Edge Data Solutions, Inc. - Quarter Report: 2020 March (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

For the quarterly period ended March 31, 2020

OR

For the transition period __________ to __________

Commission File Number: 333-198435

EDGE DATA SOLUTIONS, INC.

(Exact name of registrant as specified in its charter)

3550 Lenox Road NE. 21st Floor Atlanta GA 30326

(Address and telephone number of principal executive offices)

Mr. Delray Wannemacher, CEO, (833) 682-2428

3550 Lenox Road NE. 21st Floor Atlanta GA 30326

(Name, address and telephone number of agent for service)

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 [  ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes [X] No [  ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] No [X]

As of May 20, 2020, there were outstanding 6,421,079 shares of our common stock, par value $0.0001 per share, 7,000,000 shares of the Company’s Class A Super Voting preferred stock, par value $0.001 per share, and 7,000,000 shares of the Company’s Class C preferred stock, par value $0.001 per share

EDGE DATA SOLUTIONS, INC.

FORM 10-Q for the Quarter Ended March 31, 2020

INDEX

PART I - FINANCIAL INFORMATION

Item 1 - Financial Statements

Edge Data Solutions, Inc. (Formerly Southeastern Holdings, Inc.)

A Delaware Corporation

Financial Statements

As of March 31, 2020 (Unaudited) and for the Three Months Then Ended (Unaudited)

Edge Data Solutions, Inc. (Formerly Southeastern Holdings, Inc.)

TABLE OF CONTENTS

EDGE DATA SOLUTIONS, INC. (Formerly Southeastern Holdings, Inc.)

BALANCE SHEETS

See accompanying notes, which are an integral part of these financial statements.

EDGE DATA SOLUTIONS, INC. (Formerly Southeastern Holdings, Inc.)

STATEMENTS OF OPERATIONS

See accompanying notes, which are an integral part of these financial statements.

EDGE DATA SOLUTIONS, INC. (Formerly Southeastern Holdings, Inc.)

STATEMENTS OF CASH FLOWS

See accompanying notes, which are an integral part of these financial statements.

EDGE DATA SOLUTIONS, INC. (Formerly Southeastern Holdings, Inc.)

STATEMENT OF STOCKHOLDERS’ DEFICIENCY

As of and for the Three Months Ended March 31, 2019 (Unaudited)

See accompanying notes, which are an integral part of these financial statements.

EDGE DATA SOLUTIONS, INC. (Formerly Southeastern Holdings, Inc.)

STATEMENT OF STOCKHOLDERS’ DEFICIENCY

As of and for the Three Months Ended March 31, 2020 (Unaudited)

See accompanying notes, which are an integral part of these financial statements.

EDGE DATA SOLUTIONS, INC. (Formerly Southeastern Holdings, Inc.)

NOTES TO FINANCIAL STATEMENTS

As of March 31, 2020 (Unaudited) and for the Three Months Then Ended (Unaudited)

NOTE 1: ORGANIZATION AND NATURE OF OPERATIONS

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.

Business description

Edge Data Solutions, Inc. (EDSI) is poised to be an industry leading decentralized edge datacenter and cloud infrastructure company with several strategic advantages in the market. Our infrastructure supports streaming, network congestion, rendering, gaming, visualization and 3D, AI Rendering, cloud computing, disaster recovery, and enterprise blockchain protocols. 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. Edge Data Solutions offers green, low-cost, secure colocation and private data hosting to meet this demand for edge datacenters. Other technologies and sectors that are driving the movement range from telecom, 5G, remote work force, retail, architecture, building and construction, design and engineering, media and entertainment, healthcare and life sciences, academia, financial services, smart cities and self-driving cars. EDSI’s datacenters will be strategically placed in locations to support both edge customers and areas of projected growth. The modular design and ability to add additional datacenters in a specific location as needed preserves up front capital, allowing for rapid deployment and scalability as business demand increases.

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America (GAAP). The Company maintains the calendar year as its basis of reporting.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash Equivalents and Concentration of Cash Balance

The Company considers all highly liquid securities with an original maturity of less than three months to be cash equivalents. The Company’s cash and cash equivalents in bank deposit accounts, at times, may exceed federally insured limits. As of March 31, 2020 and December 31, 2019, the Company’s cash balances did not exceed federally insured limits.

