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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For
the quarterly period ended
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the transition period from __________ to __________ |
Commission
File No.
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
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| (Address of Principal Executive Offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
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.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).
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.
| ☐ | Large accelerated filer | ☐ | Accelerated filer |
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Smaller reporting company |
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Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No
As of November 14, 2025, there were outstanding shares of the registrant’s common stock, par value $ per share.
TABLE OF CONTENTS
| i |
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain information set forth in this Quarterly Report on Form 10-Q, including in Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere herein, with respect to our financial condition, results of operations and business that are not historical facts are “forward-looking statements”. Forward-looking statements can be identified by the use of forward-looking terminology, such as “anticipate”, “believe”, “expect”, “plan”, “intend”, “seek”, “estimate”, “project”, “could”, “may” or the negative thereof or other variations thereon, or by discussions of strategy that involve risks and uncertainties. Management wishes to caution the reader of the forward-looking statements that any such statements that are contained in this report reflect our current beliefs with respect to future events and involve known and unknown risks, uncertainties and other factors, including, but not limited to, economic, competitive, regulatory, technological, key employees, and general business factors affecting our operations, markets, growth, services, products and other factors, some of which are described in this report and some of which are discussed in our other filings with the Securities and Exchange Commission. These forward-looking statements are only estimates or predictions. No assurances can be given regarding the achievement of future results, as actual results may differ materially as a result of risks facing our company, and actual events may differ from the assumptions underlying the statements that have been made regarding anticipated events.
Important factors to consider in evaluating any forward-looking statements include:
| ● | our ability to finance and complete the design and construction of our proposed data center operations; | |
| ● | our ability to implement our business plan; | |
| ● | our ability to attract key personnel; | |
| ● | our ability to operate profitably; | |
| ● | our ability to efficiently and effectively finance our operations; | |
| ● | inability to achieve future sales levels or other operating results; | |
| ● | inability to raise additional financing for working capital; | |
| ● | inability to efficiently manage our operations; | |
| ● | the inability of management to effectively implement our strategies and business plans; | |
| ● | the unavailability of funds for capital expenditures and/or general working capital; | |
| ● | the fact that our accounting policies and methods are fundamental to how we report our financial condition and results of operations, and they may require management to make estimates about matters that are inherently uncertain; | |
| ● | deterioration in general or regional economic conditions; | |
| ● | changes in U.S. GAAP or in the legal, regulatory and legislative environments in the markets in which we operate; | |
| ● | adverse state or federal legislation or regulation that increases the costs of compliance, or adverse findings by a regulator with respect to existing operations; |
These risk factors should be considered in connection with any subsequent written or oral forward-looking statements that we or persons acting on our behalf may issue. All written and oral forward-looking statements made in connection with this report that are attributable to our company or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. Given these uncertainties, we caution investors not to unduly rely on our forward-looking statements. We do not undertake any obligation to review or confirm analysts’ expectations or estimates or to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events, except as required by applicable law or regulation.
Notwithstanding the above, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), expressly state that the safe harbor for forward-looking statements does not apply to companies that issue penny stock. If, as now, we are considered to be an issuer of penny stock, the safe harbor for forward-looking statements may not apply to us at certain times.
Throughout this report, unless otherwise designated, the terms “we,” “us,” “our,” “the Company” and “our company” refer to CalEthos, Inc., a Nevada corporation. All amounts are in U.S. Dollars, unless otherwise indicated.
| ii |
PART I - FINANCIAL INFORMATION
Item 1: Financial Statements
CalEthos, Inc.
Condensed Consolidated Balance Sheets
As of
| September 30, 2025 | December 31, 2024 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ |
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$ |
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| Prepaid and other current expenses |
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| Total current assets |
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| Data center campus costs |
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| Total assets | $ |
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$ |
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| Liabilities and stockholders’ (deficit) equity | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued expenses | $ |
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$ |
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| Notes payable – related parties, net |
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| Total current liabilities |
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| Convertible debentures, net |
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| Total liabilities |
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| Stockholders’ (deficit) equity | ||||||||
| Common stock par value $ : shares authorized; and shares issued and outstanding |
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| Additional paid-in capital |
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| Other comprehensive income |
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| Stock subscription receivable |
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| Accumulated deficit |
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| Total stockholders’(deficit) equity |
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| Total liabilities and stockholders’ (deficit) equity | $ |
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$ |
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See the accompanying notes to these unaudited condensed consolidated financial statements.
| 1 |
CalEthos, Inc.
Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss
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For the Three Months Ended
September 30, |
For the Nine Months Ended
September 30, |
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| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Operating Expenses | ||||||||||||||||
| Professional fees |
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| Equity-based compensation |
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| General and administrative expenses |
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| Payroll and related expense |
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| Total operating expenses |
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| Loss from operations |
(
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(
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(
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| Other income (expenses) | ||||||||||||||||
| Interest income |
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| Financing costs |
(
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(
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| Financing costs – related party |
(
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(
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| Abandoned project costs |
(
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(
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(
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| Loss on extinguishment of debt |
(
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| Total other expenses |
(
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(
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(
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(
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| Loss before provision for income taxes |
(
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(
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(
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(
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| Provision for income taxes | ||||||||||||||||
| Net loss | $ |
(
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) | $ |
(
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) | $ |
(
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) | $ |
(
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| Net loss per share - Basic and Diluted | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Weighted Average common shares outstanding - Basic and Diluted | ||||||||||||||||
| Comprehensive (loss) income | ||||||||||||||||
| Net loss | $ |
(
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) | $ |
(
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) | $ |
(
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(
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| Foreign currency translation gain |
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| Comprehensive loss | $ |
(
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) | $ |
(
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) | $ |
(
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) | $ |
(
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) | ||||
See the accompanying notes to these unaudited condensed consolidated financial statements.
| 2 |
CalEthos, Inc.
Unaudited Condensed Consolidated Statements of Stockholders’ (Deficit) Equity
For the Three and Nine Months Ended September 30, 2025 and 2024
| Common Stock | Additional Paid-in | Stock Subscription | Other Comprehensive | Accumulated |
Total Stockholder’ (Deficit) |
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| Shares | Amount | Capital | Receivable | Income | Deficit | Equity | ||||||||||||||||||||||
| Balance December 31, 2024 |
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$ |
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$ |
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$ |
(
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) | $ |
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$ |
(
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) | $ |
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| Forfeiture of stock options | - |
(
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(
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| Equity-based compensation | - |
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| Net loss | - |
(
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(
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| Balance March 31, 2025 |
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(
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(
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| Equity-based compensation | - |
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| Forfeiture of stock options | - |
(
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(
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| Recapture of performance-based equity-compensation | - |
(
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(
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| Warrants issued with note payable – related party | - |
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| Net loss | - |
(
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(
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| Balance June 30, 2025 |
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(
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(
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| Equity-based compensation | - |
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| Warrants issued to note payable – related party | - |
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| Net loss | - |
(
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(
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| Balance September 30, 2025 |
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$ |
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$ |
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$ |
(
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) | $ |
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$ |
(
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) | $ |
(
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| Common Stock | Additional Paid-in | Stock Subscription | Other Comprehensive | Accumulated |
Total Stockholders’ |
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| Shares | Amount | Capital | Receivable | Income | Deficit | equity | ||||||||||||||||||||||
| Balance December 31, 2023 |
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$ |
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$ |
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$ |
(
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) | $ |
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$ |
(
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) | $ |
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| Equity-based compensation | - |
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| Shares issued for extinguishment of debt |
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| Warrant issued with notes payable | - |
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| Foreign currency translation loss | - |
(
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(
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| Net loss | - |
(
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(
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| Balance March 31, 2024 |
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(
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(
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| Equity-based compensation | - |
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| Warrants issued for note payable extension | - |
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| Foreign currency translation income | - |
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| Net loss | - |
(
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(
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) | |||||||||||||||||||||||
| Balance June 30, 2024 |
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$ |
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$ |
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$ |
(
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) | $ |
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$ |
(
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) | $ |
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| Equity-based compensation | - |
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| Warrants issued for note payable extension | - |
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| Net loss | - |
(
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(
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| Balance September 30, 2024 |
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(
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(
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,
See the accompanying notes to these unaudited condensed consolidated financial statements.
