EDGE DATA SOLUTIONS, INC.

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07/25EDGE DATA SOLUTIONS, INC. : Change in Directors or Principal Officers (form 8-K)
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05/16EDGE DATA SOLUTIONS, INC. Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)
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04/01EDGE DATA SOLUTIONS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-K)
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EDGE DATA SOLUTIONS, INC. Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

05/16/2022 | 06:18pm EDT

The following discussion should be read in conjunction with our unaudited financial statements and notes thereto included herein.

General

History of Edge Data Solutions, Inc., a Delaware Corporation

EDGE DATA SOLUTIONS, INC. (the "Company", "Edge") was incorporated in the State of Delaware on September 22, 2016 and commenced its current operations after its reverse acquisition on August 23, 2018. Extended discussion of Edge's corporate history, including predecessor entities and affiliates, is incorporated by reference in the Company's Form 10-K filed on April 1, 2022.

Business Description

Edge Data Solutions, Inc. (the "Company," "Edge"), a Delaware Corporation, believes it is poised to be an industry-leading edge data center, cryptocurrency mining and cloud infrastructure provider. Edge's unique Edge Performance Platform (EPP) brings sustainable next-generation immersion-cooled high-performance computing to where it is needed most.

Compared to air-cooled solutions, Edge's EPP offers reduced carbon footprint and increased ROI through:

  ? Energy Efficiency - Environmentally friendly, lower PuE, lower operating costs
  ? Scalability - Easy, rapid and flexible deployment
  ? High-density - More computing power in a much smaller footprint
  ? Reduced CapEx - Longer equipment life, efficient structure
  ? Boosted Computing Power - Highly conducive environment for optimization
    without stressing equipment


EPP serves efficient next-generation immersion-cooled computing power for a variety of applications, including sustainable cryptocurrency mining, edge computing. Long-term, opting for EPP significantly reduces investment, and certain edge computing applications require less up-front investment.

Industries that will benefit from low-latency technology with a lower carbon footprint include cryptocurrency mining, public and private cloud providers, data centers, high-performance computing providers, virtual desktop infrastructure providers, telecom, cybersecurity and disaster recovery providers, streaming providers, artificial intelligence innovators, colleges, hospitals, governments, and enterprise blockchain infrastructure providers.

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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 March 31, 2022, we had approximately $1,517,613 of cash on hand. Currently, cash required to sustain core operations each month is $225,000, excluding one-time expenses, and we anticipate that cash requirement will significantly increase over the next twelve months. We have few customers and are highly dependent on revenue growth and may require significant additional capital to continue to execute on our business plan. Any lack of sufficiently profitable sales, changes in market conditions, or difficulty obtaining capital could be detrimental to operations and our efforts to execute on the business plan.

Operating results for the three months ended March 31, 2022 and 2021:

During the three months ended March 31, 2022, the Company generated revenues of $6,593,030 from operations, compared to $50,843 for the three months ended March 31, 2021, an increase of $6,542,187 or 12,867%. This increase is a result of the sale of data center 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 March 31, 2022, costs of net revenues were $4,498,466, compared to $36,935 for the three months ended March 31, 2021, for an increase of $4,461,531, or 12,079%. 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 profit was $2,094,564 and $13,908, an increase of $2,080,656 or 14,960%, for the three months ended March 31, 2022 and 2021, respectively.

For the three months ended March 31, 2022, selling, general and administrative expenses were $224,841, as compared to $47,699 during the three months ended March 31, 2021, an increase of $177,142, or 371%. The increase in these expenses was attributable to increased costs to support significantly increased operations.

The Company recognized stock-based compensation expense of $0 for the three months ended March 31, 2022, as compared to $19,000 for the three months ended March 31, 2021, for a decrease of $19,000, or 100%. This decrease resulted from the Company entering no new agreements that included stock-based compensation during the three months ended March 31, 2022.

During the three months ended March 31, 2022, the Company recognized $7,236 of depreciation expense, as compared to $6,978, for an increase of $258 or 4%, during the three months ended March 31, 2021, as a result of additional purchases of computing equipment.

During the three months ended March 31, 2022, the Company recognized $20,945 of interest expense, as compared to $27,085 for the three months ended March 31, 2021. The decrease of $6,140, or 23%, is a result of the repayment of $100,000 and conversion of $549,500 of convertible debt in February 2022.

The Company also generated cryptocurrency mining income of $0 and a loss of $0 on the sale of cryptocurrency during the three months ended March 31, 2022, as compared to $4,747 and $59, respectively during the three months ended March 31, 2021. The change was a result of the Company not mining cryptocurrency during the three months ended March 31, 2021.

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As a result of the changes in operating expenses and other expenses, the Company generated net income of $1,209,791 for the three months ended March 31, 2022, as compared to a net loss of $122,871 for the three months ended March 31, 2021, a change of $1,332,662, or 1,085%.

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 March 31, 2022 increased by $686,404 to $1,517,613, as compared to a balance of $831,209, as of December 31, 2021. The increase in cash for the three months ended March 31, 2022 was attributable to net cash provided by operating activities of $915,484, $118,905 of net cash used in investing activities, and net cash used in financing activities of $110,175.

As of March 31, 2022, the Company had working capital of $143,658, compared to a deficit in working capital of $1,593,822 at December 31, 2021, representing an increase in working capital of $1,737,480, which was largely attributable to sales-related cash inflows and repayments and conversions of outstanding short-term convertible notes.

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Net cash provided by operating activities of $915,484 during the three months ended March 31, 2022, as compared to net cash of $453,613 provided by operating activities for the three months ended March 31, 2021, was primarily attributable to payments related to sales.

Net cash used in investing activities of $118,905 for the three months ended March 31,2022, as compared to $1,152 of cash used by investing activities for the three months ended March 31, 2021, was attributable to the Company acquiring less data center equipment in 2021 and payments made related to prospective joint ventures for two data center sites at which the Company plans to perform research and development and roll out cloud services.

Net cash used in financing activities was $110,175 during the three months ended March 31, 2022, as compared to net cash used in financing activities of $42,105 during the three months ended March 31, 2021, was primarily a result of the repayment of a convertible note.

As reported in the accompanying consolidated financial statements, for the three months ended March 31, 2022 and 2021, the Company generated net income of $1,209,791 and incurred a net loss of $122,871, respectively. The Company's ability to continue as a going concern is dependent upon its ability to continue to generate sufficiently profitable revenue and its ability to raise capital in the event it does not generate revenue. It intends to finance its future operating activities and its near-term working capital needs through the sale of immersion-cooled data center solutions and through additional capital. 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, its revenues are currently comprised of few customers, and the loss of any significant customer could be detrimental to its ability to execute on its business plan. The Company expects to continue to generate sufficiently profitable revenues, but there can be no assurance that it will be successful in these efforts. 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 generate sufficient revenues and raise any necessary capital. There can be no assurance that the Company will be successful in doing so.

Financial Condition

The Company's total assets as of March 31, 2022 and December 31, 2021 were $3,065,028 and $3,095,177, respectively, representing a decrease of $30,149, or 1%. Total liabilities as of March 31, 2022 and December 31, 2021 were $2,748,735 and $4,627,335, respectively, for a decrease of $1,878,600, or 41%. The significant change in the Company's financial condition is attributable to the delivery of data center solutions and repayments and conversions of convertible debt during the three months ended March 31, 2022.

As a result of these transactions, the Company's cash position increased from $831,209 to $1,517,613 during the three months ended March 31, 2022.

Off-Balance Sheet Arrangements

None.

© Edgar Online, source Glimpses

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