EDGE DATA SOLUTIONS, INC. (Formerly Southeastern Holdings, Inc.)

NOTES TO FINANCIAL STATEMENTS

As of March 31, 2020 (Unaudited) and for the Three Months Then Ended (Unaudited)

Right of Use Assets and Lease Liabilities

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The standard requires lessees to recognize almost all leases on the balance sheet as a Right-of-Use (“ROU”) asset and a lease liability and requires leases to be classified as either an operating or a finance type lease. The standard excludes leases of intangible assets or inventory. The standard became effective for the Company beginning January 1, 2019. Since the Company had no leases in place prior to or during 2019, the Company has adopted ASC 842 prospectively and has applied it to its first lease agreement in 2020.

Under ASC 842, the Company determines if an arrangement is a lease at inception. ROU assets and liabilities are recognized at commencement date based on the present value of remaining lease payments over the lease term. For this purpose, the Company considers only payments that are fixed and determinable at the time of commencement. As most of the Company’s leases do not provide an implicit rate, the Company estimated the incremental borrowing rate in determining the present value of lease payments. The ROU asset also includes any lease payments made prior to commencement and is recorded net of any lease incentives received. The Company’ lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options.

Property and Equipment

Property and equipment are stated at cost net of accumulated depreciation and amortization, and accumulated impairment, if any. Depreciation and amortization of property and equipment is provided using the straight-line method over estimated useful lives, which range from three to seven years.

As of March 31, 2020, the Company’s property and equipment consisted of $29,540 of datacenter equipment, net of $81 of accumulated depreciation. Depreciation expense for the three months ended March 31, 2020 was $81.

Long-Lived Assets

The Company evaluates the recoverability of its long-lived assets whenever events or changes in circumstances have indicated that an asset may not be recoverable. Long-lived assets are grouped with other assets at the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. If the sum of the projected undiscounted cash flows is less than the carrying value of the assets, the assets are written down to the estimated fair value. As of March 31, 2020, the Company determined that its long-lived assets have not been impaired.

Accounts Payable and Accrued Liabilities

Accounts payable consisted of $74,434 of liabilities incurred by the issuer prior to the merger as of each March 31, 2020 and 2019. The remaining accounts payable of $102,568 and $88,926 as of March 31, 2020 and December 31, 2019, respectively, consisted of amounts due for professional services and various other general and administrative expenses incurred after the acquisition.

As of December 31, 2019, accrued expenses consisted of $1,811 of state and local taxes payable, $1,903 of accrued interest due to a vendor and $7,266 of accrued interest on convertible debt. As of March 31, 2020, accrued expenses consisted of $1,811 of state and local taxes payable, $2,374 of accrued interest due to a vendor and $4,665 of accrued interest on convertible debt.

As of December 31, 2019, accrued liabilities included $41,000 of accrued consulting fees payable to entities owned by the CEO ($22,000 and $19,000, respectively). During the quarter ended March 31, 2020, the Company paid out the $41,000 of accrued compensation, for accrued related party compensation payable of $0 as of March 31, 2020.

EDGE DATA SOLUTIONS, INC. (Formerly Southeastern Holdings, Inc.)

NOTES TO FINANCIAL STATEMENTS

As of March 31, 2020 (Unaudited) and for the Three Months Then Ended (Unaudited)

Fair Value of Financial Instruments

Financial Accounting Standards Board (“FASB”) guidance specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The three levels of the fair value hierarchy are as follows:

Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 1 primarily consists of financial instruments whose value is based on quoted market prices such as exchange-traded instruments and listed equities.

Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly (e.g., quoted prices of similar assets or liabilities inactive markets, or quoted prices for identical or similar assets or liabilities in markets that are not active).

Level 3 - Unobservable inputs for the asset or liability. Financial instruments are considered Level 3 when their fair values are determined using pricing models, discounted cash flows or similar techniques and at least one significant model assumption or input is unobservable.

The carrying amounts reported in the balance sheets approximate their fair value.

Revenue Recognition

The Company recognizes revenue under ASC 606, using the following five-step model, which requires that the Company: (1) identify a contract with the customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to performance obligations and (5) recognize revenue as performance obligations are satisfied. The Company’s current and anticipated revenue streams consist of:

During the quarter ended March 31, 2020, the Company recognized no revenue. While the Company generated limited revenue in the second quarter of 2020, there can be no assurances that service lines will generate satisfactory revenue or continue to generate revenue.

