Notes
to Unaudited Condensed Consolidated Financial Statements
September
30, 2022
Note
1 – Organization and Accounting Policies
ORGANIZATION AND ACCOUNTING POLICIES
CalEthos,
Inc. (the “Company” or “we”) was incorporated on March 20, 2002 under the laws of the State of Nevada.
The
Company is implementing its plan to build a clean-energy-powered, containerized, immersion-cooled data center that provides wholesale
colocation data center services to enterprise IT and hyperscale customers. In addition, the Company may acquire assets and all or part
of other companies operating in the high-density computing industry or to invest or joint venture with other more-established companies
already in the industry that would add value to the Company’s business strategy.
In
July 2022, due to the declining state of the bitcoin mining industry and market for its planned products, the Company’s board
of directors resolved to discontinue the development in South Korea of the Company’s 5 nanometer ASIC chip and containerized,
immersion-cooled bitcoin mining computer system and to focus exclusively on developing the clean-energy-powered data center segment
of its business strategy. The Company has suspended operations of its South Korean subsidiary and will decide in the next
twelve months whether to use it to develop other products or dissolve it.
Amendments
to Certificate of Incorporation
In
October 2021, the Board of Directors authorized an amendment to the Articles of Incorporation of the Company to change the Company’s
name to AIQ Blockchain, Inc. The name change has not yet been effected, and on July 2022, FINRA was notified that the Company was no longer
changing its name or symbol and that the application was being withdrawn.
Korean
entity
On
November 5, 2021, AIQ System Inc. (“AIQ”) was incorporated in Seoul, Republic of Korea. AIQ is authorized to issue 3 million
shares of common stock. At the date of incorporation, 10,000 shares were issued to the Company for 100,000,000 Korean Won or approximately
$89,000 for 100% ownership of AIQ.
Basis
of Presentation
The
accompanying Condensed Consolidated Financial Statements and notes thereto are unaudited. The unaudited interim 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 September 30, 2022
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 interim nine-months
period ended September 30, 2022 and 2021. The results for the nine months ended September 30, 2022 are not necessarily indicative of
the results to be expected for the full year ending December 31, 2022 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, 2021, included in the Company’s annual report on Form 10-K filed with the
SEC on March 31, 2022.
Liquidity
and Going Concern
The
Company incurred net income of approximately $2,399,000
for the nine months ended September 30, 2022, of which $4,791,000
was attributable to a non cash transaction for the reversal of compensation for restricted stock units, and had an accumulated deficit of approximately $14,431,000
as of September 30, 2022. The Company has financed its activities principally through debt and equity financing and shareholder
contributions. Management expects to incur additional losses and cash outflows in the foreseeable future in connection with its
operating activities.
The
Company’s 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.
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 products; 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 obtaining adequate financing to fund its 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, and will depend on a number
of factors, including market demand for the Company’s products and services, the success of product development efforts, the timing
of receipts for customer deposits, the management of working capital, and the continuation of normal payment terms and conditions for
purchase of goods and services. 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 substantially
increase revenues, reduce expenditures, or otherwise generate cash flows from operations, then the Company will likely need to raise
additional funding from investors or through other avenues to continue as a going concern.
COVID-19
The
continuing COVID-19 global pandemic has caused significant disruption to the economy and financial markets globally, and the full extent
of the potential impacts of COVID-19 are not yet known. Circumstances caused by the COVID-19 pandemic are complex, uncertain and rapidly
evolving. The impact of COVID-19 has not been significant to the Company’s results of operations, financial condition, and liquidity
and capital resources. Although no material impairment or other effects have been identified to date, there is substantial uncertainty
in the nature and degree of its continued effects over time. That uncertainty affects management’s accounting estimates and assumptions,
which could result in greater variability in a variety of areas that depend on these estimates and assumptions as additional events and
information become known. The Company will continue to consider the potential impact of the COVID-19 pandemic on its business operations.
Earnings
Per Share
We
use ASC 260, “Earnings Per Share” for calculating the basic and diluted earnings (loss) per share. We compute 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.
