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 September 30, 2021, we had approximately $147,261 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 September 30, 2021 and 2020:

During the three months ended September 30, 2021, the Company generated revenues of $144,733 from operations, compared to $14,317 for the three months ended September 30, 2020, an increase of $130,416 or 911%. This increase is a result of the sale of data center 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 September 30, 2021, costs of net revenues were $110,516, compared to $0 for the three months ended September 30, 2020, for an increase of 100%. The change is a result of direct costs associated with the Company's data center sales.

As a result of the changes in revenues and cost of net revenues discussed above, the Company's gross margin was $34,217 and $14,317 for the three months ended September 30, 2021 and 2020, respectively.

For the three months ended September 30, 2021, selling, general and administrative expenses were $80,547, as compared to $52,343 during the three months ended September 30, 2020, an increase of $28,204, or 54%. The increase in these expenses was attributable to increased legal, accounting and other professional fees associated with operations.

The Company recognized stock-based compensation expense of $121,980 for the three months ended September 30, 2021, as compared to $218,500 for the three months ended September 30, 2020, for a decrease of $96,520, or 44%. This decrease resulted from lower stock-based compensation commitments, as the Company entered fewer consulting and advisory agreements in 2021, as compared to significant agreements to issue shares in 2020.

During the three months ended September 30, 2021, the Company recognized $7,165 of depreciation expense, as compared to $6,303, for an increase of $862 or 14%, during the three months ended September 30, 2020, as a result of added equipment during the later periods of 2020 and during 2021.

During the three months ended September 30, 2021, the Company recognized $22,921 of interest expense, as compared to $17,955 for the three months ended September 30, 2020. The increase of $4,966, or 28%, is primarily attributable to the accrual of interest on convertible debt issuances near the end of 2020 to fund operations.

The Company also generated cryptocurrency mining income of $1,234 and a loss of $3,285 on the sale of cryptocurrency during the three months ended September 30, 2021, as compared to $716 and $0, respectively during the three months ended September 30, 2020. The change was a result of the use of excess data center capacity after the Company built out its data centers during 2020 and cryptocurrency market fluctuations.





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As a result of the changes in operating expenses and other expenses, the Company generated a net loss of $288,282 for the three months ended September 30, 2021, as compared to a net loss of $295,103 for the three months ended September 30, 2020, a change of $6,821, or 2%.

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 nine months ended September 30, 2021 and 2020:

During the nine months ended September 30, 2021, the Company generated revenues of $971,656 from operations, compared to $20,624 for the nine months ended September 30, 2020, an increase of $951,032 or 46,113%. This increase is a result of (i) customers purchasing and consuming data center credits for use of the Company's computing equipment and (ii) the sale of data center 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 nine months ended September 30, 2021, costs of net revenues were $793,394, compared to $0 for the nine months ended September 30, 2020, for an increase of 100%. The change is primarily a result of direct costs associated with the Company's hardware sales.

As a result of the changes in revenues and cost of net revenues discussed above, the Company's gross margin was $178,262 and $20,624 for the nine months ended September 30, 2021 and 2020, respectively.

For the nine months ended September 30, 2021, selling, general and administrative expenses were $237,648, compared to $185,331 during the nine months ended September 30, 2020, an increase of $52,317, or 29%. The increase in these expenses was attributable to increased legal, accounting and other professional fees associated with operations.

The Company recognized stock-based compensation expense of $140,980 for the nine months ended September 30, 2021, as compared to $381,900 for the nine months ended September 30, 2020, for a decrease of $240,920, or 63%. This decrease was attributable to timing of significant compensation issuances in 2020, as compared to fewer grants in 2021.

During the nine months ended September 30, 2021, the Company recognized $21,231 of depreciation expense, as compared to $10,513, for an increase of $9,282 or 89%, during the nine months ended September 30, 2020, as a result of added equipment during the later periods of 2020 and during 2021.

During the nine months ended September 30, 2021, the Company recognized $73,266 of interest expense, as compared to $42,064 for the nine months ended September 30, 2020. The increase of $31,202, or 74%, 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 $12,025 and a loss of $3,285 on the sale of cryptocurrency during the nine months ended September 30, 2021, as compared to $716 and $0, respectively during the nine months ended September 30, 2020. The change was a result of the use of excess data center capacity after the Company built out its data centers during 2020 and cryptocurrency market fluctuations.

As a result of the changes in operating expenses and other expenses, the Company incurred a net loss of $490,980 for the nine months ended September 30, 2021, compared to a net loss of $698,253 for the nine months ended September 30, 2020, a change of $207,273, or 30%.

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 September 30, 2021 increased by $66,893 to $147,261, as compared to a balance of $80,368, as of December 31, 2020. The decrease in cash for the nine months ended September 30, 2021 was attributable to net cash provided by operating activities of $119,056, $1,152 of net cash used in investing activities, and net cash used in financing activities of $51,011.

As of September 30, 2021, the Company had a deficit in working capital of $1,180,657, compared to a deficit in working capital of $849,989 at December 31, 2020, representing a decrease in working capital of $330,668, 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 provided by operating activities of $119,056 during the nine months ended September 30, 2021, as compared to net cash of $315,956 used in operating activities for the nine months ended September 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 nine months ended September 30, 2021 decreased by $139,906 from $141,058 of cash used by investing activities for the nine months ended September 30, 2020. This is attributable to the Company acquiring less data center equipment in 2021 and advancing funds pertaining to a prospective acquisition in the prior period.

Net cash used in financing activities was $51,011 during the nine months ended September 30, 2021, as compared to net cash provided by financing activities of $506,110 during the nine months ended September 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 nine months ended September 30, 2021 and 2020, the Company incurred net losses of $373,750 and $698,253, respectively. The Company produced revenues during the nine months ended September 30, 2021 and limited revenue during the nine months ended September 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 data center 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 September 30, 2021 and December 31, 2020 were $354,361 and $241,831, respectively, representing an increase of $112,530, or 47%. Total liabilities as of September 30, 2021 and December 31, 2020 were $1,466,664 and $1,004,134, respectively, for an increase of $462,530, or 46%. 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 increased from $80,368 to $147,261 during the nine months ended September 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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