Stock-Based Compensation

The Company accounts for share-based payments pursuant to ASC 718, “Stock Compensation” and, accordingly, the Company records compensation expense for share-based awards based upon an assessment of the grant date fair value for stock options and restricted stock awards using the Black-Scholes option pricing model.

Stock compensation expense for stock options is recognized over the vesting period of the award or expensed immediately when stock or options are awarded for previous or current service without further recourse.

On February 18, 2020, the Company issued 50,000 shares of common stock to an advisor and recorded $9,500 of stock-based compensation expense.

Subsequently, on May 6, 2020, the Company agreed to issue 60,000 shares of common stock to a consultant for services rendered.

EDGE DATA SOLUTIONS, INC. (Formerly Southeastern Holdings, Inc.)

NOTES TO FINANCIAL STATEMENTS

As of March 31, 2020 (Unaudited) and for the Three Months Then Ended (Unaudited)

Income Taxes

The Company is subject to taxation in various jurisdictions and may be subject to examination by various authorities.

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets, including tax loss and credit carryforwards, 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. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred income tax expense represents the change during the period in the deferred tax assets and deferred tax liabilities. The components of the deferred tax assets and liabilities are individually classified as current and non-current based on their characteristics. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

The Company recognizes the amount of taxes payable or refundable for the current year and recognizes deferred tax liabilities and assets for the expected future tax consequences of events and transactions that have been recognized in the Company’s financial statements or tax returns.

NOTE 3: GOING CONCERN

As shown in the accompanying financial statements as of March 31, 2020, the Company had $479 of cash and $30,475 of current assets, as compared to total current liabilities of $492,909, has incurred substantial operating losses, and had an accumulated deficit of $655,417. Furthermore, the Company’s revenue history has been limited and unstable, and there can be no assurances of future revenues.

Given these factors, the Company is dependent on financing from outside parties, and management intends to pursue outside capital through debt and equity vehicles. There is no assurance that these efforts will materialize or be successful or sufficient to fund operations and meet obligations as they come due.

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 continue as a going concern. The financial statements do not include any adjustments to reflect the possible future effect on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern.

NOTE 4: STOCKHOLDERS’ DEFICIENCY

The Company has designated ten million (10,000,000) shares of its preferred stock, par value $0.001 as Class A Preferred Super Majority Voting Stock (“Class A”). The Class A shares have the right to vote upon matters submitted to the holders of common stock, par value $0.0001 of the Company. Class A shares have a vote equal to the number of shares of common stock of the Company which would give the holders of the Class A shares a vote equal to sixty percent (60%) of the common stock. This vote shall be exercised pro-rata by the holders of the Class A. The Company shall have the right to redeem, in its sole and absolute discretion, at any time one (1) year after the date of issuance of such Class A shares, all or any portion of the shares of Class A at a price of one cent ($0.01) per share. On October 4, 2018, the Company issued a total of 7,000,000 Class A shares to its CEO and COO as stock-based compensation for services rendered.

The Company has not currently authorized a Class B designation of Preferred Stock.

EDGE DATA SOLUTIONS, INC. (Formerly Southeastern Holdings, Inc.)

NOTES TO FINANCIAL STATEMENTS

As of March 31, 2020 (Unaudited) and for the Three Months Then Ended (Unaudited)

The Company has designated ten million (10,000,000) shares of its preferred stock, par value $0.001 as Class C Convertible Preferred Non-Voting Stock (“Class C”). Each share of Class C shall be convertible into five (5) shares of common stock. The holders of Class C shall be entitled to receive the same dividend as the holders of the common stock and such dividend shall be paid pro rata per share on a fully converted basis. The holders of Class C shall have piggyback registration rights. The Company shall have the right to redeem, in its sole and absolute discretion, at any time after five (5) years, all or any portion of the shares of Class C at a price of five dollars ($5.00) per share. The Class C shares shall be considered to have a junior liquidation preference to Class A shares and a senior dividend preference to Class A shares. On October 4, 2018, the Company issued a total of 7,000,000 Class C shares to its CEO and COO as stock-based compensation for services rendered. Subsequently, in April 2019, the Company filed an amended and restated certificate of designation, which restricts the CEO and COO from converting the 7,000,000 shares into common stock for 36 months from the issuance date.