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 adoptions of any such ASU’s may be expected to cause a material impact on the Company’s
condensed consolidated financial condition or the results of its operations.
Note
2 – Intangible and Other Assets
INTANGIBLE AND OTHER ASSETS
On
December 23, 2021, AIQ entered into a Technology Development Agreement (the “Agreement”) with PICOCEL, Co., Ltd. (the “Contractor”
or “PICOCEL”) to develop a FPGA based Bitcoin mining simulation system. The Agreement was expected to be completed within
6 weeks for a total contract price of 198,000,000 Korean Won (“KRW”) or approximately $167,000. Total payments made to PICOCEL
as of September 30, 2022 amounted to approximately $69,000. On March 17, 2022, the Company and PICOCEL entered into a mutual agreement
to cancel and terminate the Agreement. As of the date of the termination, PICOCEL had completed the first phase of the Agreement upon
delivery of the SHA-256 code and FPGA board simulator.
On
April 5, 2022, AIQ entered into a Technology Development Agreement (the “Agreement”) with NNS, Co., Ltd. (the “Contractor”
or “NNS”) to develop a FPGA based Bitcoin mining simulation system. The Agreement was expected to be completed within 9 weeks
for a total contract price of 99,000,000 KRW, including 9,000,000 KRW VAT, or approximately $82,000. The payments are scheduled as follows:
SCHEDULE OF PAYMENTS
| |
Amount | |
| |
USD | | |
KRW | |
Within 5 days after signing the contract | |
$ | 41,000 | | |
| 49,500,000 | |
Within 5 days after all conditions are met as stated in “Schedule B – Statement of Work” | |
| 41,000 | | |
| 49,500,000 | |
Total | |
$ | 82,000 | | |
| 99,000,000 | |
Payment
of 90,000,000 KRW or approximately $69,000 was made to NNS as of September 30, 2022 which was expensed and included in in the condensed
consolidated statement of operations.
Impairment
During
the six months ended June 30, 2022, the Bitcoin market was in a constant decline, and since the ASIC chip being developed by AIQ was
planned to be used for Bitcoin mining machines, management believes that there is an impairment indicator as of June 30, 2022. Management
plans to discontinue the operations of AIQ subsequent to June 30, 2022 and no more future cash flows are expected from AIQ.
Indicators
of impairment include significant underperformance relative to historical or projected future operating results, significant changes
in our use of the assets or in our business strategy, loss of or changes in customer relationships and significant negative industry
or economic trends. When indications of impairment arise for a particular asset or group of assets, we assess the future recoverability
of the carrying value of the asset (or asset group) based on an undiscounted cash flow analysis. If the carrying value exceeds projected,
net, undiscounted cash flows, an additional analysis is performed to determine the asset’ (or asset group), typically a discounted
cashflow analysis, and an impairment charge is recorded for the excess of carrying value over fair value.
As
of September 30, 2022, intangibles and other assets were fully impaired. Impairment loss amounted to $154,000, inclusive of a $12,000
impairment of prepaid VAT related to the services provided by PICOCEL and NNS.
