NOTES
TO FINANCIAL STATEMENTS
As
of December 31, 2019 and 2018 and for the Year Ended December 31, 2019 and the Period from
February 5, 2018 (Inception) Through
December 31, 2018
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. Subsequently, on January 13, 2020,
the Company changed its name to Edge Data Solutions, Inc.
Business
description
Edge
Data Solutions, Inc. (“EDSI” or “Company”) is a holding company with a foundation on building out a network
of next generation, decentralized datacenters in support of the rapid growth driven by advanced computing technologies,
including blockchain. Centralized infrastructure facilities servicing multiple geographical areas encounter many issues such as
data congestion and weak network connections. To address this, data processing is moving closer to the customer. EDSI offers low-cost,
secure colocation and private data hosting to meet this demand for Edge and micro datacenters. Technologies that are driving
the movement range from cloud or information services, communications, networking, blockchain mining, disaster recovery solutions,
AI, IoT, Big data, rendering, 5G, retail, healthcare, financial services, Smart Cities and self-driving cars. EDSI’s datacenters
will generate revenue immediately after being deployed with a blockchain mining solution. These will be strategically placed
to support both Edge customers and blockchain mining simultaneously. The modular design and ability to add additional datacenters
as needed, preserves up front capital allowing for rapid deployment and scalability as business demand increases.
After
further evaluation of the market the Company is exploring options to purchase properties for its anticipated datacenter deployment.
Change
in Control
On
August 23, 2018, the Company entered into an agreement to purchase the assets of Blockchain Holdings, LLC for consideration of
300,000,000 shares to be issued in exchange for all of Blockchain Holdings, LLC’s assets. This share issuance resulted in
a change of control of the issuer. The Company determined that this transaction resulted in a change of control based on the transfer
of common stock since (1) the Company’s historical Class A Super Voting Preferred Stock was legally void, and (2) the intent
of management would have been to transfer that control in connection with the purchase if that class of stock were valid. Immediately
prior to the transaction, the Company’s former CEO, Paul Dickman, owned 72% of the outstanding common stock. Immediately
after the transaction, the member of Blockchain Holdings, LLC held a total of 68% of the outstanding common stock, with the Company’s
new management controlling a total of 45.6% of the outstanding common stock comprised of 22.8% held by a company owned and controlled
by the current CEO and 22.8% held by an entity owned and controlled by the COO.
EDGE
DATA SOLUTIONS, INC. (Formerly Blockchain Holdings Capital Ventures, Inc.)
NOTES
TO FINANCIAL STATEMENTS
As
of December 31, 2019 and 2018 and for the Year Ended December 31, 2019 and the Period from
February 5, 2018 (Inception) Through
December 31, 2018
Reverse
Recapitalization
The
Company evaluated the August 23, 2018 acquisition of Blockchain Holdings, LLC’s outstanding interests and determined that
the acquisition falls under guidance of the SEC’s Financial Reporting Manual, Section 12100, which deems the transaction
to be a change in control and a “capital transaction in substance.” The Merger is being accounted for as a reverse
recapitalization. Reverse recapitalization accounting applies when a non-operating public shell company (Southeastern Holdings,
Inc.) acquires a private operating company (Blockchain) and the owners and management of the private operating company have actual
or effective voting and operating control of the combined company. A reverse recapitalization is equivalent to the issuance of
stock by the private operating company for the net monetary assets of the public shell corporation accompanied by a recapitalization
with accounting similar to that resulting from a reverse acquisition, except that no goodwill or other intangible assets are recorded.
The reverse recapitalization accounting is attributable to a long-held position of the staff of the Securities and Exchange Commission
as the acquisition of a non-operating public shell company does not qualify as a business for business combination purposes, as
described in Accounting Standards Codification Topic 805, Business Combinations. The Company’s recapitalization entry
resulted in the following changes to equity:
|
|
Prior to Recapitalization
|
|
|
Transaction
August 23, 2018
|
|
|
Recapitalization
August 23, 2018
|
|
|
After Recapitalization
|
|
Class A super voting preferred stock*
|
|
$
|
1,000
|
|
|
$
|
-
|
|
|
$
|
(1,000
|
)
|
|
$
|
-
|
|
Class B non-voting preferred stock*
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
Common stock
|
|
|
13,836
|
|
|
|
30,000
|
|
|
|
|
|
|
|
43,836
|
|
Additional paid-in capital
|
|
|
1,526
|
|
|
|
|
|
|
|
(121,607
|
)
|
|
|
(120,081
|
)
|
Accumulated deficit
|
|
|
(92,607
|
)
|
|
|
|
|
|
|
92,607
|
|
|
|
-
|
|
Total Stockholders’ Equity / (Deficit)
|
|
$
|
(76,245
|
)
|
|
$
|
30,000
|
|
|
$
|
(30,000
|
)
|
|
$
|
(76,245
|
)
|
*As
discussed elsewhere in this note, the Company subsequently discovered that all of its historical Preferred Stock classes were
improperly filed with the State of Delaware and therefore legally null and void. The Company eliminated the outstanding Preferred
Stock from the historical entity in the recapitalization accounting on August 23, 2018.
