The following discussion should be read in conjunction with our unaudited
financial statements and notes thereto included herein.
General
EDGE DATA SOLUTIONS, INC. (the "Company"), formerly Blockchain Holdings Capital
Ventures, Inc. (formerly Southeastern Holdings, Inc., formerly Safe Lane
Systems, Inc.) was incorporated in the State of Colorado on September 10, 2013.
Safe Lane Systems, Inc. redomiciled to become a Delaware holding corporation in
September of 2016. On September 22, 2016, Safe Lane Systems, Inc. formed two
wholly owned subsidiaries, SLS Industrial, Inc and Southeastern Holdings, Inc.
(both Delaware corporations) and on September 30, 2016 completed a merger and
reorganization in which Southeastern Holdings, Inc. (now Edge Data Solutions,
Inc.) became the holding company. On December 1, 2016, the Company spun off its
wholly owned subsidiary, SLS Industrial, Inc., along with its assets and
liabilities, leaving Southeastern Holdings, Inc. as the only surviving entity.
On August 23, 2018, the Company entered into a Bill of Sale and Assignment and
Assumption Agreement with Blockchain Holdings, LLC ("Blockchain"), pursuant to
which the Company purchased all of the assets of Blockchain which are used in
the business of sourcing of blockchain mining equipment from various suppliers
for their customers and also providing management of the equipment hosted,
mining pools and tech work on such equipment. The Company issued 300,000,000
(equivalent to 3,000,000 after the reverse split) shares of its common stock,
par value $.0001 to the members of Blockchain in exchange for the assets of
Blockchain.
On August 30, 2018 the Company changed its name to Blockchain Holdings Capital
Ventures, Inc.
On January 13, 2020, the Company changed its name to Edge Data Solutions, Inc.
Edge Data Solutions, Inc. (EDSI) is poised to be an industry-leading edge data
center and cloud infrastructure provider. EDSI's proprietary Edge Performance
Platform (EPP) allows us to deploy next-generation edge data centers where they
are needed most. EDSI's data centers provide next-generation immersion Cooling
technology that improves performance, reduces energy costs and latency. Key
industries we serve more computing power are fintech, cloud gaming, telecom 5G,
3D/video/AI rendering, video streaming, remote desktop, IoT, autonomous
vehicles. Centralized infrastructure facilities servicing multiple geographical
areas encounter many issues with data latency, congestion and weak network
connections. To address this, data processing is moving closer to the customer.
EDSI offers green, low-cost, secure colocation and private data hosting to meet
this demand for Edge data centers. EDSI plans to deploy to strategic locations
based on demand for Tier 2 and Tier 3 cities outside the major metropolitans to
underserved markets, supporting both edge customers and areas of projected
growth. With the rise and proliferation of this technology adoption we plan to
solidify our footprint by securing multiple locations across the US, while
generating revenue from our operations. The modular design and ability to add
additional data centers as needed, preserves up front capital allowing for rapid
deployment and scalability as business demand increases.
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The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. However, the above conditions raise
substantial doubt about the Company's ability to do so. New business
opportunities may never emerge, and we may not be able to sufficiently fund the
pursuit of new business opportunities should they arise.
As of June 30, 2021, we had approximately $20,521 of cash on hand. Our current
monthly cash burn rate is approximately $35,000, and it is expected that burn
rate will continue and is expected to continue at $35,000 until significant
additional capital is raised and our marketing plan is executed. Our trade
creditors may call debts at any time, and our cash reserves would not be
sufficient to satisfy all balances. We are currently dependent on minimal
expenses to be covered by a loan or other cash infusion from the Company's CEO
and Director Delray Wannamaker, and President and Director, Daniel Wong. There
is no guarantee that this cash infusion will continue to be made.
Operating results for the three months ended June 30, 2021 and 2020:
During the three months ended June 30, 2021, the Company generated revenues of
$776,080 from operations, compared to $6,307 for the three months ended June 30,
2020, an increase of $769,773 or 12,205%. This increase is a result of (i)
customers purchasing and consuming datacenter credits for use of the Company's
computing equipment and (ii) the sale of datacenter hardware solutions. The
Company anticipates future revenue from its current efforts, but there can be no
assurances that such efforts will be successful.
For the three months ended June 30, 2021, costs of net revenues were $660,091,
compared to $0 for the three months ended June 30, 2020, for an increase of
100%. The change is a result of direct costs associated with the Company's
revenue streams.