The
table below summarizes the impairment loss for the nine months ended September 30, 2022:
SCHEDULE OF IMPAIRMENT LOSS
| |
Amount | | |
VAT | | |
Total | |
PICOCEL | |
$ | 69,000 | | |
$ | 5,000 | | |
$ | 74,000 | |
NNS | |
| 69,000 | | |
| 5,000 | | |
| 74,000 | |
Total | |
| 138,000 | | |
| 10,000 | | |
| 148,000 | |
Foreign exchange loss | |
| 4,000 | | |
| 2,000 | | |
| 6,000 | |
Impairment loss | |
$ | 142,000 | | |
$ | 12,000 | | |
$ | 154,000 | |
Note
3 – Accounts Payable and Accrued Expenses
ACCOUNTS PAYABLE AND ACCRUED EXPENSES
The
following table summarizes the Company’s accounts payable and accrued expense balances as of the dates indicated:
SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUED EXPENSES
| |
September 30, | | |
December 31, | |
| |
2022 | | |
2021 | |
Accounts payable | |
$ | 251,000 | | |
$ | 221,000 | |
Accrued expenses | |
| 2,000 | | |
| 99,000 | |
Accrued interest | |
| 211,000 | | |
| 114,000 | |
Accounts payable and accrued expenses | |
$ | 464,000 | | |
$ | 434,000 | |
Accrued
Interest
The
following table presents the details of accrued interest as of the dates indicated:
SCHEDULE OF ACCRUED INTEREST
| |
September 30, | | |
December 31, | |
| |
2022 | | |
2021 | |
Notes payable | |
$ | 18,000 | | |
$ | 9,000 | |
Convertible promissory notes | |
| 193,000 | | |
| 105,000 | |
Balance, end of the year | |
$ | 211,000 | | |
$ | 114,000 | |
Note
4 – Notes Payable
NOTES PAYABLE
The
table below summarizes the transactions as of the dates indicated:
SCHEDULE OF NOTES PAYABLE
| |
September 30, | | |
December 31, | |
| |
2022 | | |
2021 | |
Balance, beginning of the year | |
$ | 111,000 | | |
$ | 11,000 | |
Additions | |
| – | | |
| 150,000 | |
Payments | |
| (25,000 | ) | |
| (50,000 | ) |
Balance, end of the year | |
$ | 86,000 | | |
$ | 111,000 | |
On
July 7, 2020, the Company issued a promissory note in the principal amount of $11,000.
The note is noninterest bearing. The principal was due on or before March 11, 2022. During any event of default under the note, the
interest rate shall increase to 10%
per annum. Events of default include failure to pay principal or interest, breach of covenants, breach of representations and
warranties, borrower’s assignment of substantial part of its property or business, any money judgment, writ, or similar
process shall be entered or filed against the borrower or any subsidiary of the borrower or any of its properties or other assets
for more than $100,000,
bankruptcy, liquidation of business, and cessation of operations. The principal amount outstanding under this note was $11,000
as of September 30, 2022. The note principal and interest are past due, therefore in default. For the nine months ended September
30, 2022 the Company has accrued approximately $2,000
of default interest.
On
February 19, 2021, the Company issued a promissory note in the principal amount of $25,000. The interest on the unpaid principal balance
accrued at a rate of 10% per annum. The principal and any accrued interest was to be paid in a single installment on or before February
19, 2022. If the Company fails to pay the balance of this note in full on the due date or fails to make any payment due within 15 days
of the due date, any unpaid principal shall accrue interest at the rate of 15% per annum during the default (default interest). Events
of default include failure to make any payment including accrued interest when due, voluntary, or involuntary petition of bankruptcy,
appointment of a receiver, custodian, trustee or similar party to take possession of the Company’s assets or property, or assignment
made by the Company for the benefit of creditors. The principal amount was settled in full on January 25, 2022.
On
April 22, 2021, the Company issued a promissory note in the principal amount of $50,000.
The interest on the unpaid principal balance accrued at a rate of 10%
per annum. The principal and any accrued interest was to be paid in a single installment on or before April
22, 2022. If the Company fails to pay the balance of this note in full on the date or fails to make any payments due within
15 days of the due date, any unpaid principal shall accrue interest at the rate of 15%
per annum during the default. Events of default include failure to make any payment including accrued interest when due, voluntary,
or involuntary petition of bankruptcy, appointment of a receiver, custodian, trustee or similar party to take possession of the
Company’s assets or property, or assignment made by the Company for the benefit of creditors. The principal amount outstanding
under this note was $50,000
as of September 30, 2022. The note principal and interest are past due, therefore in default. Interest accrued, including default
interest, as of September 30, 2022 is $8,000.
On
July 1, 2021, the Company issued a promissory note in the principal amount of $25,000.
The interest on the unpaid principal balance accrues at a rate of 10%
per annum. The principal and any accrued interest was to be paid in a single installment on or before July
1, 2022. If the Company fails to pay the balance of this note in full on the date or fails to make any payments due within 15
days of the due date, any unpaid principal shall accrue interest at the rate of 15%
per annum during the default (default interest). Events of default include failure to make any payment including accrued interest
when due, voluntary, or involuntary petition of bankruptcy, appointment of a receiver, custodian, trustee or similar party to take
possession of the Company’s assets or property, or assignment made by the Company for the benefit of creditors. The principal
amount outstanding under this note was $25,000
as of September 30, 2022. The note principal and interest are past due, therefore in default. Interest accrued, including default
interest, as of September 30, 2022 is $3,000.