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 December
31, 2019 and 2018, the Company’s cash balances did not exceed federally insured limits.
EDGE
DATA SOLUTIONS, INC. (Formerly Blockchain Holdings Capital Ventures, Inc.)
NOTES
TO FINANCIAL STATEMENTS
As
of December 31, 2019 and 2018 and for the Year Ended December 31, 2019 and the Period from
February 5, 2018 (Inception) Through
December 31, 2018
Property
and Equipment
Property
and equipment with an original cost in excess of $1,000 and having a useful life over one year is recorded at cost when purchased.
Depreciation is recorded for property and equipment using the straight-line method over the estimated useful lives of assets.
In
accordance with ASC Topic 360, the Company reviews its long-lived assets, including property, plant and equipment, for impairment
whenever events or changes in circumstances indicate that the carrying amounts of the assets may not be fully recoverable. If
the total of the expected undiscounted future net cash flows is less than the carrying amount of the asset, a loss is recognized
for the difference between the fair value and carrying amount of the asset.
The
Company purchased coin mining equipment for $26,550 in early 2018 and determined that the fair market value of such equipment
decreased significantly and recognized impairment expense of $26,550 during the period from February 5, 2018 (Inception) through
December 31, 2018.
As
of each, December 31, 2019 and 2018, the Company had $0 of property and equipment, net of $26,550 of impairment.
Accounts
Payable and Accrued Liabilities
Accounts
payable consisted of $74,434 of liabilities incurred by the issuer prior to the merger as of each December 31, 2019 and 2018.
The remaining accounts payable of $88,926 and $35,138 as of December 31, 2019 and 2018, respectively, consisted of amounts
due for professional services and various other general and administrative expenses incurred after the acquisition.
Accrued
expenses consisted of $1,811 for state and local taxes payable and $103 of accrued interest due to a vendor as of December 31,
2018. 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.
Accrued
liabilities as of December 31, 2018 also included $82,500 of accrued consulting fees payable to entities owned by the CEO
and COO ($45,000 and $37,500, respectively). 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).
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.
EDGE
DATA SOLUTIONS, INC. (Formerly Blockchain Holdings Capital Ventures, Inc.)
NOTES
TO FINANCIAL STATEMENTS
As
of December 31, 2019 and 2018 and for the Year Ended December 31, 2019 and the Period from
February 5, 2018 (Inception) Through
December 31, 2018
Revenue
Recognition
The
Company recognizes revenue under ASC 606, using the following five-step model, which requires that we: (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
revenue streams historically consisted of three components:
|
1.
|
Equipment
sales – The Company purchased and resold equipment, recognizing the equipment’s original costs and costs to deliver
such to the customer as costs of goods sold.
|
|
|
|
|
2.
|
Consulting
and management fees – These fees consisted of various services provided to companies entering the blockchain space and
range from equipment setup to facility management to general consulting.
|
|
|
|
|
3.
|
Coin
mining commissions – The Company collected a 5% commission on coins processed by its management clients.
|
While
the operating company generated early revenue from the aforementioned sources, the Company has shifted its focus to finding, building,
vetting and acquiring assets to support computing demands including the blockchain and other computing-intensive spaces and is
not currently pursuing operations that historically have generated revenue.
There
can be no assurances that these efforts will generate future 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
October 4, 2018, the Company issued 7,000,000 shares of Class A Preferred Stock and 7,000,000 shares of its Class C Convertible
Preferred Stock to its officers as compensation. The Company determined the value of the Class A Preferred Stock to be $26,317
based on the amount of control the stock granted the officers in common stockholder voting matters, under the assumption that
the common stock’s value was $0.0001 per share. The Company further assigned $3,500 of value to the Class C Convertible
Preferred Stock based on the amount of common shares the officers could convert that stock into under the assumption of common
stock having a value of $0.0001 per share.