On January 20, 2020, the Company purchased datacenter equipment components for 32,000 shares of common stock and capitalized $6,083 based on the estimated value of surrounding equity transactions.

In January 2020, the Company issued 627,862 equity units at $0.25 to two individuals in exchange for conversion of $100,000 of convertible notes and $6,966 of accrued interest and an additional $50,000 of cash. Each equity unit consists of one three-year warrant to purchase two shares of the Company’s common stock for $0.50 each, and one share of the Company’s common stock. The Company may call the warrants in the event its common stock trades for $1.00 or more per share for ten out of fifteen consecutive trading days. In connection with these transactions, the Company assigned $119,665 of value to the common stock and $37,301 to the warrants using the Black-Scholes model with the following inputs:

On February 18, 2020, the Company issued 50,000 fully-vested shares of common stock to an advisor and recognized $9,500 of stock-based compensation expense associated with the grant.

As of March 31, 2020, the Company was authorized to issue 150,000,000 shares of common stock. All common stock shares have full dividend and voting rights. However, it is not anticipated that the Company will be declaring dividends in the foreseeable future.

As of March 31, 2020, the Company had 6,361,079 common shares outstanding.

As of March 31, 2020, 7,000,000 shares of Class A Preferred Stock and 7,000,000 shares of Class C Preferred Stock were issued and outstanding.

NOTE 5: RELATED PARTY TRANSACTIONS

During the three months ended March 31, 2020, the Company paid out previously accrued consulting fees payable to the CEO and COO of $22,000 and $19,000, respectively, and paid $6,600 and $1,955 in health insurance premiums for the CEO and COO, respectively. The Company does not currently have consulting or employment agreements with these individuals, and as a result, these fees may fluctuate from time to time. While the Company believes these individuals were appropriately classified as contractors and has accordingly neither paid nor accrued payroll taxes, these payments may result in future tax liabilities should the Internal Revenue Service deem these individuals to be employees. As of March 31, 2020, the Company owed $0 of outstanding compensation to the CEO and COO.

During the three months ended March 31, 2020, the Company’s CEO and COO paid expenses on behalf of the Company totaling $47,804 and $30,311, and the Company repaid $54,749 and $25,000 of related party advances, respectively. As of March 31, 2020, the Company was indebted to the CEO for $52,295 and to the COO for $34,501, respectively, for expenses paid on behalf of the company.

EDGE DATA SOLUTIONS, INC. (Formerly Southeastern Holdings, Inc.)

NOTES TO FINANCIAL STATEMENTS

As of March 31, 2020 (Unaudited) and for the Three Months Then Ended (Unaudited)

NOTE 6: CONVERTIBLE NOTES

As discussed in Note 4, in January, two individuals converted a total of $100,000 of outstanding principal and $6,966 of accrued interest into 427,862 equity units, each consisting of one common share and a three-year warrant to purchase two shares of common stock at $0.50 per share, in connection with additional subscriptions totaling $50,000 to purchase 200,000 of these equity units.

In February 2020, the Company issued two short-term convertible notes for total proceeds of $110,000. These notes mature one year from execution and accrue interest at a rate of 10% per annum. Conversion terms call for conversion of principal and accrued interest at 70% of the stock price upon closing any offering resulting in aggregate financing of at least $1,000,000.

The Company evaluated the convertible notes in light of ASC 470 and determined that a beneficial conversion feature exists. However, given the contingent nature of the holder’s option and the lack of a market for the Company’s stock, the Company concluded that such a feature is not currently ascertainable and allocated the full principal amount to the convertible note liability.

During the three months ended March 31, 2020, the Company recognized $4,310 of interest expense on convertible debt, net of $6,966 converted interest, for outstanding accrued interest of $4,666 as of March 31, 2020.

NOTE 7: SIGNIFICANT AGREEMENTS

On January 29, 2020, the Company entered into a master service agreement with Charter Trading Corporation (“Charter”), a Texas company, under which Charter will provide materials and various engineering and design services in connection with the Company’s development of planned datacenters. The Company has not yet realized any financial impacts pertaining to this agreement.