| 3 |
CalEthos, Inc.
Unaudited Condensed Consolidated Statements of Cashflow
For the Nine Months Ended September 30,
| 2025 | 2024 | |||||||
| Cash Flows From Operating Activities | ||||||||
| Net loss | $ |
(
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) | $ |
(
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) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Abandoned data center campus development costs |
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| Amortization of note payable discounts |
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| Amortization of debt issuance cost |
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| Fair value of equity-based compensation |
(
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| Loss on extinguishment of debt |
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| Changes in operating assets and liabilities | ||||||||
| Prepaid expenses and other current assets |
(
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| Accounts payable and accrued expenses |
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| Net cash used in operating activities |
(
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(
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| Cash Flows From Investing Activities | ||||||||
| Date center campus development cost |
(
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(
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| Net cash used in investing activities |
(
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(
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| Cash Flows From Financing Activities | ||||||||
| Cash proceeds from issuance of convertible debentures |
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| Cost for issuance of convertible debentures |
(
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(
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| Cash proceeds for issuances of notes payable |
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| Net cash provided by financing activities |
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| Effect of exchange rate changes on cash and cash equivalents |
(
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) | ||||||
| Net decrease in cash and cash equivalents |
(
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(
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| Cash and cash equivalents, beginning of period |
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| Cash and cash equivalents, end of period | $ |
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$ |
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| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income taxes | $ | $ | ||||||
| Non-cash investing and financing activities | ||||||||
| Relative fair value of warrants issued with note payable | $ |
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$ |
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| Capitalized interest – project development cost | $ |
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$ |
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| Accrued expenses – project development cost | $ |
(
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) | $ | ||||
| Equity-based compensation capitalized | $ |
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$ |
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Recapture of equity-based compensation capitalized |
$ |
(
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) | $ |
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Equity-based compensation expensed |
$ |
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$ |
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| Recapture of equity-based compensation expensed | $ |
(
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) | $ |
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| Common stock issued for forgiveness of principal and interest | $ | $ |
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See the accompanying notes to these unaudited condensed consolidated financial statements.
| 4 |
CalEthos, Inc.
Notes to the Unaudited Condensed Consolidated Financial Statements
For the Nine Months Ended September 30, 2025 and 2024
Note 1 – Organization and Accounting Policies
CalEthos, Inc. (the “Company” or “we”) was incorporated on March 20, 2002 under the laws of the State of Nevada.
In July 2022, the Company’s board of directors resolved to restructure the business of the Company to focus exclusively on the development of a large-scale data center campus, initially in Imperial County, California. In addition, the Company would consider the acquisition of assets or all or part of other companies operating in the clean energy or data center infrastructure industries or opportunities to invest in, or joint venture with, other more-established companies already in the industry that would add value to the Company’s business strategy.
After optioning parcels of land in Imperial County and working with the Imperial County planning department and other local regulatory agencies in seeking zoning changes and other required regulatory approvals required for the Company’s proposed data center campus, it became evident by May 2025 that the Company’s timelines for the receipt of such approvals would not be met. Key factors driving the delay included the need for additional environmental studies, unresolved community concerns, and delays in receiving several outstanding government approvals. As a result, the Company elected not to renew its purchase option on a 315-acres parcel of land in Imperial County when it expired in July 2025 and to shift its development efforts to other locations in which the regulatory environment for data center development and the purchase of available power may be more favorable and the timelines in which the Company may receive all required regulatory approvals may be shorter.
In May 2025, the Company formed TerraVolt Infrastructure Inc. (“TerraVolt”), a wholly-owned subsidiary established to meet the demand for sustainable, baseload, powered land and infrastructure solutions for large-scale data centers development and end users. TerraVolt’s proposed solution is an Infrastructure-as-a-Service (IaaS) Platform that will integrate a portfolio of grid and behind-the-meter power with construction-ready data center building sites that include utilities and fiber connectivity. TerraVolt plans to provide this turnkey solution to hyperscalers, colocation providers, and data center developers seeking to deploy new capacity faster than with traditional power generation and transmission.
The Company is currently focusing on properties in states in which onsite power production utilizing natural gas fuel cells and turbines are allowed and in which the Company can acquire access to natural gas pipeline and capacity for delivery within a reasonable timeframe.
Korean Entity
On
November 5, 2021, AIQ System Inc. (“AIQ”) was incorporated in Seoul, Republic of Korea. AIQ is authorized to issue
million
shares of common stock. At the date of incorporation,
shares were issued to the Company for
Korean Won, or approximately
$
Basis of Presentation
The accompanying condensed consolidated financial statements and notes thereto are unaudited. The unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and note disclosures normally included in the Company’s annual financial statements have been condensed or omitted. The December 31, 2024 condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by GAAP. These interim unaudited condensed consolidated financial statements, in the opinion of management, reflect all normal recurring adjustments necessary for a fair presentation of the financial position, results of operations and cash flows for the nine-month periods ended September 30, 2025 and 2024. The results for the nine months ended September 30, 2025 are not necessarily indicative of the results to be expected for the full year ending December 31, 2025 or for any future period.
These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2024, included in the Company’s annual report on Form 10-K filed with the SEC on April 2, 2025.
Principles of Consolidation
The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary from the formation date. All material intercompany transactions and balances have been eliminated in consolidation.
Going Concern and Liquidity
The
Company incurred a net loss of approximately $
The Company’s unaudited condensed consolidated financial statements have been presented on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.
| 5 |
The Company is subject to a number of risks similar to those of other similar stage companies, including dependence on key individuals; successful development, marketing and branding of services; the uncertainty of product development and generation of revenues; dependence on outside sources of financing; risks associated with research and development; dependence on third-party suppliers and collaborators; protection of intellectual property; and competition with larger, better-capitalized companies. Ultimately, the attainment of profitable operations is dependent on future events, including locating and contracting to purchase suitable real estate with access to gas pipelines or other suitable power sources, contracting for the purchase of natural gas or otherwise obtaining the necessary power for the development of a data center, obtaining adequate financing to fund the Company’s operations and generating a level of revenues adequate to support the Company’s cost structure.