Interest
expense on notes payable amounted to $3,000
and $9,000
for the three and nine months ended September 30, 2022, respectively, and $4,000 and $8,000 for the three and nine months ended September 30,
2021, respectively.
Note
5 – Convertible Promissory Notes
CONVERTIBLE PROMISSORY NOTES
In
2021, the Company issued two convertible promissory notes amounting to $55,000 and $3,850,000 (the “Notes”), respectively.
The total aggregate proceeds were $3,550,000 due to a $355,000 aggregate original issue discount. The Notes are non-interest bearing
with the principal due and payable on March 1, 2022 and August 31, 2022, respectively. Any amount of unpaid principal on the date of
maturity will accrue interest at rate of 10% per annum (default interest). Interest accrued as of September 30, 2022 is $35,000. The
principal amount and all accrued interest are convertible into shares of the Company’s common stock, as of the date of issuance,
at a rate of $1.00 and $1.25 per share (“Conversion Rate”), respectively. The Conversion Rate is adjustable if, at any time
when any principal amount of the Notes remains unpaid or unconverted, the Company issues or sells any shares of the Company’s common
stock for no consideration or for a consideration per share (before deduction of reasonable expenses or commissions or underwriting discounts
or allowances in connection therewith), which is less than the Conversion Rate in effect on the date of such issuance (or deemed issuance)
of such shares of common stock (a “Dilutive Issuance”). Immediately upon a Dilutive Issuance, the Conversion Rate will be
reduced to the amount of the consideration per share received by the Company in such Dilutive Issuance. Events of default include failure
to issue conversion shares, the occurrence of a breach or default under any other agreement, any money judgment, writ, or similar process
entered or filed against the Company or any of its property or other assets for more than $100,000, bankruptcy filing, application for
the appointment of a custodian, trustee or receiver, insolvency, the Company’s common stock delisted, or dissolution, winding up,
or termination of the business of the Company. The note principal and interest are past due, therefore in default.
In
connection with the issuance of the Notes, the Company issued to the purchasers of the Notes stock purchase warrants (the “Warrants”)
to purchase an aggregate of 1,567,500 shares of the Company’s common stock for a purchase price of $1.50 to $1.87 per share, subject
to adjustments. The Warrants were valued using the Black Scholes option pricing model for a total fair value of $3,004,000 based on a
3-year term, volatility of 404.91% to 405.93%, a risk-free equivalent yield of 0.27% to 0.42%, and stock price ranging from $0.10 to
$1.95.
In
accordance with ASC 470 - Debt, the Company has allocated the cash proceeds amounts of the Notes among the Notes, the Warrants and the
conversion feature. The relative fair value of the Warrants issued amounted to approximately $1,690,000 and the beneficial conversion
amounted to $0, which amounts are being amortized and expensed over the term of the Notes.
The
Company determined that the conversion feature of the Notes would not be an embedded feature to be bifurcated and accounted for as a
derivative in accordance with ASC 815-15 Derivatives and Hedging.
Financing
cost recognized for the amortization of debt discount was approximately $1,526,000 and $170,000 for the nine months ended September 30,
2022 and 2021, respectively.
The
convertible promissory notes consisted of the following as of the dates indicated:
SCHEDULE OF CONVERTIBLE PROMISSORY NOTES
| |
September 30, | | |
December 31, | |
| |
2022 | | |
2021 | |
Principal | |
| | | |
| | |
Balance, beginning of year | |
$ | 4,613,000 | | |
$ | 708,000 | |
Additions | |
| – | | |
| 3,905,000 | |
Balance, end of period | |
| 4,613,000 | | |
| 4,613,000 | |
| |
| | | |
| | |
Discount | |
| | | |
| | |
Balance, beginning of year | |
| 1,526,000 | | |
| 5,000 | |
Additions | |
| – | | |
| 2,045,000 | |
Amortization | |
| (1,526,000 | ) | |
| (524,000 | ) |
Balance, end of period | |
| - | | |
| 1,526,000 | |
Net carrying amount | |
$ | 4,613,000 | | |
$ | 3,087,000 | |
Effective
interest rate used to amortize the debt discount for the nine months ended September 30, 2022 and 2021 ranges from 4.76% to 64.60%.