In
February and March 2019, the Company granted advisors and consultants 915,000 shares of common stock in connection with services
provided. 875,000 of these shares vested immediately, and 40,000 vested in June 2019. In April and May 2019, the Company issued
250,000 fully-vested shares of common stock to advisors and consultants in connection for services provided.
In
August 2019, the Company issued 50,000 shares of common stock to an advisor for services rendered. The Company’s contract
with the advisor called for 50,000 shares of common stock to be issued every 90 days, resulting in an additional 50,000 shares
due in November 2019. The Company accrued such shares in 2019, and the Board subsequently approved issuance in January 2020.
The
Company recognized stock-based compensation expense of $127 for the year ended December 31, 2019 and $26,317 of stock-based compensation
expense. For the period from February 5, 2018 (Inception) through December 31, 2018.
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.
EDGE
DATA SOLUTIONS, INC. (Formerly Blockchain Holdings Capital Ventures, Inc.)
NOTES
TO FINANCIAL STATEMENTS
As
of December 31, 2019 and 2018 and for the Year Ended December 31, 2019 and the Period from
February 5, 2018 (Inception) Through
December 31, 2018
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 December 31, 2019, the Company had $14,453 of cash, as compared to total
current liabilities of $503,769, has incurred substantial operating losses, and had an accumulated deficit of $559,698.
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 Preferred 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.
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 shares 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 Preferred shares to its CEO and COO as stock-based compensation for services rendered. 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.
*Upon
the change in control discussed in note 1 to the financial statements, the Company discovered that all of its historical Preferred
Stock classes were improperly filed with the State of Delaware and therefore legally null and void. The Company eliminated the
outstanding Preferred Stock from the historical entity in the recapitalization accounting on August 23, 2018. The Class A and
C shares above are governed by certificates of designation filed with the State of Delaware on September 17, 2018.
EDGE
DATA SOLUTIONS, INC. (Formerly Blockchain Holdings Capital Ventures, Inc.)
NOTES
TO FINANCIAL STATEMENTS
As
of December 31, 2019 and 2018 and for the Year Ended December 31, 2019 and the Period from
February 5, 2018 (Inception) Through
December 31, 2018
In
connection with the acquisition on August 23, 2018, the Company recognized a reverse recapitalization totaling 138,355,000 (equivalent
to 1,383,550 post-split) shares of common stock, which reflects all Southeastern Holdings, Inc. prior equity activity, and recognized
the issuance of 300,000,000 (equivalent to 3,000,000 post-split) shares of common stock recorded at par value to effect the acquisition.
On
August 29, 2018, the Company’s former CEO purchased 266,667 (equivalent to 2,667 post-split) common shares for $40,000.
On
December 13, 2018, the Company announced a 100-for-1 reverse split of outstanding common shares. On December 27, 2018, the reverse
split became effective, resulting in the outstanding common share pool being reduced from 438,621,667 shares to 4,386,217 common
shares, resulting in a reclassification of $39,477 from the common stock’s par value to additional paid-in capital. At that
time, the Company also reduced its authorized common shares from 450,000,000 to 150,000,000.
On
September 30, 2019, the Company re-allocated its preferred stock value between par value and additional paid-in capital, resulting
in a net reclassification of $15,817 from Class A and Class C preferred stock to additional paid-in capital during the year ended
December 31, 2019.
As
of December 31, 2019, 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 December 31, 2019, the Company had 5,651,217 common shares outstanding.
As
of December 31, 2019, 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 period from February 5, 2018 (inception) through December 31, 2018, the Company paid consulting fees of $10,000 and $7,500
to its CEO and COO, respectively, and included these fees in general and administrative expenses. The Company accrued an additional
$45,000 and $37,500 of consulting fees to the CEO and COO, respectively, resulting in $82,500 of accrued expenses as of December
31, 2018.
During
2019, the Company paid $5,000 and $25,000 in current period consulting fees, paid out $45,000 and $37,500 of previously
accrued consulting fees, and accrued an additional $22,000 and $19,000 of consulting fees to entities controlled by the
CEO and COO, all respectively. As of December 31, 2019, accrued consulting fees payable to the CEO and COO totaled $22,000
and $19,000, 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.
Equipment
sales revenue during the period from February 5, 2018 (Inception) through December 31, 2018 included $6,450 of sales to the former
CEO and $2,391 to the current CEO.