The Company will need to raise debt or equity financing in the future in order to continue its operations and achieve its growth targets. However, there can be no assurance that such financing will be available in sufficient amounts and on acceptable terms, when and if needed, or at all. The precise amount and timing of the funding needs cannot be determined accurately at this time The Company believes its cash balances and cash flow from operations will not be sufficient to fund its operations and growth for the next twelve months from the issuance date of these financial statements. If the Company is unable to raise additional funding from investors or through other avenues, it may not be able to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
Segment Reporting
The Company’s chief operating decision maker (“CODM”) is the Company’s Chief Executive Officer. The Company operates as one operating segment and uses net income or loss as measures of profit or loss on a consolidated basis in making decisions regarding the allocation of capital resources and performance assessment. Additionally, the Company’s CODM regularly reviews the Company’s expenses on a consolidated basis. The financial metrics used by the CODM help make key operating decisions, such as determination of the use of capital resources for data center development and general and administrative expenses.
Since the Company operates as one reportable segment, all financial information required by “Segment Reporting” can be found in the accompanying unaudited condensed consolidated financial statements. The CODM does not review segment assets at a level other than that presented in the Company’s unaudited condensed consolidated balance sheets. There are no intra-entity sales or transfers, and no significant expense categories regularly provided to the CODM beyond those disclosed in the Unaudited Condensed Consolidated Statements of Operations.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods.
Foreign Currency Translation
The financial statements of foreign subsidiaries, for which the functional currency is the local currency, are translated into U.S. dollars using the exchange rate at the consolidated balance sheet date for assets and liabilities and a weighted-average exchange rate during the year for revenue, expenses, gains and losses. Translation adjustments are recorded as other comprehensive income (loss) within shareholders’ equity (deficit). Gains or losses from foreign currency transactions are recognized in the consolidated statements of operations.
| 6 |
Fair Value Measurement
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants as of the measurement date. Applicable accounting guidance provides an established hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors that market participants would use in valuing the asset or liability. There are three levels of inputs that may be used to measure fair value:
| Level 1 - | Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. |
| Level 2 - | Other inputs that are directly or indirectly observable in the marketplace. |
| Level 3 - | Unobservable inputs which are supported by little or no market activity. |
The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
As of and for the nine months ended September 30, 2025 and 2024, the Company had no assets or liabilities that required fair value measurement.
Cash and Cash Equivalents
The
Company considers all highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents.
Cash and cash equivalents are recorded at cost, which approximates their fair value. The Company maintains its cash and cash equivalents
in banks insured by the Federal Deposit Insurance Corporation (“FDIC”) in accounts that at times may be in excess of the
federally insured limit of $
Prepaid Expenses
Prepaid expenses are assets held by the Company that are expected to be realized and consumed within twelve months after the reporting period.
Data Center Campus Costs
Data center development cost is stated at cost, which includes the cost incurred to complete phase I of the Company’s former data center development plan. Phase I costs included the option payment for the land and the cost of consulting firms to provide power and connectivity assessments, feasibility studies, engineering plans, and project benchmarking. Data center development cost also included internal cost such as payroll-related cost and debt interest cost.
In accordance with ASC 360-10-35, the Company reviews the carrying amounts of data center cost when events or changes in circumstances indicate the assets may not be recoverable. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any. Where it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
The recoverable amount is the higher of fair value, less costs of disposal and value in use. In assessing value in use, the estimated future cash flows to be derived from continuing use of the asset or cash-generating unit are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Fair value less costs of disposal is the amount obtainable from the sale of an asset or cash-generating unit in an arm’s length transaction between knowledgeable, willing parties, less the cost of disposal. When a binding sale agreement is not available, fair value less costs of disposal is estimated using a discounted cash flow approach with inputs and assumptions consistent with those of a market participant. If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the cash-generating unit is reduced to its recoverable amount. An impairment loss is recognized immediately in operating results.
| 7 |
Related Parties
The Company follows Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) section 850-10 for the identification of related parties and disclosure of related-party transactions.
Pursuant to ASC section 850-10-20, the related parties include (a.) affiliates of the Company (“Affiliate” means, with respect to any specified Person, any other Person that, directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control with such Person, as such terms are used in and construed under Rule 405 under the Securities Act); (b.) entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option of ASC section 825–10–15, to be accounted for by the equity method by the investing entity; (c.) trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; (d.) principal owners of the Company; (e.) management of the Company; (f.) other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and (g.) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.
The consolidated financial statements are required to include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures are required to include: (a.) the nature of the relationship(s) involved; (b.) a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; (c.) the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and (d.) amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.
Commitments and Contingencies
The Company follows ASC section 450-20 to report accounting for contingencies. Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or un-asserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or un-asserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s consolidated financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed.
Stock-Based Compensation
The Company accounts for its stock-based compensation under ASC 718, “ Compensation – Stock Compensation ” using the fair value-based method. Under this method, compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. This guidance establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments.
| 8 |
The Company uses the fair value method for equity instruments granted to non-employees and uses the BSM model for measuring the fair value of options. The stock-based fair value compensation is determined as of the date of the grant (measurement date) and is recognized over the vesting periods.
The Company uses ASC 260, “ Earnings Per Share ” for calculating the basic and diluted earnings (loss) per share. The Company computes basic earnings (loss) per share by dividing net income (loss) by the weighted average number of common shares outstanding. Diluted earnings (loss) per share is computed based on the weighted average number of shares of common stock plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method. Dilutive potential common shares include outstanding stock options and warrants and stock awards. For periods with a net loss, basic and diluted loss per share is the same, in that any potential common stock equivalents would have the effect of being anti-dilutive in the computation of net loss per share.
Securities that could potentially dilute loss per share in the future were not included in the computation of diluted loss per share for the nine months ended September 30, 2025 and 2024 because their inclusion would be anti-dilutive. Common stock equivalents amounted to and as of September 30, 2025 and 2024, respectively.
Recent Accounting Pronouncements
The Company’s management reviewed all recently issued accounting standard updates (“ASU’s”) not yet adopted by the Company and does not believe the future adoption of any such ASU’s may be expected to cause a material impact on the Company’s consolidated financial condition or the results of its operations.
