment and payable on demand.
Effective March 1, 2012, the Company agreed to pay the President of the Company $4,000 per month for management services if funds are available or to accrue such amount if funds are not available. Effective July 1, 2016, the Company agreed to pay the President of the Company $2,000 per month for management services if funds are available or to accrue such amount if funds are not available. Effective October 1, 2018, the Company agreed to pay the President of the Company $6,000 per month for management services if funds are available or to accrue such amount if funds are not available. Effective April 30, 2019, the Company agreed to pay the President of the Company $11,500 per month for management services if funds are available or to accrue such amount if funds are not available. Accounts payable – related party are the fees earned but not yet paid of $104,623 and $68,341 at December 31, 2019 and December 31, 2018, respectively.
|
| Year ended December 31, 2019 | Year ended December 31, 2018 |
|
|
|
|
| Management fees | $ 121,500 | $ 36,000 |
Mr. Sawatsky provided consulting services to the Company related to public company reporting with no expected compensation for the year ended December 31, 2019.
Note 5.
Notes Payable
During the year ended December 31, 2018, the Company received a loan for $20,000 from an individual. The loan is in addition to the loans previously entered into by the Company, is unsecured, non-interest bearing, has no specific terms for
F-9
repayment and payable on demand. As of December 31, 2018, the loans totaled $244,000.
During the year ended December 31, 2019, the Company received advances of $79,900. The advances are unsecured, non-interest bearing, have no specific terms for repayment and payable on demand. As of December 31, 2019, the advances totaled $323,900.
Note 6.
Convertible Notes Payable and Derivative Liability
On April 25, 2019, the Company borrowed $30,000 from an unrelated third party. The unsecured loan 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 October 25, 2019 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 $28,112 which was recorded as a discount on the note payable and a day one loss on the derivative liability of $9,362. In addition, the note holder was issued 25,000 shares of common stock with a relative fair value of $6,250 which was recorded as a debt discount and will be amortized over the life of the note. As of December 31, 2019, the balance on the loan, net of unamortized discount of $0, is $30,000.
On June 4, 2019, the Company borrowed $55,000 from an unrelated third party. The unsecured loan 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. 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 December 31, 2019, the balance on the loan, net of unamortized discount of $9,019, is $45,981.
On September 9, 2019, the Company borrowed $30,000 from an unrelated third party. The unsecured loan 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. 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. As of December 31, 2019, the balance on the loan, net of unamortized discount of $11,373, is $18,627.
On November 14, 2019, the Company borrowed $85,000 from an unrelated third party. The unsecured loan 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. 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 notes payable. As of December 31, 2019, the balance on the loan, net of unamortized discount of $63,049, is $21,951.
As of December 31, 2019, the total derivative liability on the above notes was adjusted to a fair value of $185,295. During the year ended December 31, 2019, $100,174 of the discount was amortized leaving an unamortized balance of $83,441. The fair value of the conversion option was estimated using the Black-Scholes option pricing model and the following assumptions during the period: fair value of stock $0.25 - $1.10, volatility of 51% - 59% based on a comparable company peer group, expected term of 0.32 – 1.00 years, risk-free rate of 1.5% - 2.3% and a dividend yield of 0%.
F-10
Note 7.
Capital Stock
Between May and August 2018, third party investors purchased 746,800 shares of the Company’s common stock at a price of $0.25 per share for gross proceeds of $186,700. The Company relied upon the exemption provided by Section 4(a)(2) of the Securities Act of 1933 in connection with the sale of the common stock described above.
On October 15, 2018, the Company’s Board of Directors declared a five-for-one reverse stock split of the Company’s common stock. The record date for the stock split was October 15, 2018. Shareholders of record as of the close of business on the record date received one share of common stock of the Company for every five shares that they owned on such date. The earnings per share calculations and share data for all periods presented have been recast to reflect the impact of the stock split on outstanding shares.
During the year ended December 31, 2019 the Company issued 50,000 shares of its restricted common stock to the third party that provided the Company with the $60,000 in loans described in Note 5.
On November 4, 2019, the Company issued 50,000 common shares to a consultant for services. The fair value of the shares was $39,000 and was recognized as of December 31, 2019. During the year ended December 31, 2019, $39,000 of expense was recognized.
On November 14, 2019, the Company entered into an Equity Purchase Agreement with Tiger Trout Capital, LLC (“TTC”). Under the Agreement, TTC agreed to provide the Company with up to $2,500,000 of funding through the purchase of shares of the Company's common stock. As of December 31, 2019, the Company issued 136,363 shares of its common stock with a fair value of $100,908 to TTC pursuant to this agreement as an inducement to enter the agreement.