As a result of the changes in revenues and cost of net revenues discussed above,
the Company's gross margin was $115,989 and $6,307 for the three months ended
June 30, 2021 and 2020, respectively.
For the three months ended June 30, 2021, selling, general and administrative
expenses were $94,530, as compared to $55,788 during the three months ended June
30, 2020, an increase of $38,742, or 69%. The increase in these expenses was
attributable to increased legal, accounting and other professional fees.
The Company recognized stock-based compensation expense of $0 for the three
months ended June 30, 2021, as compared to $153,900 for the three months ended
June 30, 2020, for a decrease of $153,900, or 100%. This decrease was a result
of no new consulting agreements in the second quarter of 2021.
During the three months ended June 30, 2021, the Company recognized $7,088 of
depreciation expense, as compared to $4,129, for an increase of $2,959 or 71%,
during the three months ended June 30, 2020, as a result of added equipment
during the later periods of 2020 and during 2021.
During the three months ended June 30, 2021, the Company recognized $23,260 of
interest expense, as compared to $15,171 for the three months ended June 30,
2020. The increase of $8,089, or 53%, is primarily attributable to the accrual
of interest on significant new convertible debt issuances to fund operations
throughout the end of 2020 and he beginning of 2021.
The Company also generated cryptocurrency mining income of $5,320 and a gain of
$537 on the sale of cryptocurrency during the three months ended June 30, 2021,
as compared to $0 and $0, respectively during the three months ended June 30,
2020. The change was a result of the use of excess datacenter capacity after the
Company built out its datacenters during 2020.
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As a result of the changes in operating expenses and other expenses, the Company
generated a net operating loss of $79,827 for the three months ended June 30,
2021, as compared to a net loss of $307,431 for the three months ended June 30,
2020, a change of $227,604, or 74%.
The future trends of all expenses are expected to be primarily driven by the
Company's ability to execute its business plans. Furthermore, the Company's
ability to continue to fund operating expenses will depend on its ability to
raise capital, continue to generate revenue and experience revenue growth. There
can be no assurance that the Company will be successful in doing so.
Operating results for the six months ended June 30, 2021 and 2020:
During the six months ended June 30, 2021, the Company generated revenues of
$826,923 from operations, compared to $6,307 for the six months ended June 30,
2020, an increase of $820,616 or 13,011%. This increase is a result of (i)
customers purchasing and consuming datacenter credits for use of the Company's
computing equipment and (ii) the sale of datacenter hardware solutions. The
Company anticipates future revenue from its current efforts, but there can be no
assurances that such efforts will be successful.
For the six months ended June 30, 2021, costs of net revenues were $697,025,
compared to $0 for the six months ended June 30, 2020, for an increase of 100%.
The change is a result of direct costs associated with the Company's revenue
streams.
As a result of the changes in revenues and cost of net revenues discussed above,
the Company's gross margin was $129,898 and $6,307 for the six months ended June
30, 2021 and 2020, respectively.
For the six months ended June 30, 2021, selling, general and administrative
expenses were $142,230, compared to $132,990 during the six months ended June
30, 2020, an increase of $9,240, or 7%. The increase in these expenses was
primarily attributable to recognition of licensing fees paid pursuant to a
reseller agreement.
The Company recognized stock-based compensation expense of $19,000 for the six
months ended June 30, 2021, as compared to $9,500 for the six months ended June
30, 2020, for an increase of $9,500, or 100%. This increase was attributable to
an issuance to a consultant for support of operations in 2021.
During the six months ended June 30, 2021, the Company recognized $14,066 of
depreciation expense, as compared to $4,210, for an increase of $9,856 or 234%,
during the six months ended June 30, 2020, as a result of added equipment during
the later periods of 2020 and during 2021.
During the six months ended June 30, 2021, the Company recognized $50,345 of
interest expense, as compared to $24,108 for the six months ended June 30, 2020.
The increase of $26,237, or 109%, is primarily attributable to the accrual of
interest on significant new convertible debt issuances to fund operations
throughout 2020.
The Company also generated cryptocurrency mining income of $10,067 and a gain of
$478 on the sale of cryptocurrency during the six months ended June 30, 2021, as
compared to $0 and $0, respectively during the six months ended June 30, 2020.
The change was a result of the use of excess datacenter capacity after the
Company built out its datacenters during 2020 and the sale of mined
cryptocurrency.