Effective March 1, 2020, the Company entered into a consulting agreement with a capital formation consultant, with the intent that the consultant will make introductions to potential capital sources. The consulting agreement calls for a monthly cash fee of $10,000 for the first six months and 100,000 shares of restricted common stock upon the earlier of (a) closing of $500,000 of debt or equity financing or (b) the second agreement renewal. Upon the earlier of (a) a $2,500,000 debt or equity financing or (b) the second agreement renewal, the consultant’s base compensation will increase to $15,000 per month. In the event the Company achieves at least $2,500,000 of debt or equity funding, the consultant will receive 250,000 fully vested warrants to purchase shares of the Company’s common shares at $0.25 each for the next three years. The Company may, at the option of the Board, issue additional equity as an annual performance bonus.

NOTE 8: FINANCE LEASE

On March 27, 2020, the Company entered into a 36-month lease for datacenter equipment. Terms of the lease call for 36 monthly payments of $1,292, with the first payment due at inception, together with a $7,753 security deposit, $3,140 of sales tax and a $500 origination fee, for a total of $12,685 due up front. The Company paid the $12,685 on March 27, 2020.

The Company evaluated the lease in light of ASC 842 and determined that it was a long-term finance lease, since (a) the lease term is for the major part of the remaining economic life of the underlying asset and (b) the present value of the sum of lease payments equals or substantially exceeds the fair value of the underlying asset. At lease inception, the Company recognized a right of use asset for $38,895, prepaid tax of $3,140 and a lease liability of $38,895. The Company will ratably amortize the right of use asset and prepaid tax to lease expense over the lease’s life. Based on the present value, term and payment schedule, the Company determined the lease’s implicit rate to be 12.55% and will record interest expense accordingly over the life of the lease.

EDGE DATA SOLUTIONS, INC. (Formerly Southeastern Holdings, Inc.)

NOTES TO FINANCIAL STATEMENTS

As of March 31, 2020 (Unaudited) and for the Three Months Then Ended (Unaudited)

As of March 31, 2020, lease-related assets and liabilities included:

Future maturities of the lease liability are as follows:

NOTE 9: ACQUISITION DEPOSITS

During the three months ended March 31, 2020, the Company issued $13,500 of payments in connection with a prospective acquisition of the assets of Blockchain Resources Corp. While the transaction has not yet closed, the Company anticipates issuing significant equity and is still negotiating terms of the agreement as of the date of this filing. As such, the Company recorded the $13,500 as acquisition deposits as of March 31, 2020.

NOTE 10: CONCENTRATIONS, COMMITMENTS AND CONTINGENCIES

As of and for the three months ended March 31, 2020, the Company determined that there were no significant concentrations, commitments and contingencies.

NOTE 11: RECENT ACCOUNTING PRONOUNCEMENTS

In February 2016, the FASB issued ASU 2016-02, “Leases” (Topic 842). This ASU requires a lessee to recognize a right-of-use asset and a lease liability under most operating leases in its balance sheet. The ASU is effective for annual and interim periods beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company has adopted this accounting policy on January 1, 2019 and applied the standard to its current capital lease.

Management does not believe that any other recently issued, but not yet effective, accounting standards could have a material effect on the accompanying financial statements. As new accounting pronouncements are issued, we will adopt those that are applicable under the circumstances.

NOTE 12: SUBSEQUENT EVENTS

On April 9, 2020, the Company entered into a one-year convertible promissory note for $50,000. The note bears 10% interest per annum and is convertible at a 30% discount in the event of a $1,000,000 or greater financing.

On April 22, 2020, the Company entered into two convertible promissory notes, each for $50,000 and maturing in one year. These notes bear 12% interest per annum and are convertible at a 30% discount in the event of a $1,000,000 or greater financing.

On May 6, 2020, the Company agreed to issue 60,000 shares of common stock to a consultant in exchange for services rendered.

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

This report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties and are based on the beliefs and assumptions of management and information currently available to management. The use of words such as “believes”, “expects”, “anticipates”, “intends”, “plans”, “estimates”, “should”, “likely” or similar expressions, indicates a forward-looking statement. In connection with, and because we desire to take advantage of, the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, we caution readers regarding certain forward looking statements in the following discussion and elsewhere in this report and in any other statement made by, or on our behalf, whether or not in future filings with the Securities and Exchange Commission. Forward-looking statements are statements not based on historical information and which relate to future operations, strategies, financial results or other developments. Forward looking statements are necessarily based upon estimates and assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control and many of which, with respect to future business decisions, are subject to change. These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed in any forward-looking statements made by, or on our behalf. We disclaim any obligation to update forward-looking statements.