Note 2 – Data Center Development Costs
On
July 22, 2024, the Company entered into an option agreement (“Option”) to acquire for a purchase price of $
On
March 30, 2023, the Company signed an option agreement (“Initial Option”) to acquire
As
of the Termination Date, the Company had approximately $
As
disclosed in
Note 1 – Organization and Accounting Policies,
given
the recent development of the Plan and the prolonged uncertainty, the Company elected not to renew its purchase option on the New Property
when it expired in July 2025. Consequently, previously capitalized data center development costs were expensed, and the Company will
cease capitalizing additional data center development expenses until the Company can secure parcels with appropriate zoning for data
center use and greater certainty around the execution of its development plans, as disclosed in Note 1. As of the termination of the
data center development, the Company had approximately $
| 9 |
Note 3 – Notes Payable – Related Party
Notes payable – related party transactions are summarized for the periods as follows:
|
Nine months ended September 30, 2025 |
Year Ended December 31, 2024 |
|||||||
| Principal | ||||||||
| Balance, beginning of the period | $ |
|
$ |
|
||||
| Additions |
|
|
||||||
| Settlement |
(
|
) | ||||||
| Balance, end of the period |
|
|
||||||
| Discount | ||||||||
| Balance, beginning of the period | ||||||||
| Additions |
|
|
||||||
| Amortization |
(
|
) |
(
|
) | ||||
| Balance, end of the period |
|
|||||||
| Net carrying amount | $ |
|
$ |
|
||||
In
April 2025, the Company issued a $
In
July 2025, the Company issued a $
In
July 2025, the Company and the Lender agreed to extend the maturity date of the April 2025 Note, which was accounted for as a modification
under ASC 470—Debt. In connection with this modification, the Company issued Modification Warrants to the Lender. The fair value
of the Modification Warrants, determined to be $
Interest
expense for the notes payable amounted to $
Note 4 – Convertible Debentures
Convertible debentures transactions are summarized for the periods as follows:
| Principal |
Nine Months Ended
September 30,
|
Year Ended December 31, 2024 |
||||||
| Balance, beginning of period | $ |
|
$ |
|
||||
| Additions |
|
|
||||||
| Conversions |
(
|
) | ||||||
| Balance, end of period |
|
|
||||||
| Debt issuance cost | ||||||||
| Balance, beginning of period |
|
|||||||
| Additions |
|
|
||||||
| Amortization |
(
|
) |
(
|
) | ||||
| Balance, end of period |
|
|
||||||
| Net book value | $ |
|
$ |
|
||||
In
June 2024, the Company initiated a private placement offering for its convertible debentures (the “Debentures”). The Debentures
bear interest at
In accordance with the Debenture, the Company has the right to prepay the Debentures upon providing 45 days notice of its intention to prepay.
The
outstanding principal amount of the Debentures and all accrued interest thereon shall automatically be converted into shares of common
stock at the then effective conversion price upon (i) the close of business on the sixtieth (60th) consecutive day on which the VWAP
of the Company’s common stock is at least $
| 10 |
For
the nine months ended September 30, 2025, the Company issued Debentures in the amount of $
Interest
expense on convertible promissory notes amounted to $
Note 5 – Commitments and Contingencies
Litigation
From time to time, the Company may become subject to legal proceedings, claims and litigation arising in the ordinary course of business. The Company is not currently a party to any material legal proceedings, nor is the Company aware of any pending or threatened litigation that would have a material adverse effect on the Company’s business, operating results, cash flows or financial condition should such litigation be resolved unfavorably.
Note 6 – Stockholders Equity
Stock Options
|
Number of Shares |
Weighted Average Strike Price/Share |
Weighted Average Remaining Contractual Term (Years) |
Weighted Average Grant Date Fair Value/Share |
Intrinsic Value |
||||||||||||||||
| Balance, December 31, 2024 |
|
|
|
|
||||||||||||||||
| Granted |
|
|
|
|||||||||||||||||
| Forfeited |
|
|
|
|||||||||||||||||
| Exercised | – | |||||||||||||||||||
| Expired | - | |||||||||||||||||||
| Balance, September 30, 2025 |
|
|
|
|
||||||||||||||||
| Vested and exercisable, September 30, 2025 |
|
|
|
|
||||||||||||||||
| Unvested, September 30, 2025 |
|
$ |
|
$ |
|
$ |
|
|||||||||||||
For the three and nine months ended September 30, 2025, the total equity-based compensation expense was approximately $ and $( ), respectively. During the three months ended September 30, 2025, the Company recorded a recapture of approximately $ of equity-based compensation related to the non-performance of the performance-based awards. Therefore, the three and nine months ended September 30, 2025 equity-based compensation was $ and $ , respectively, for the time-based equity awards.
The Company had outstanding stock options as of September 30, 2025, of which outstanding options had a time-based vesting requirement, and the remaining outstanding options had a performance-based vesting requirement, as follows:
| Time-based | Performance-based | |||||||
| CEO | ||||||||
| COO | ||||||||
| VP - Senior Counsel | ||||||||
| Terminated employees | ||||||||
| Non-employees -Vested on issuance | ||||||||
| Total | ||||||||
| 11 |
In May 2025, as described in Note 1 – Organization and Accounting Policies, the Company’s management shifted the core focus of the Company’s operations. As a result of this strategic shift, the original performance-based milestone included in the employee stock option agreements were determined to be no longer achievable. The original milestones, which were tied to specific legacy business objectives, were rendered obsolete by the revised operational direction of the Company. The stock option agreements provided for the milestones to be modified with the mutual consent of the Company and the employees. In accordance with the terms of the stock option agreements, these milestones were modified by agreement of the Company and the affected employees to better align with the new business plan, as follows:
Milestone 1 - Upon the execution by the Company of an agreement to lease or purchase land for (a) a geothermal well field, geothermal power plant or geothermal cooling/heating plant, (b) another type of clean energy power plant, or (c) pre- permitted construction-ready building sites for a data center or other facilities to be constructed pursuant to the Company’s data center infrastructure platform.
Milestone 2 - Upon the Company receiving all required approvals from local, county and state agencies to allow the Company to proceed with the construction and development of an exploratory geothermal well, a geothermal power plant, a geothermal cooling/heating plant, or another type of clean energy power plant or for the Company’s data center infrastructure platform.
Milestone 3 - Upon the execution by the Company (or by a partnership or joint venture to which the Company is a party) of an agreement pursuant to which a third party (a) will purchase power or heating/cooling, either as an off-taker of power or heating/cooling, (b) will purchase infrastructure under an Infrastructure-as-a- Service Agreement, (c) as a utility company, will purchase power or heating/cooling under a power or heating/cooling purchase agreement, or (d) through a partnership or joint venture agreement to which the Company is a party, will purchase power or heating/cooling the partnership or joint venture produces or for data center infrastructure that the partnership or joint venture provides to such third party.
Milestone 4 - Upon completion by the Company of construction of (a) a geothermal power plant, a geothermal heating/cooling plant, or other type of clean energy power plant, or (b) a data center infrastructure platform, and the receipt by the Company of all required operating permits from local, county or state officials for the operation of such plant or platform.
Milestone 5 - Upon the operation by the Company, either directly or indirectly, of a power plant, heating/cooling plant or other type of clean energy power plant, or an infrastructure platform, at an operating expense (OPEX) of 40% or less in any full fiscal year.