As a result of the changes in operating expenses and other expenses, the Company
incurred a net loss of $202,698 for the six months ended June 30, 2021, compared
to a net loss of $403,151 for the six months ended June 30, 2020, a change of
$200,453, or 48%.
The future trends of all expenses are expected to be primarily driven by the
Company's ability to execute its business plans. Furthermore, the Company's
ability to continue to fund operating expenses will depend on its ability to
raise capital, continue to generate revenue and experience revenue growth. There
can be no assurance that the Company will be successful in doing so.
Liquidity and Capital Resources
The Company's cash position at June 30, 2021 decreased by $59,847 to $20,521, as
compared to a balance of $80,368, as of December 31, 2020. The decrease in cash
for the six months ended June 30, 2021 was attributable to net cash used in
operating activities of $7,714, $1,152 of net cash used in investing activities,
and net cash used in financing activities of $50,981.
As of June 30, 2021, the Company had a deficit in working capital of $1,020,743,
compared to a deficit in working capital of $849,989 at December 31, 2020,
representing a decrease in working capital of $170,754, which was largely
attributable to the use of cash in operations, amortization of prepaid expenses,
customer deposits, finance lease-related liabilities, deferred revenue and
short-term convertible debt.
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Net cash used in operating activities of $7,714 during the six months ended June
30, 2021, as compared to net cash of $266,003 used in operating activities for
the six months ended June 30, 2020, was primarily attributable to a significant
net loss, which was offset by customer deposits, stock-based compensation,
write-off of acquisition deposits and increases in accounts payable and
increased by payment of accrued liabilities.
Net cash used in investing activities was $1,152 for the six months ended June
30, 2021 decreased by $84,795 from $85,947 of cash used by investing activities
for the six months ended June 30, 2020. This is attributable to the Company
acquiring less datacenter equipment in 2021 and advancing funds pertaining to a
prospective acquisition in the prior period.
Net cash used in financing activities was $50,981 during the six months ended
June 30, 2021, as compared to net cash provided by financing activities of
$390,898 during the six months ended June 30, 2020. The difference was a result
of changes in finance lease assets and liabilities, net repayments of related
party advances, and no new convertible debt issued in 2021.
As reported in the accompanying consolidated financial statements, for the six
months ended June 30, 2021 and 2020, the Company incurred net losses of $202,698
and $403,151, respectively. The Company produced revenues during the six months
ended June 30, 2021 and limited revenue during the six months ended June 30,
2020. The Company's ability to continue as a going concern is dependent upon its
ability to generate revenue, reach consistent profitability and raise additional
capital. To date, the Company has raised funds from related party advances,
convertible debt, subscriptions to equity units, and the sale of common stock to
its former CEO. It intends to finance its future operating activities and its
near-term working capital needs through the sale of datacenter hardware
solutions and future convertible debt financings or stock subscriptions. The
sale of equity and entry into other future financing arrangements may result in
dilution to stockholders and those securities may have rights senior to those of
common shares. If the Company raises additional funds through the issuance of
convertible notes or other debt financing, these activities or other debt could
contain covenants that would restrict the Company's operations. Any other
third-party funding arrangements could require the Company to relinquish
valuable rights. The Company will require additional capital beyond its
currently anticipated needs. Additional capital, if available, may not be
available on reasonable terms or at all.
While the Company has generated revenues, it has not generated substantial
revenues or profits from its current operations. The Company expects to continue
to incur operating losses as it incurs professional fees and other expenses
related to implementing its business plan. The future trends of all expenses are
expected to be primarily driven by the Company's ability to execute its business
plans and continue to generate revenue. Furthermore, the Company's ability to
continue to fund operating expenses will depend on its ability to raise capital
and generate sufficient revenues. There can be no assurance that the Company
will be successful in doing so.
Financial Condition
The Company's total assets as of June 30, 2021 and December 31, 2020 were
$114,877 and $241,831, respectively, representing a decrease of $126,954, or
53%. Total liabilities as of June 30, 2021 and December 31, 2020 were $1,060,878
and $1,004,134, respectively, for an increase of $56,744, or 6%. The significant
change in the Company's financial condition is attributable to revenue
generation, customer deposits on hardware, commencement of a finance lease
arrangement, cash burn from operations and increases in accounts payable and
repayment of accrued expenses.
As a result of these transactions, the Company's cash position decreased from
$80,368 to $20,521 during the six months ended June 30, 2021.
Off-Balance Sheet Arrangements
We have made no off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources that is material to investors.
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