During
the period from February 5, 2018 (Inception) through December 31, 2018, the Company paid the CEO’s company, Wannemacher
Corporation., $5,612 of commissions on management and consulting revenue and paid the COO’s company, Omnivance Advisors,
Inc. $4,829 of commissions on the same. The Company also paid out an estimated $3,464 ($1,732 to the CEO and $1,732 to the COO)
in cryptocurrency as commission from the Company’s mining operations and included this in sales and marketing expense. These
commissions are included in sales and marketing expense on the statement of operations.
EDGE
DATA SOLUTIONS, INC. (Formerly Blockchain Holdings Capital Ventures, Inc.)
NOTES
TO FINANCIAL STATEMENTS
As
of December 31, 2019 and 2018 and for the Year Ended December 31, 2019 and the Period from
February 5, 2018 (Inception) Through
December 31, 2018
During
the period from February 5, 2018 (Inception) through December 31, 2018, the Company’s revenues and costs of goods sold included
the following related party transactions:
|
|
Management and Consulting Fees
|
|
|
Equipment Sales
|
|
Customer
|
|
February 5, 2018 (Inception) through December 31, 2018
|
|
|
February 5, 2018 (Inception) through December 31, 2018
|
|
ChineseInvestors.com, Inc. (1)
|
|
$
|
18,954
|
|
|
$
|
141,263
|
|
Paul Dickman (2)
|
|
|
-
|
|
|
|
6,450
|
|
Delray Wannemacher (3)
|
|
|
-
|
|
|
|
2,391
|
|
Total related party revenue
|
|
$
|
18,954
|
|
|
$
|
150,104
|
|
Cost of goods sold
|
|
|
-
|
|
|
|
(159,450
|
)
|
Gross margin
|
|
$
|
18,954
|
|
|
$
|
(9,346
|
)
|
(1)
Paul Dickman, the Company’s former CEO was the CFO of ChineseInvestors.com, Inc. and was therefore deemed to exercise significant
influence.
(2)
Paul Dickman is the Company’s former CEO.
(3)
Delray Wannemacher is the Company’s current CEO.
During
2019, the Company’s CEO and COO paid expenses on behalf of the Company totaling $101,694 and $36,216, and
the Company repaid $42,454 and $7,027 of those expenses, respectively. As of December 31, 2019, the Company was indebted to the
CEO for $59,240 and to the COO for $29,189 for expenses paid on behalf of the company.
As
of December 31, 2019 and 2018, the Company was indebted to its CEO and COO for $41,000 and $82,500 of accrued consulting
fees, respectively.
NOTE
6: CONVERTIBLE NOTES
In
May 2019, the Company issued short-term convertible notes for total proceeds of $100,000 and issued another convertible note in
November 2019 for an additional $100,000. 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 lack of a market for the Company’s stock, the Company concluded that such a feature would be trivial in value
and allocated the full principal amount to the convertible note liability.
During
the year ended December 31, 2019, the Company recorded interest expense of $7,267, resulting in accrued interest of $7,267 as
of December 31, 2019.
Subequently,
in January 2020, two noteholders converted $100,000 of principal and $6,966 of interest into 427,862 equity units at $0.25, each
consisting of a 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.
EDGE
DATA SOLUTIONS, INC. (Formerly Blockchain Holdings Capital Ventures, Inc.)