The outstanding performance-based awards are as follows:
| CEO | COO | VP- Senior Counsel | Total | |||||||||||||
| Milestone 1 |
|
|
|
|
||||||||||||
| Milestone 2 |
|
|
|
|
||||||||||||
| Milestone 3 |
|
|
|
|
||||||||||||
| Milestone 4 |
|
|
|
|
||||||||||||
| Milestone 5 |
|
|
|
|
||||||||||||
| Total |
|
|
|
|
||||||||||||
| 12 |
The revised performance-based milestones were at the time of the modification directly linked to the execution of the Company’s new business model at such time, most notably, the acquisition or leasing of land suitable for geothermal development. The identification of prospective locations has emphasized areas with sufficient geothermal activity, evidenced by the presence of other operational or in-development facilities in the same geographic regions. However, as of the date of the modification, the Company remains in an exploratory and negotiation stage and has not identified, nor entered into any definitive land lease or purchase agreements. Also, if the Company finds suitable land for the project, there can be no assurance that financing to lease or acquire the land will be available in sufficient amounts and on acceptable terms.
The Company evaluated the modification of the performance-based awards under ASC 718, Compensation – Stock Compensation and determined that the change represented a Type IV “improbable-to-improbable” modification. That is, both the original and new milestones were not considered probable of achievement at the time of modification. Because the Company is in the early stages of exploring and negotiating suitable land, and considering potential challenges such as regulatory delays, market competition, or failure to reach agreement with landowners, there remains substantial uncertainty regarding the achievement and timing of the new milestone; therefore:
| ● | Original milestone : Not probable of achievement, as the related business objective was discontinued. | |
| ● | New milestone: Also, not probable at the time of modification, as substantial uncertainty remains regarding the successful acquisition or leasing of suitable land. |
As a result, consistent with ASC 718-20-55-108, no compensation expense related to these performance-based stock options has been recognized as of the modification date. The fair value of the modified awards is measured as of the modification date, but compensation cost will not be recognized until it becomes probable that the revised milestone will be satisfied.
| 13 |
The Company will continue to evaluate, at each reporting date, whether it has become probable that the new performance milestone will be achieved. Factors considered include, but are not limited to:
| ● | Progress on negotiations for land acquisition or lease agreements. | |
| ● | Developments in regulatory approvals or permitting for onsite power and geothermal projects. | |
| ● | Changes in the competitive or market landscape for onsite power and geothermal sites. |
Once management concludes that achieving the milestone has become probable, the Company will begin recognizing compensation cost for the modified options, reflecting the fair value at the modification date. If it becomes probable, the cumulative catch-up adjustment will be recognized in that period, and expense will be recognized prospectively over the vesting period for any remaining requisite service.
The
historical performance-based compensation costs, related to the outstanding
stock options, was approximately $
In January 2025, the Company issued to the Vice President and Sr. counsel, Real Estate, Land Use and Governmental Affairs, a non-qualified stock option agreement for the purchase of shares of the Company’s common stock for an exercise price of $ , which was the fair value of the Company’s common stock on the grant date. The option vests as to shares of common stock as follows:
| ● | The option becomes exercisable as to shares of common stock on January 16, 2026 and shall vest and become exercisable as to an additional shares of common stock on each of January 16, 2027, January 16, 2028, and January 16, 2029 provided that the optionee is a consultant, an employee or a Board member in good standing with the Company on such applicable vesting date. | |
| ● | The option vests as to the remaining shares of common stock based on the employee completing the modified milestones, as disclosed above. |
| 14 |
The Company’s management has accounted for the options in accordance with ASC 718, which requires the Company to estimate the service period over which the compensation cost will be recognized. Management has estimated that the first and second development phase (a) and (b) will be completed by December 31, 2025, the third development phase (c) by March 31, 2026, and the fourth and fifth development phases (d) and (e) by June 30, 2029. The estimated service period will be adjusted for actual and expected completion date changes. Any such change will be recognized prospectively, and the remaining deferred compensation will be recognized over the remaining service period.
The
option grant date fair value of $
In
November 2024, the Company issued to a consultant a non-qualified stock option to purchase
shares of the Company’s common
stock at an exercise price of $
per share, the fair market value of the Company’s common stock as of November 15, 2024 grant
date. In May 2025, the Company terminated the contract with the consultant. As of the termination date, none of the stock options were
vested. As a result, the stock option to purchase the
shares of the Company’s common stock was forfeited and the associated
compensation expense of approximately $
In
April 2024, the Company awarded its Chief Strategy and Development officer a non-qualified stock option to purchase
shares
of the Company’s common stock at a purchase price of $
per share, which was the fair market value of the Company’s common
stock on the date of issuance. In January 2025, the Company terminated the employment agreement. As of the termination date, the employee
vested the options as to
shares of common stock, the options to purchase the remaining
shares of common stock was cancelled
and the associated compensation expense capitalized in the prior year of approximately $
In
December 2023, the Board of Directors approved the issuance of stock options to the Company’s CEO and COO for the purchase of
shares of common stock with an exercise price of $
, per share, which was the fair market value of the Company’s common stock
on the date of issuance. For the nine months ended September 30, 2025, the Company recognized compensation expense of approximately $
related to time-based equity awards, and upon the determination that the related project would not be completed recorded a reversal of
approximately $
for performance-based awards, both of which were recorded as equity-based compensation. During the same period,
the Company recorded a reversal of approximately $
In
December 2023, the Board of Directors approved the issuance of stock options to two consultants, an executive advisor and a data center
development advisor, for the purchase of
and
, respectively, shares of common stock (collectively “2023 Consultant
Options”) with an exercise price of $
, per share, which was the fair market value of the Company’s common stock on the
date of issuance. In January 2025, both of the consultants were terminated. As of the termination date, one the options had vested as
to
shares of common stock and the option for the remaining
shares of common stock was cancelled. The other option was cancelled
in its entirety. The associated compensation expense capitalized in the prior year of approximately $
| 15 |
In
June 2023, the Board of Directors approved the issuance of stock options to the Company’s COO for the purchase of
shares
of common stock with an exercise price of $
, per share, which was the fair market value of the Company’s common stock on the
date of issuance. In June 2023, as part of an employment agreement an executive was granted an incentive stock option and a non-qualified
stock option to purchase
and
, respectively, shares of the Company’s common stock for $
per share. The stock
options are exercisable for a period of
from the date of grant, which was June 19, 2023. For the nine months ended September
30, 2025, the Company recognized compensation expense of approximately $
related to time-based equity awards, and upon the determination
that the related project would not be completed recorded a reversal of approximately $
for performance-based awards, both of which
were recorded as equity-based compensation. During the same period, the Company recorded a reversal of approximately $
Warrants
The following table summarized warrants outstanding as of September 30, 2025:
|
Number of Shares |
Weighted Average Strike Price/Share |
Weighted Average Remaining Contractual Term (Years) |
Weighted Average Grant Date Fair Value/Share |
Intrinsic Value |
||||||||||||||||
| Balance, December 31, 2024 |
|
|
|
|
||||||||||||||||
| Granted |
|
|
|
|||||||||||||||||
| Forfeited | - | |||||||||||||||||||
| Exercised | – | |||||||||||||||||||
| Expired | - | |||||||||||||||||||
| Balance, September 30, 2025 |
|
|
|
|||||||||||||||||
| Vested and exercisable, September 30, 2025 |
|
|
|
|||||||||||||||||
| Unvested, September 30, 2025 | $ | – | $ | $ | ||||||||||||||||
Note 7 – Subsequent Events
The Company evaluated all events that occurred after the balance sheet date through the date the financial statements were issued to determine if they must be reported. The management determined there are no reportable events.
| 16 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with our financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and the financial statements and related notes thereto in our Annual Report on Form 10-K for the year ended December 31, 2024.