The identification in this report of factors that may affect our future performance and the accuracy of forward-looking statements is meant to be illustrative and by no means exhaustive. All forward-looking statements should be evaluated with the understanding of their inherent uncertainty.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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 decentralized edge datacenter/cloud infrastructure company with several strategic advantages in the market. Our infrastructure supports streaming, network congestion, rendering, gaming, visualization and 3D, AI Rendering, cloud computing, disaster recovery, and enterprise blockchain protocols. 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. Edge Data Solutions offers green, low-cost, secure colocation and private data hosting to meet this demand for edge datacenters. Other technologies and sectors that are driving the movement range from telecom, 5G, remote work force, retail, architecture, building and construction, design and engineering, media and entertainment, healthcare and life sciences, academia, financial services, smart cities and self-driving cars. EDSI’s datacenters will be strategically placed in locations to support both edge customers and areas of projected growth. The modular design and ability to add additional datacenters in a specific location as needed preserves up front capital, allowing for rapid deployment and scalability as business demand increases.

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, 2020, we had approximately $479 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 COO and Director, Daniel Wong. There is no guarantee that this cash infusion will continue to be made.

Operating results for the three months ended March 31, 2020 and 209:

For the three months ended March 31, 2020, the Company generated revenues of $0 from operations, compared to $0 for the three months ended March 31, 2019, a decrease of $0 or 0%. 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, 2020, costs of net revenues were $0, compared to $0 for the three months ended March 31, 2019.

As a result of the changes in revenues and cost of net revenues discussed above, the Company’s gross margin remained consistent at $0 for the three months ended March 31, 2020 and 2019.

For the three months ended March 31, 2020, selling, general and administrative expenses were $77,201, compared to $19,658 during the three months ended March 31, 2019, an increase of $57,543, or 293%. The increase in these expenses are attributable to increased legal, accounting and other professional fees.

During the three months ended March 31, 2020, the Company recognized $81 of depreciation expense and $0 during the three months ended March 31, 2019, as a result of equipment that was deemed worthless.

During the three months ended March 31, 2020, the Company recognized $8,937 of interest expense, as compared to $0 for the three months ended March 31, 2019. The increase of $8,937, or 100%, is attributable to the accrual of interest on convertible debt and certain balances due to our vendors.

As a result of the changes in operating expenses, the Company incurred a net loss of $95,719 for the three months ended March 31, 2020, compared to a net loss of $19,658 for the three months ended March 31, 2019, a change of $76,061, or 387%.

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. 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, 2020 decreased by $13,974 to $479, as compared to a balance of $14,453, as of December 31, 2019. The decrease in cash for the three months ended March 31, 2020 was attributable to net cash used in operating activities of $134,010, $38,330 of net cash used in investing activities, and net cash provided by financing activities of $158,366.

As of March 31, 2020, the Company had a deficit in working capital of $462,434, compared to a deficit in working capital of $489,316 at December 31, 2019, representing an increase in working capital of $26,882, attributable to prepaid expenses and acquisition deposits.

Net cash used in operating activities of $134,010 during the three months ended March 31, 2020, as compared to net cash of $11,055 used in operating activities for the three months ended March 31, 2019, was primarily attributable to a significant net loss, which was offset by stock-based compensation and decreases in accounts payable and increased by payment of accrued liabilities.

Net cash used by investing activities was $38,330 for the three months ended March 31, 2020 increased by $38,330 from $0 of cash used by investing activities for the three months ended March 31, 2019. This is attributable to the Company acquiring datacenter equipment and advancing funds pertaining to a prospective acquisition.

Net cash provided by financing activities of $158,366 during the three months ended March 31, 2020 increased by $153,329, as compared to $5,037 during the three months ended March 31, 2019. The difference was a result of the issuance of convertible debt and subscriptions to equity units.