Note 8.
Income Taxes
The cumulative tax effect at the expected rate of 21% of significant items comprising the Company’s net deferred tax amount is as follows:
| December 31, 2019 | December 31, 2018 |
|
|
|
Deferred tax asset attributable to: |
|
|
Net operating loss | $ 193,200 | $ 134,600 |
Valuation allowance | (193,200) | (134,600) |
Net | $ - | $ - |
A reconciliation of income tax provision to the provision that would be recognized under the statutory rates is as follows:
| December 31, 2019 | December 31, 2018 |
|
|
|
Benefit attributable to operating loss | $ 121,600 | $ 41,800 |
Non-deductible expenses | (63,000) | - |
Impact of change in tax rate | - | - |
Valuation allowance | (58,600) | (41,800) |
Net provision | $ - | $ - |
The amount taken into income as deferred tax assets must reflect that portion of the income tax loss carry forwards that is more likely-than-not to be realized from future operations. The Company has chosen to provide an allowance of 100% against all available income tax loss carry forwards, regardless of their time of expiry.
No provision for income taxes has been provided in these financial statements due to the net loss. At December 31, 2019, the Company has net operating loss carry forwards, which expire commencing in 2031, totaling approximately $920,000, the benefit of which has not been recorded in the financial statements.
Note 9.
Subsequent Events
On January 15, 2020, the Company converted $20,000 in advances from an unrelated third party into a promissory note. The unsecured note bears an interest rate of 8% and matures on January 15, 2021.
F-11
On January 23, 2020, the Company borrowed $120,000 from an unrelated third party. The loan 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 is due and payable on January 22, 2021. 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 the date of conversion.
During February and March 2020 the Company sold convertible notes in the principal amount of $164,000. The notes are unsecured, bear interest at 8% per year, and are due and payable on February 15, 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 $0.25.
On March 16, 2020 the Company acquired all of the outstanding shares of Fourth Wave Energy, Inc. for 6,200,000 restricted shares of the Company’s common stock.
In connection with this acquisition the Company entered into consulting agreements with certain founders of Fourth Wave. The consulting agreements require the Company to collectively pay $385,000 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 is for a twelve month period and expires in the Spring of 2021.
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.
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 $0.01 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 Series A holders 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 31st day of December in each year, commencing on December 3l, 2020 at the rate of $0.10 per share per year.
On March 26, 2020, we issued 1,000 shares of our Series A preferred stock to J. Jacob Isaacs.
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.
F-12
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A.
As required by Rule 13a-15 under the Exchange Act, our management evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2019.
Based upon an evaluation of the effectiveness of our disclosure controls and procedures performed by our management, with participation of our Chief Executive Officer and Chief Financial Officer as of the end of the period covered by this report, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures have not been effective as a result of a weakness in the design of internal control over financial reporting.
Certain internal control weaknesses became evident that, in the aggregate, represent material weaknesses, including: (i) lack of segregation of incompatible duties; and (ii) insufficient Board of Directors representation.
As used herein, “disclosure controls and procedures” mean our controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f) under the Securities Exchange Act of 1934. Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our control over financial reporting based on the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on our evaluation under the framework, management has concluded that our internal control over financial reporting was not effective as of December 31, 2019.
There were no changes in our internal controls that occurred during the quarter ended December 31, 2019 that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.
This annual report does not include an attestation report of our company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our company's registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit us to provide only the management's report in this annual report.
Management's Remediation Initiatives
Management plans to initiate efforts to remediate the identified material weaknesses and other deficiencies and enhance our internal controls when and if operating funds become available.
ITEM 9B.
None.
10
PART III
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Name
Age
Position
J. Jacob Isaacs
36
Chief Executive, Financial and Accounting Officer and a Director
Mr. Isaacs was initially appointed as a director and officer on August 16, 2016 and resigned on November 24, 2017. Mr. Isaacs was reappointed as an officer and director on January 11, 2018. Mr. Isaacs served as the Chief Executive Officer, President, Chief Financial Officer and Secretary/Treasurer of Cumberland Hills, Ltd. since its inception in January 2010 until its subsequent merger in 2013. Since 2013 Mr. Isaacs has operated his own private consulting firm advising small companies on the process of going public. He is also active in restructuring corporations and arranging debt consolidations.
Our directors are appointed for a one-year term to hold office until the next annual general meeting of our shareholders or until their successors are elected or appointed. Our officers are appointed by our board of directors and serve at the discretion of the board.