This discussion contains certain forward-looking statements that involve risks and uncertainties. Our actual results and the timing of certain events could differ materially from those discussed in these forward-looking statements as a result of certain factors, including, but not limited to, those set forth herein and elsewhere in this Quarterly Report and in our other filings with the Securities and Exchange Commission. See “Cautionary Note Regarding Forward Looking Statements.”
Plan of Operations
In July 2022, our board of directors resolved to restructure our business to focus exclusively on the development of a large-scale data center campus, initially in Imperial County, California. In implementing our plan, we determined that we would consider the acquisition of assets or all or part of other companies operating in the clean energy or data center infrastructure industries or opportunities to invest in, or joint venture with, other more-established companies already in the industry that would add value to our business strategy.
Over the last two and a half years, we have worked with the County of Imperial, California to integrate data centers as an “approved use” into its 51,000-acre Lithium Valley Specific Plan. In July 2024, we contracted to purchase a 315-acre site in the center of Lithium Valley, which offered nearby grid connectivity and proximity to geothermal power plants, fiber connectivity, transportation, gas, water and other resources. In parallel to working with the County, we worked with geothermal power companies to develop a portfolio of power that could be delivered to our site and used for powering a clean-energy data center development. However, by May 2025, it became evident that our timelines for the receipt of the required regulatory approvals would not be met. Key factors driving the delay included the need for additional environmental studies, unresolved community concerns, and several outstanding government approvals. As a result, we elected not to renew our purchase option on a 315-acres parcel of land in Imperial County when it expired in July 2025 and to shift our development efforts to other locations in which the regulatory environment for data center development and the purchase of available power may be more favorable and the timelines in which we may receive all required regulatory approvals may be shorter.
In May 2025, we formed TerraVolt Infrastructure Inc. (“TerraVolt”), a wholly-owned subsidiary established to meet the demand for sustainable, baseload, powered land and infrastructure solutions for large-scale data centers development and end users. TerraVolt’s proposed solution is an Infrastructure-as-a-Service (IaaS) Platform that will integrate a portfolio of grid and behind-the-meter power with construction-ready data center building sites that include utilities and fiber connectivity. TerraVolt plans to provide this turnkey solution to hyperscalers, colocation providers, and data center developers seeking to deploy new capacity faster than with traditional power generation and transmission. We are currently focused on the identification of properties in states in which onsite power production utilizing natural gas fuel cells and turbines are allowed and in which we can acquire access to natural gas pipeline and capacity for delivery within a reasonable timeframe. We are still considering the use of geothermal power, but are no longer considering the development of the well field, only the co-development and ownership of the power plants as the off-taker and user of the power produced.
We believe TerraVolt’s IaaS Platform will address many time-to-power challenges for the data center industry. With AI, cloud computing and high-performance computing driving exponential growth in electricity consumption, the demand for entitled property with the required infrastructure and a proven path to power in a favorable timeframe has become critical:
| ● | The U.S. data center industry currently consumes 4% of all electricity produced in the United States and is projected to consume as much as 10% within the next five years. | |
| ● | Grid-served power is becoming less predictable in both cost and availability, and the data center industry is seeking alternative power solutions that accelerate deployment timelines while meeting the critical demands for reliability, sustainability and cost-effectiveness. | |
| ● | Hyperscale, colocation providers, and data center developers are looking beyond traditional power generation and transmission to solutions that offer better time-to-power that will help them deliver capacity faster. |
TerraVolt has recently assembled a team of land use and data center experts that are currently evaluating a number of locations with favorable energy resources and welcoming local, county and state officials that will support timely power plant construction, behind-the-meter power delivery, and large-scale data center developments. However, we currently have only limited capital with which to pay our anticipated expenses. To fund our business plan going forward, we intend to raise funds from investors by issuing our common stock, preferred stock and/or debt securities.
Results of Operations for the nine months ended September 30, 2025 and 2024
The table summarizes the results of operations for the nine months ended September 30,
| Change | ||||||||||||||||
| 2025 | 2024 | Dollar | Percentage | |||||||||||||
| Revenues | $ | - | $ | - | $ | - | - | % | ||||||||
| Operating Expenses | ||||||||||||||||
| Professional fees | 270,000 | 300,000 | (30,000 | ) | (10.0 | ) | ||||||||||
| Equity-based compensation | (10,000 | ) | 318,000 | (328,000 | ) | (103.1 | ) | |||||||||
| General and administrative | 33,000 | 42,000 | (9,000 | ) | (21.4 | ) | ||||||||||
| Payroll and related expenses | 421,000 | 175,000 | 246,000 | 140.6 | ||||||||||||
| Total operating expenses | 714,000 | 835,000 | (121,000 | ) | (14.5 | ) | ||||||||||
| Other (expenses) income | ||||||||||||||||
| Interest income | 4,000 | 10,000 | (6,000 | ) | (60.0 | ) | ||||||||||
| Financing cost | (132,000 | ) | (823,000 | ) | (691,000 | ) | (84.0 | ) | ||||||||
| Financing costs – related party | (321,000 | ) | (869,000 | ) | (548,000 | ) | 63.1 | |||||||||
| Abandoned project | (4,581,000 | ) | (344,000 | ) | 4,237,000 | 1,231.7 | ||||||||||
| Loss on extinguishment of debt | - | (6,468,000 | ) | (6,468,000 | ) | (100.0 | ) | |||||||||
| Total other expenses | $ | (5,030,000 | ) | $ | (8,494,000 | ) | $ | (3,476,000 | ) | (40.9 | )% | |||||
| 17 |
Revenues
For the nine months ended September 30, 2025 and 2024, we had no revenues.
Operating Expenses
Professional fees
Our professional fees decreased to $270,000 for the nine months ended September 30, 2025 from $300,000 for the nine months ended September 30, 2024. The decrease of approximately $30,000 was attributable to a decrease in our consulting fees of approximately $28,000, a decrease in our legal fees of $43,000, a decrease in our accounting fees of $3,000, and a decrease in filing fees of $10,000, which was offset in part by an increase in our audit fees of approximately $14,000, and an increase in transfer agent costs and geologist costs of approximately $40,000.
Equity-based compensation
Our equity-based compensation for the nine months ended September 30, 2025 decreased to $(10,000) from $318,000 for the nine months ended September 30, 2024. During the nine months ended September 30, 2025, we recorded a recapture of approximately $236,000 of equity-based compensation related to the non-performance of the performance-based awards. That recapture exceeded by $10,000 the equity- based compensation expense of $226,000 for the time-based equity awards during the nine months ended September 30, 2025.