Potential
future shares to be issued on conversion of the notes as of the dates indicated are as follows:
SCHEDULE OF POTENTIAL FUTURE SHARES ISSUANCE OF CONVERSION NOTES
| |
September 30, | | |
December 31, | |
| |
2022 | | |
2021 | |
Principal | |
$ | 4,613,000 | | |
$ | 4,613,000 | |
Interest | |
| 193,000 | | |
| 105,000 | |
Total | |
| 4,806,000 | | |
| 4,718,000 | |
Conversion price per share | |
| 1.00 – 1.25 | | |
| 1.00 – 1.25 | |
Potential future share | |
| 4,028,844 | | |
| 3,947,394 | |
The
default interest expense for the convertible promissory notes amounted to $88,000 and $48,000 for the nine months ended September 30,
2022 and 2021, respectively.
Note
6 – Commitments and contingencies
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.
In addition, the Company may receive letters alleging infringement of patent or other intellectual property rights. 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, except as follows.
On
January 3, 2022, a complaint was filed against our company in the Superior Court of California, County of Los Angeles titled Michael
Sekula v. CalEthos Inc, Michael Campbell and Does 1-25 (Case No. 22STCV00121) for, among other matters, failure to pay wages, fraud
and other wage-related claims. In the complaint, the plaintiff claimed he worked under a consulting agreement as Vice President of Brand
Management of our company and was to be paid $4,000 per month and to receive an option to purchase 50,000 shares of our common stock
that was to vest quarterly over the term of the agreement. In the complaint, the plaintiff alleged that, on or around March 27, 2020,
the Company ceased paying the plaintiff despite the plaintiff’s continuing efforts on behalf of our company and that the Company agreed to continue
to accrue his monthly retainer amount until such time that the Company received at least $100,000 in funding. Plaintiff further alleged that he
continued to work for our company for 38 additional weeks in reliance on our promise of payment. The plaintiff claimed that our refusal
to make the promised payments amounts to violations of the California labor laws and seeks damages in excess of $450,000.
On
June 9, 2022, a Settlement Agreement and Mutual Release was reached by the parties whereby as full consideration for the plaintiff’s
execution of and compliance with the agreement and plaintiff’s release of all claims against the defendants, the Company agreed
to pay a gross settlement amount of $90,000. Such payment was made on June 23, 2022.
Note
7 – Stockholders Deficit
STOCKHOLDERS DEFICIT
Restricted
Common Stock Awards
On
August 17, 2021, the Company entered into Restricted Share Award Agreements (the “Award Agreements”) with two consultants
pursuant to which the Company issued to the consultants shares of common stock of the Company in exchange for their future services.
The Awards had an initial term of one year, which was to be automatically renewed on a year-to-year basis unless either party gave a
written notice of termination. The two consultants who entered into these agreements include:
|
1) |
A
consultant who was granted 10,000,000 restricted share awards. |
|
2) |
An
entity, which is owned by the Company’s CEO and majority shareholder, was granted 1,500,000 restricted share awards. |
The Company’s management accounted for the Award Grants as restricted
stock compensation in accordance with ASC 718 – Stock Compensation (“ASC 718”). ASC 718 required the Company to estimate
the service period over which the compensation cost would be recognized. Management had estimated that the first two development phases
would be completed within 15 months and the Foundry Mask would be completed within 6 months for a total of 21 months service period. Compensation
cost was to be recognized ratably over 21 months and in the same manner had the Company paid in cash. The estimated service period would
be adjusted for changes in actual and expected completion dates. Any such change was to be recognized prospectively, and the remaining
deferred compensation was to be recognized over the remaining service period.