We believe Mr. Isaacs is qualified to act as a director based upon his knowledge of business practices and, in particular, the regulations relating to public companies.
Mr. Isaacs is not independent as that term is defined in Section 803 of the NYSE MKT Company Guide.
We do not have a financial expert as that term is defined by the Securities and Exchange Commission.
Our Board of Directors does not have standing audit, nominating or compensation committees, committees performing similar functions, or charters for such committees. Instead, the functions that might be delegated to such committees are carried out by our Directors, to the extent required. Our Directors believe that the cost of associated with such committees, has not been justified under our current circumstances. During the years ended December 31, 2019 and 2018 we did not compensate any person for serving as a director.
Executive Compensation
Name and principal position | Year | Salary | Total |
J. Jacobs Isaacs (1) | 2019 2018 | 121,500 | 121,500 36,000 |
(1)
Mr. Isaacs was initially appointed as a director and officer on August 16, 2016 and resigned on November 24, 2017. Mr. Isaacs was reappointed as an officer and director on January 11, 2018.
(2)
In 2019, Mr. Isaacs was paid $85,000 and accrued $36,500. In 2018, Mr. Isaacs was paid $15,600 and accrued $20,400.
There have never been any grants of stock options to our officers or directors.
The following shows the amounts we expect to pay to our officer during the twelve months ended December 31, 2020 and the amount of time this person expects to devote to our business
Projected
Percent of time to be devoted
Name
Compensation
to the Company’s Business
J. Jacob Isaacs
$138,000
80%
11
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table shows the ownership, as April 15, 2020, of those persons owning beneficially 5% or more of our common stock and the number and percentage of outstanding shares owned by each of our directors and officers and by all officers and directors as a group. Each owner has sole voting and investment power over their shares of common stock.
Percent of
Name
Shares Owned
Outstanding Shares
J. Jacob Isaacs
15,750,000
53.8%
All officers and directors
as a group (one person)
15,750,000
53.8%
On March 26, 2020, we issued 1,000 shares of our Series A preferred stock to J. Jacob Isaacs. 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 number of votes that the holder of each Series A preferred share is entitled to cast is determined by the following formula:
X x 250%
1,000
Where:
X =
number of votes entitled to be cast by holders of our common stock or by holders of any of our other outstanding securities.
The holders of the Series A Preferred shares and the holders of our common stock and any other shares of our capital stock having general voting rights will vote together as one class on all matters submitted to a vote of our shareholders.
Each Series A Preferred share is convertible into one share of our common stock.
ITEM 13.
CERTAIN RELATIONSHIPS, RELATED PARTY TRANSACTIONS AND DIRECTOR INDEPENDENCE
See Note 4 to the December 31, 2019 financial statements included as part of report.
ITEM 14.
PRINCIPAL ACCOUNTING FEES AND SERVICES
The aggregate fees billed for the most recently completed fiscal years ended December 31, 2019 and December 31, 2018 for professional services rendered by the principal accountant for the audit of our annual financial statements and services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for these fiscal periods were as follows:
|
|
| |
| Year Ended | ||
| December 31, 2019 | December 31, 2018 | |
Audit Fees – MaloneBailey LLP | 13,010 | - | |
Audit Fees – LBB & Associates Ltd., LLP | 9,500 | 19,500 | |
Audit Related Fees |
|
| |
Tax Fees | - | - | |
All Other Fees | - | - | |
Total | 22,510 | 19,500 | |
12
Our board of directors pre-approves all services provided by our independent auditors. All of the above services and fees were reviewed and approved by the board of directors either before or after the respective services were rendered.
Our board of directors has considered the nature and amount of fees billed by our independent auditors and believes that the provision of services for activities unrelated to the audit is compatible with maintaining our independent auditors’ independence.
13
PART IV
ITEM 15.
EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES
Exhibit Number |
| Description |
|
|
|
3.1 |
| Articles of Incorporation (1) |
3.2 |
| Amended Articles of Incorporation (1) |
3.3 |
| Bylaws (1) |
31.1* |
| Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act |
31.2* |
| Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act |
32.1* |
|
(1)
Incorporated by reference to the same exhibit filed with the Company’s registration statement on Form S-1 (File #333-190265).
* Provided herewith
14
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant has caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized on the 15th day of April, 2020.
FOURTH WAVE ENERGY, INC
By:
/s/ J. Jacob Isaacs
J. Jacob Isaacs, Principal Executive, Financial and Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
April 15, 2020
By:
/s/ J. Jacob Isaacs
J. Jacob Isaacs, Principal Executive, Financial and Accounting Officer and a Director
15