As reported in the accompanying consolidated financial statements, for the three months ended March 31, 2020 and 2019, the Company incurred net losses of $95,719 and $19,785, respectively. The Company produced no revenues during the periods. 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 working capital needs largely from proceeds from the sale of equity securities, if any. 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 historically generated revenues, it has not generated any 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. 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, 2020 and December 31, 2019 were $106,663 and $14,453, respectively, representing an increase of $92,210, or 638%. Total liabilities as of March 31, 2020 and December 31, 2019 were $519,149 and $503,769, respectively, for an increase of $15,380, or 3%. The significant change in the Company’s financial condition is attributable to convertible debt issued, the sale of equity units, 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 $14,453 to $479 during the three months ended March 31, 2020.

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.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not required for smaller reporting companies.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

An evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Operating Officer, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report on Form 10-Q. Disclosure controls and procedures are procedures designed with the objective of ensuring that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, such as this Form 10-Q, is recorded, processed, summarized and reported, within the time period specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and is communicated to our management, including our Chief Executive Officer and Chief Financial Officer, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Based on that evaluation, our management concluded that, as of March 31, 2020, our disclosure controls and procedures were not effective.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended March 31, 2020 that materially affected or are reasonably likely to materially affect our internal control over financial reporting.

PART II

Item 1. Legal Proceedings.

The Company is not a party to any legal proceeding that it believes will have a material adverse effect upon its business or financial position.

Item 1A. Risk Factors.

Not required for smaller reporting companies.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

During the period from January 1, 2020 through March 31, 2020, the Company issued the following unregistered securities.

On January 23, 2020, the Company entered into a Subscription Agreement and Conversion of Convertible Note with FNFC Profit Sharing Plan and Trust (“FNFC”) to issue 206,986 equity units, each consisting of one share of the Company’s common stock and one three-year warrant to purchase two shares of common stock for $0.50. In exchange for the equity units, FNFC converted $25,000 of outstanding principal, $1,747 of accrued interest and invested an additional $25,000.

On January 27, 2020, the Company entered into a Subscription Agreement and Conversion of Convertible Note with JMA Enterprises (“JMA”) to issue 420,876 equity units, each consisting of one share of the Company’s common stock and one three-year warrant to purchase two shares of common stock for $0.50. In exchange for the equity units, FNFC converted $75,000 of outstanding principal, $5,219 of accrued interest and invested an additional $25,000.

On February 15, 2019, the Company agreed to issue 125,000 shares of common stock to Fisher Herman Construction, LLC in exchange for execution of a 24-month service contract with the Company. The agreement calls for 375,000 future shares to be issued over the term of the contract, so long as the contract is in full force and effect, consisting of (i) 50,000 shares every 90 days and (ii) 75,000 shares due upon completion of the contract. On February 15, 2020, the Company issued 50,000 shares of common stock under this agreement. The Company generated no proceeds from this transaction.

On February 19, 2020, the Company entered into a convertible note with Charles Horak for proceeds of $100,000. The note matures in one year, bears interest at 10% per annum and is convertible at a 30% discount in the event of a financing event of at least $1,000,000. On April 22, 2020, the Company received $50,000 of additional funds from Charles Horak under similar terms.

On February 27, 2020, the Company entered into a convertible note with Anthony Givogue for proceeds of $10,000. The note matures in one year, bears interest at 10% per annum and is convertible at a 30% discount in the event of a financing event of at least $1,000,000.

On April 9, 2020, the Company entered into a one-year convertible promissory note with Chuck Ruhmann for proceeds of $50,000. The note bears 10% interest per annum and is convertible at a 30% discount in the event of a $1,000,000 or greater financing.

On April 22, 2020, the Company entered into a convertible promissory note with Zoran Stojkov for proceeds of $50,000. The note matures in one year, bears 12% interest per annum and is convertible at a 30% discount in the event of a $1,000,000 or greater financing.

On May 6, 2020, the Company agreed to issue 60,000 shares of common stock to Paul Manos in exchange for professional services rendered.

These sales were made in a private placement transaction, pursuant to the exemption provided by Section 4(2) of the Securities Act and Rule 506 of Regulation D promulgated under the Securities Act (“Regulation D”), as a sale to “accredited investors”as defined in Rule 501(a) of the Regulation D. The issuances did not involve any public offering; no general solicitation or general advertising was used in connection with the offering. The Company intends to use the proceeds from these transactions to fund its operations.

Item 3. Defaults Upon Senior Securities.

There have been no defaults upon senior securities.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits

a. Exhibits

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.