Payroll and related expenses
Payroll and related expenses increased to $421,000 for the nine months ended September 30, 2025 from $175,000 for the nine months ended September 30, 2024. The increase of $246,000 related to our abandonment of our data center campus project in Imperial County, California in July 2025. Therefore, during the second and third quarters of 2025, we did not capitalize payroll and related expenses.
Financing costs
Our financing cost for the nine months ended September 30, 2025 decreased to $132,000 from $823,000 for the nine months ended September 30, 2024. The decrease was due to a decrease in the 2025 interest expense and amortization of debt issuance costs associated with our convertible debentures issued during the year ended December 31, 2024
Financing costs – related party
Our financing cost – related party for the nine months ended September 30, 2025 decreased to $321,000 from $869,000 for the nine months ended September 30, 2024. The decrease of $548,000 was due to a decrease in interest and loan discount expense for notes payable to the related party.
Results of Operations for the three months ended September 30, 2025 and 2024
The table summarizes the results of operations for the three months ended September 30,
| 2025 | 2024 | Dollar | Percentage | |||||||||||||
| Revenues | $ | - | $ | - | $ | - | - | % | ||||||||
| Operating Expenses | ||||||||||||||||
| Professional fees | 93,000 | 44,000 | 49,000 | 111.4 | ||||||||||||
| Equity-based compensation | 93,000 | 88,000 | 5,000 | 5.7 | ||||||||||||
| General and administrative | 20,000 | 4,000 | 16,000 | 400.0 | ||||||||||||
| Payroll and related expenses | 153,000 | 82,000 | 71,000 | 86.6 | ||||||||||||
| Total operating expenses | 359,000 | 218,000 | 141,000 | 64.7 | ||||||||||||
| Other (expenses) income | ||||||||||||||||
| Interest income | 2,000 | 1,000 | 1,000 | 100.0 | ||||||||||||
| Financing cost | (55,000 | ) | (817,000 | ) | (762,000 | ) | (93.3 | ) | ||||||||
| Financing cost – related party | (246,000 | ) | - | 246,000 | 100.0 | |||||||||||
| Abandoned projects | - | (344,000 | ) | (344,000 | ) | (100.0 | ) | |||||||||
| Total other expenses | $ | (299,000 | ) | $ | (1,160,000 | ) | $ | (859,000 | ) | (74.1 | )% | |||||
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Revenues
For the three months ended September 30, 2025 and 2024, we had no revenues.
Operating Expenses
Professional fees
Our professional fees increased to $93,000 for the three months ended September 30, 2025 from $44,000 for the three months ended September 30, 2024. The increase of approximately $49,000 was attributable to an increase in our consulting fees of approximately $26,000, an increase in our legal fees of $7,000, an increase in our audit fees of $2,000, and an increase in transfer agent costs and geologist for approximately $14,000.
Equity-based compensation
Our equity-based compensation for the three months ended September 30, 2025 increased to $93,000 from $88,000 for the three months ended September 30, 2024.
Payroll and related expenses
Payroll and related expenses increased to $153,000 for the three months ended September 30, 2025 from $82,000 for the three months ended September 30, 2024. The increase of $71,000 related to our abandonment of our data center campus project in Imperial County, California in July 2025. Therefore, during the three months ended September 30, 2025, we did not capitalize payroll and related expenses.
Financing costs
Our financing cost for the three months ended September 30, 2025 decreased to $55,000 from $817,000 for the three months ended September 30, 2024.
Financing costs – related party
Our financing cost – related party for the three months ended September 30, 2025 increased to $246,000 from $nil for the three months ended September 30, 2024. The increase was due to interest expense and amortization of debt issuance costs associated with our notes payable to the related party issued during the three months ended September 30, 2025.
Liquidity and Capital Resources
Our working capital as of September 30, 2025 and December 31, 2024 was as follows.
| 2025 | 2024 | |||||||
| Current assets | $ | 287,000 | $ | 296,000 | ||||
| Current liabilities | (1,163,000 | ) | (515,000 | ) | ||||
| Working capital deficit | $ | (876,000 | ) | $ | (219,000 | ) | ||
Our working capital deficit increased from a $219,000 deficit as of December 31, 2024 to a deficit of $876,000 as of September 30, 2025 for an increase of $657,000. The increase in working capital deficit was due to a $12,000 decrease in cash and cash equivalents, a $3,000 increase in prepaid and other current assets, a $188,000 increase in accounts payable and accrued expenses, and a $460,000 increase in notes payable – related party.
Cash Flows
| For the nine months ended September 30, | ||||||||
| 2025 | 2024 | |||||||
| Net cash used in operating activities | $ | (513,000 | ) | $ | (492,000 | ) | ||
| Net cash used in investing activities | (464,000 | ) | (1,085,000 | ) | ||||
| Net cash provided by financing activities | 965,000 | 1,426,000 | ||||||
| Effect of exchange rate changes on cash and cash equivalents |
- |
(1,000 |
) | |||||
| Change in cash and cash equivalents during the period | (12,000 | ) | (152,000 | ) | ||||
| Cash and cash equivalents, beginning of period | 286,000 | 308,000 | ||||||
| Cash and cash equivalents, end of period | $ | 274,000 | $ | 156,000 | ||||
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Cash Flows from Operations
Cash used in operating activities increased to approximately $513,000 for the nine months ended September 30, 2025 from approximately $492,000 for the nine months ended September 30, 2024, which was predominantly related to the decrease in our expenditures for filing fees, legal fees, transfer agent fees and consulting fees paid during the period, which was offset by a decrease in our cashflows from investing activities, as we did not capitalize cost associated with the data center during the three months ended September 30, 2025.
Cash Flows from Investing
Our cash used in investing activities decreased to approximately $464,000 for the nine months ended September 30, 2025 from approximately $1,085,000 for the nine months ended September 30, 2024. The primary use of cash was for expenditures for the development of our data center campus. For the three months ended September 30, 2025, we did not capitalize cost associated with the data center.
Cash Flows from Financing
Our cash provided by financing activities decreased to approximately $965,000 for the nine months ended September 30, 2025 from approximately $1,426,000 for the nine months ended September 30, 2024. The decrease was due to our incurring less debt in the nine months ended September 30, 2025.
Liquidity and Material Cash Requirements
Even though we experienced negative cash flows from operations of approximately $513,000 for the nine months ended September 30, 2025, as a result of our issuance of convertible debentures in the aggregate principal amounts of $215,000 and the issuance of notes payable to a related party in the aggregate principal amount of $750,000, we had cash and cash equivalents of approximately $274,000 as of September 30, 2025. As of September 30, 2025, we had outstanding approximately $1,635,000 principal amount of convertible debentures with a maturity date on December 31, 2026 and $750,000 principal amount of promissory notes with a maturity date of January 31, 2026.
