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. 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., 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 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 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, edge 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.





22






Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. However, certain conditions raise substantial doubt about the Company's ability to do so. The Company has incurred substantial operating losses in its history and has an accumulated deficit of $1,298,157. Furthermore, the Company's revenue history is limited, the Company is currently not on a trajectory to meet originally anticipated revenues for 2022, and there can be no assurances of future revenues or sufficient profits to fund operations.

As of June 30, 2022, we had approximately $858,721 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 external 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 June 30, 2022 and 2021:

During the three months ended June 30, 2022, the Company generated revenues of $2,664,057 from operations, compared to $776,080 for the three months ended June 30, 2021, an increase of $1,887,977 or 243%. This increase is primarily a result of ongoing deliveries on sales of data center solutions. The Company anticipates future revenue from its current efforts, but there can be no assurances that such efforts will be sufficient or successful.

For the three months ended June 30, 2022, costs of net revenues were $1,948,719, compared to $660,091 for the three months ended June 30, 2021, for an increase of $1,288,628, or 195%. 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 $715,338 and $115,989, an increase of $599,349 or 517%, for the three months ended June 30, 2022 and 2021, respectively.

For the three months ended June 30, 2022, selling, general and administrative expenses were $622,395, as compared to $94,530 during the three months ended June 30, 2021, an increase of $527,865, or 558%. The increase in these expenses was attributable to increased costs to support significantly increased operations.

The Company recognized stock-based compensation expense of $41,052 for the three months ended June 30, 2022, as compared to $0 for the three months ended June 30, 2021, for an increase of $41,052, or 100%. This increase resulted from the Company's hiring efforts and entry into an advisory agreement resulting in stock-based compensation during the three months ended June 30, 2022.

During the three months ended June 30, 2022, the Company recognized $7,776 of depreciation expense, as compared to $7,088, for an increase of $688 or 10%, during the three months ended June 30, 2021, as a result of additional purchases of computing equipment.

During the three months ended June 30, 2022, the Company recognized $4,128 of interest expense, as compared to $23,260 for the three months ended June 30, 2021. The decrease of $19,132, or 82%, is a result of the repayment of $100,000 and conversion of $549,500 of convertible debt in February 2022, leaving $100,000 of convertible debt outstanding during Q2 2022.

The Company also generated cryptocurrency mining income of $0 and a loss of $1,976 on the sale of cryptocurrency during the three months ended June 30, 2022, as compared to $5,320 and a gain of $537, respectively during the three months ended June 30, 2021. The change was a result of the Company not mining cryptocurrency during the three months ended June 30, 2022 and collection and immediate liquidation of cryptocurrency for a customer payment in June 2022.





23

As a result of the changes in operating expenses and other expenses, the Company generated a net loss of $168,239 for the three months ended June 30, 2022, as compared to a net loss of $79,827 for the three months ended June 30, 2021, a change of $88,412, or 111%.

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, 2022 and 2021:

During the six months ended June 30, 2022, the Company generated revenues of $9,257,087 from operations, compared to $826,923 for the six months ended June 30, 2021, an increase of $8,430,164 or 1,019%. This increase is driven by deliveries on sales of data center solutions. The Company anticipates future revenue from its current efforts, but there can be no assurances that such efforts will be sufficient or successful.

For the six months ended June 30, 2022, costs of net revenues were $6,447,185, compared to $697,025 for the six months ended June 30, 2021, for an increase of $5,750,160, or 825%. 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 $2,809,902 and $129,898, an increase of $2,680,004 or 2,063%, for the six months ended June 30, 2022 and 2021, respectively.

For the six months ended June 30, 2022, selling, general and administrative expenses were $847,236, as compared to $142,230 during the six months ended June 30, 2021, an increase of $705,006, or 496%. The increase in these expenses was attributable to increased costs to support significantly increased operations.

The Company recognized stock-based compensation expense of $41,052 for the six months ended June 30, 2022, as compared to $19,000 for the six months ended June 30, 2021, for an increase of $22,052, or 116%. This increase resulted from the Company's hiring efforts and entry into an advisory agreement resulting in stock-based compensation during the six months ended June 30, 2022.

During the six months ended June 30, 2022, the Company recognized $15,012 of depreciation expense, as compared to $14,066, for an increase of $946 or 7%, during the six months ended June 30, 2021, as a result of additional purchases of computing equipment.

During the six months ended June 30, 2022, the Company recognized $25,073 of interest expense, as compared to $50,345 for the six months ended June 30, 2021. The decrease of $25,272, or 50%, 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 $1,976 on the sale of cryptocurrency during the six months ended June 30, 2022, as compared to $10,067 and a gain of $478, respectively during the six months ended June 30, 2021. The change was a result of the Company not mining cryptocurrency during the six months ended June 30, 2021 and collection and immediate liquidation of cryptocurrency for a customer payment in June 2022.





24

As a result of the changes in operating expenses and other expenses, the Company generated net income of $1,041,552 for the six months ended June 30, 2022, as compared to a net loss of $202,698 for the six months ended June 30, 2021, a change of $1,244,250, or 614%.

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, 2022 increased by $27,512 to $858,721, as compared to a balance of $831,209, as of December 31, 2021. The increase in cash for the six months ended June 30, 2022 was attributable to net cash provided by operating activities of $331,851, $184,619 of net cash used in investing activities, and net cash used in financing activities of $119,720.

As of June 30, 2022, the Company had deficit in working capital of $1,825, compared to a deficit in working capital of $1,593,822 at December 31, 2021, representing an increase in working capital of $1,591,997, which was largely attributable to sales-related cash inflows and repayments and conversions of outstanding short-term convertible notes.

Net cash provided by operating activities of $331,851 during the six months ended June 30, 2022, as compared to net cash of $464 provided by operating activities for the six months ended June 30, 2021, was primarily attributable to payments related to increased sales in 2022, as compared to 2021.

Net cash used in investing activities of $184,619 for the six months ended March 31,2022, as compared to $1,152 of cash used by investing activities for the six months ended June 30, 2021, was attributable to the Company acquiring less data center equipment in 2021 and payments made related to prospective joint ventures 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 $119,720 during the six months ended June 30, 2022, as compared to net cash used in financing activities of $59,159 during the six months ended June 30, 2021, was primarily a result of the repayment of a convertible note.

As reported in the accompanying consolidated financial statements, for the six months ended June 30, 2022 and 2021, the Company generated net income of $1,041,552 and incurred a net loss of $202,698, 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. Furthermore, the Company has not met its projected revenue targets from 2022-to-date. 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.





25






Financial Condition

The Company's total assets as of June 30, 2022 and December 31, 2021 were $1,337,538 and $3,095,177, respectively, representing a decrease of $1,757,639, or 57%. Total liabilities as of June 30, 2022 and December 31, 2021 were $1,148,432 and $4,627,335, respectively, for a decrease of $3,478,903, or 75%. 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 six months ended June 30, 2022.

As a result of these transactions, the Company's cash position increased from $831,209 to $858,721 during the six months ended June 30, 2022.

Off-Balance Sheet Arrangements

None.

© Edgar Online, source Glimpses