NOTES
TO FINANCIAL STATEMENTS
As
of December 31, 2019 and 2018 and for the Year Ended December 31, 2019 and the Period from
February 5, 2018 (Inception) Through
December 31, 2018
NOTE
7: INCOME TAX
The
Company recorded no deferred income tax provision or benefit for the year ended December 31, 2019 or the period from February
5, 2018 (Inception) through December 31, 2018, because the Company believes it is more likely than not that net operating loss
carryforwards will not be utilized in the near future due to net losses. The Company has generated no taxable income. The income
tax provision (benefit) differs from the amount computed by applying the U.S. Federal income tax rate of 21% plus applicable state
rates to the loss before income taxes due to the unrecognized benefit resulting from the Company’s valuation allowance,
as well as due to nondeductible expenses. The Company’s blended tax rate of 21% currently consists of 21% for U.S. Federal
income tax and 0% for Delaware state income taxes. The following tables set forth the Company’s analysis of its deferred
tax assets and related valuation allowances:
Income
Tax Valuation Allowance
|
|
As of
|
|
|
|
December 31, 2019
|
|
|
December 31, 2018
|
|
|
|
|
|
|
|
|
Net loss before income taxes
|
|
$
|
(301,750
|
)
|
|
$
|
(181,265
|
)
|
Adjustments to net loss:
|
|
|
|
|
|
|
|
|
Stock-based compensation expense
|
|
|
127
|
|
|
|
29,817
|
|
Permanent book-tax differences:
|
|
|
|
|
|
|
|
|
IRS deduction limitations
|
|
|
1,504
|
|
|
|
641
|
|
Net operating loss carryforwards retained from reverse recapitalization accounting acquiree
|
|
|
-
|
|
|
|
(76,683
|
)
|
Net operating losses from reverse recapitalization accounting acquirer
|
|
|
-
|
|
|
|
151
|
|
Net taxable income (loss)
|
|
|
(300,119
|
)
|
|
|
(227,339
|
)
|
Income tax rate
|
|
|
21
|
%
|
|
|
21
|
%
|
Income tax recovery
|
|
|
(63,025
|
)
|
|
|
(47,741
|
)
|
Valuation allowance change
|
|
|
63,025
|
|
|
|
47,741
|
|
Provision for income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
Components
of Deferred Income Tax Assets
|
|
As of
|
|
|
|
December 31, 2019
|
|
|
December 31, 2018
|
|
Net operating loss carryforward
|
|
$
|
110,766
|
|
|
$
|
47,741
|
|
Valuation allowance
|
|
|
(110,766
|
)
|
|
|
(47,741
|
)
|
Net deferred income tax asset
|
|
$
|
-
|
|
|
$
|
-
|
|
NOTE
8: CONCENTRATIONS, COMMITMENTS AND CONTINGENCIES
During
the period from February 5, 2018 (Inception) through December 31, 2018, the Company identified the following concentrations among
its customers, which it deems significant:
|
|
Concentration
|
|
Customer
|
|
February 5, 2018 (Inception)
through
December 31, 2018
|
|
Customer A (related party)
|
|
|
52
|
%
|
Customer B
|
|
|
33
|
%
|
Customer C
|
|
|
3
|
%
|
The
Company has identified no material commitments and contingencies through the date of these financial statements.
EDGE
DATA SOLUTIONS, INC. (Formerly Blockchain Holdings Capital Ventures, Inc.)
NOTES
TO FINANCIAL STATEMENTS
As
of December 31, 2019 and 2018 and for the Year Ended December 31, 2019 and the Period from
February 5, 2018 (Inception) Through
December 31, 2018
NOTE
9: 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 has determined that it currently does not impact the Company’s
financial statements.
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
10: SUBSEQUENT EVENTS
On
January 10, 2020, the Company purchased graphics hardware with a stated value of $16,000 for 32,000 shares of common stock. This
purchase occurred in connection with a nonbinding memo of understanding pertaining to a prospective acquisition. This transaction
has not yet closed as of the date of these financial statements.
In
January 2020, the Company also approved the issuance of 50,000 common shares to the advisor whose shares were accrued in November
2019, as discussed in the “Stock-Based Compensation” section of Note 2.
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 a 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.
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.
In
February 2020, the Company issued a one-year convertible note for $100,000, bearing interest at 10% annually and calling for conversion
at a 30% discount in the event of a financing exceeding $1,000,000.
In
February 2020, the Company issued 50,000 additional shares to an advisor pursuant to an advisory 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.
On
March 29, 2020, the Company entered into two agreements with NFS Leasing, Inc. to lease datacenter equipment for 36 months,
at which point the company has the options to: (a) purchase equipment at fair market value, (b) extend lease payments on a month-to-month
basis or (c) return the equipment. The agreements call for payment, as follows:
|
●
|
Agreement
1: Initial payment of $12,686 ($7,754 security deposit, $3,140 sales tax, a $500 origination fee and one month of rent at
$1,292), with 35 monthly payments of $1,292 to follow. All payments are made in advance.
|
|
|
|
|
●
|
Agreement
2: Initial payment of $85,863 ($69,775 security deposit, $959 sales tax on first month’s rent, a $3,500 origination
fee and one month of rent at $11,629), with 35 monthly payments of $11,629 plus sales tax to follow. All payments are made
in advance.
|
On April 9, 2020, the Company issued a
one-year convertible note for $50,000, bearing interest at 10% per annum and calling for conversion at a 30% discount in the event
of a financing exceeding $1,000,000.
Management
has evaluated all significant events through the date the financial statements were available to be issued, noting no further
subsequent events requiring disclosure.