As discussed above, we have outstanding indebtedness in the aggregate amount of $2,304,000 maturing prior to December 31, 2026. In addition, it is anticipated that we will incur expenses in the implementation of our business plan described above, and such expenses will require substantial financing to complete the development of the property for a data center operation and to achieve our goals. We currently have only limited capital with which to pay our outstanding indebtedness and these anticipated expenses. To pay our outstanding indebtedness and to fund our business plan going forward, we intend to raise funds from investors by issuing common stock, preferred stock and/or debt securities. We are currently in discussions with several potential funding sources. However, there can be no assurance we will be able to successfully raise additional funds when required, if at all.
The failure to obtain this necessary capital when needed on acceptable terms, or at all, could force us to delay, limit, reduce or terminate our development plans, any commercialization efforts or other operations. We may not be able to secure financing on favorable terms, or at all, to meet our future capital needs. In addition, even if we are able to obtain sufficient funding to commence our business operations, we may need to pursue additional financing in the future to make expenditures and/or investments to support the growth of our business and may require additional capital to pursue our business objectives and respond to new competitive pressures, pay extraordinary expenses or fund our growth, including through acquisitions. Additional funds, however, may not be available when we need them on terms that are acceptable to us, or at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to commence our proposed business operations, to continue to grow and support our business and to respond to business challenges could be significantly limited.
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Going Concern
The unaudited financial statements included in this Report have been prepared on a going concern basis, which implies that our company will continue to realize its assets and discharge its liabilities and commitments in the normal course of business. We are presently in the development stage and, apart from our cash balances, have only limited assets. Our company has not generated revenues in the last two fiscal years, has never paid any dividends and is unlikely to pay dividends or generate earnings in the immediate or foreseeable future. The continuation of our company as a going concern is dependent upon: (i) continued financial support from our shareholders; (ii) the ability of our company to continue raising necessary debt or equity financing to achieve its operating objectives; and (iii) our ability to acquire assets and establish a business or merge or otherwise acquire business opportunities.
Our independent auditors included an explanatory paragraph in their report on our financial statements for the year ended December 31, 2024 regarding concerns about our ability to continue as a going concern. In addition, our financial statements contain further note disclosures in this regard. The implementation of our business plan is dependent upon our ability to continue raising sufficient new capital from equity or debt markets in order to fund our on-going operating losses and real estate acquisition activities. The issuance of additional equity securities could result in a significant dilution in the equity interests of our current stockholders.
Application of Critical Accounting Policies
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying disclosures of our company. Although these estimates are based on management’s knowledge of current events and actions that our company may undertake in the future, actual results may differ from such estimates.
Principles of Consolidation
The consolidated financial statements include the accounts of our company and our wholly-owned subsidiary from the formation date. All material intercompany transactions and balances have been eliminated in consolidation.
Foreign Currency Translation
The financial statements of our former foreign subsidiary, for which the functional currency is the local currency, was translated into U.S. dollars using the exchange rate at the consolidated balance sheet date for assets and liabilities and a weighted-average exchange rate during the year for revenue, expenses, gains and losses. Translation adjustments were recorded as other comprehensive income (loss) within shareholders’ equity (deficit). Gains or losses from foreign currency transactions are recognized in the consolidated statements of operations.
Debt and Debt Discounts
In accordance with ASC 470-20, Debt with Conversion and Other Options , we first allocate the cash proceeds of any notes we sell with warrants between the notes and any warrants on a relative fair value basis. Proceeds are then allocated to the conversion feature.
We account for debt discounts originating in connection with conversion features that remain embedded in the related notes in accordance with ASC 470-20. These costs are classified on the balance sheet as a direct deduction from the debt liability. We amortize these costs over the term of our debt agreements as financing cost in the consolidated statement of operations and comprehensive loss.
Stock-Based Compensation
We account for our stock-based compensation under ASC 718, “ Compensation – Stock Compensation ” using the fair value based method. Under this method, compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. This guidance establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments.
We use the fair value method for equity instruments granted to non-employees and use the BSM model for measuring the fair value of options. The stock-based fair value compensation is determined as of the date of the grant (measurement date) and is recognized over the vesting periods.
Recent Accounting Pronouncements
Our management reviewed all recently-issued accounting standard updates (“ASU’s”) not yet adopted by our company and does not believe the future adoptions of any such ASU’s may be expected to cause a material impact on our consolidated financial condition or the results of our operations.
Off-Balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial position, revenues and expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.
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Item 3. Quantitative and Qualitative Disclosures about Market Risk
Not required under Regulation S-K for smaller reporting companies.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this Quarterly Report, our Chief Executive Officer and Chief Financial Officer (our “Certifying Officers”), conducted evaluations of our disclosure controls and procedures. As defined under Sections 13a - 15(e) and 15d - 15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the term “disclosure controls and procedures” means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission (“SEC”). Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including the Certifying Officers, to allow timely decisions regarding required disclosures.
Based on their evaluation, the Certifying Officers concluded that, as of September 30, 2025, our disclosure controls and procedures were not effective.
The material weakness related to internal control over financial reporting that was identified at September 30, 2025 was that we did not have sufficient personnel staffing in our accounting and financial reporting department. As a result, we were not able to achieve adequate segregation of duties and were not able to provide for adequate review of the financial statements.
This control deficiency could result in a reasonable possibility that material misstatements of the financial statements will not be prevented or detected on a timely basis. However, our management believes that the material weakness identified does not result in the restatement of any previously reported financial statements or any other related financial disclosure, and management does not believe that the material weakness had any effect on the accuracy of our financial statements included as part of this Quarterly Report.
We will continue to monitor and evaluate the effectiveness of our disclosure controls and procedures and our internal controls over financial reporting on an ongoing basis and are committed to taking action and implementing additional enhancements or improvements, as necessary and as funds allow.
Changes in internal control over financial reporting.
There were no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on the Effectiveness of Internal Controls
Readers are cautioned that our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material error. An internal control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our control have been detected. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any control design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
We know of no material active or pending legal proceeding against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation.
Item 1A. Risk Factors
We are a small reporting company, as defined by Rule 12b-2 of the Exchange Act, and are not required to provide the information under this item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Sales of Unregistered Securities
There have been no sales of unregistered securities within the reporting period covered by this report that would be required to be disclosed pursuant to Item 701 of Regulation S-K[, with the exception of the following:]
In July 2025, in connection with a loan made to us by an accredited investor in the amount of $500,000 and an agreement to extend the maturity date of an existing loan, we issued to the lender a five-year warrant to purchase 2,000,000 shares of common stock for a purchase price of $0.50 per share. Such warrant was issued by us in reliance upon the exemption from registration available under Section 4(2) of the Securities Act and Regulation D promulgated thereunder.
Repurchases of Shares or of Company Equity Securities
None.
Item 3. Default Upon Senior Securities
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information
None
Item 6. Exhibits
The following documents are filed as a part of this report or incorporated herein by reference:
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SIGNATURES
Pursuant to the requirements of Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Date: November 14, 2025 | CalEthos, Inc. | |
| By: | /s/ Michael Campbell | |
| Name: | Michael Campbell | |
| Title: | Chief Executive Officer | |
| By: | /s/ Dean S Skupen | |
| Name: | Dean S Skupen | |
| Title: | Chief Financial Officer | |
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