The
Company issued restricted stock grants totaling 10,000,000
shares to Hyuncheol (Peter) Kim, the Company’s former Chief Technology Officer, and 1,500,000
to a M1 Advisors LLC, a company owned by the Company’s chief executive officer. The value was $1.93
per share on the date of issuance (“Grant Date”) for an aggregate fair value of $22,195,000
The
stock-based award compensation was recorded as an increase in deferred compensation expense, common stock, and additional paid-in capital
in the Company’s books at the time of the grant.
On
July 27, 2022, the Company sent Hyuncheol (Peter) Kim, the Company’s former Chief Technology Officer, a letter notifying him
that the Company’s Board of Directors had resolved to discontinue the Company’s 5 nanometer ASIC chip and bitcoin mining
machine project and that his consulting agreement will terminate at the end of August 2022. The restricted stock grant issued in
connection with the consulting agreement will also be cancelled.
Also,
at the end of August 2022, the Company cancelled the restricted stock grant issued to M1 Advisors LLC.
The
table below summarizes the transactions related to the Company restricted stock awards as of September 30, 2022:
SCHEDULE OF COMPANY RESTRICTED STOCK AWARDS
| |
Shares | | |
Deferred compensation | |
Grant date fair value | |
| 11,500,000 | | |
$ | 22,195,000 | |
Accretion | |
| - | | |
| (11,168,000 | ) |
Forfeiture | |
| (11,500,000 | ) | |
| (11,027,000 | ) |
Balance as of September 30, 2022 | |
| - | | |
$ | - | |
Restricted
stock grant compensation expense for the three and nine months ended September 30, 2022, is as follows:
SCHEDULE
OF RESTRICTED STOCK GRANT COMPENSATION EXPENSE
| |
Three months
ended | | |
Nine months
ended | |
| |
September 30,
2022 | | |
September 30,
2022 | |
2022 Accretion expense | |
$ | - | | |
$ | 6,377,000 | |
Reversal of 2021 accretion expense | |
| (4,791,000 | ) | |
| (4,791,000 | ) |
Reversal of 2022 accretion expense | |
| (6,377,000 | ) | |
| (6,377,000 | ) |
Restricted stock grant compensation | |
$ | (11,168,000 | ) | |
$ | (4,791,000 | ) |
Warrants
Expired
As
of September 30, 2022, a total of 253,000 warrants expired.
Note
8 – Earnings (Loss) Per Share
EARNINGS
(LOSS) PER SHARE
The
following table sets forth the computation of basic and diluted earnings (loss) per share
SCHEDULE
OF EARNINGS PER SHARE BASIC AND DILUTED
Numerator | |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| |
For the three Months Ended September 30, | | |
For the Nine Months Ended September 30, | |
Numerator | |
2022 | | |
2021 | | |
2022 | | |
2021 | |
Net income (loss) | |
$ | 10,500,000 | | |
$ | (2,063,000 | ) | |
$ | 2,399,000 | | |
$ | (2,813,000 | ) |
Effect of dilutive instruments | |
| | | |
| | | |
| | | |
| | |
Convertible notes interest expense | |
| 51,000 | | |
| - | | |
| 88,000 | | |
| - | |
Numerator for diluted EPS | |
| 10,551,000 | | |
| (2,063,000 | ) | |
| 2,487,000 | | |
| (2,813,000 | ) |
| |
| | | |
| | | |
| | | |
| | |
Denominator | |
| | | |
| | | |
| | | |
| | |
Denominator - for basic EPS | |
| 14,176,349 | | |
| 17,602,886 | | |
| 24,769,518 | | |
| 17,282,889 | |
| |
| | | |
| | | |
| | | |
| | |
Effect of dilutive instruments | |
| | | |
| | | |
| | | |
| | |
Warrants | |
| 748,432 | | |
| - | | |
| 748,432 | | |
| - | |
Convertible notes | |
| 4,028,844 | | |
| - | | |
| 4,028,844 | | |
| - | |
Dilutive potential common shares | |
| 4,777,276 | | |
| - | | |
| 4,777,276 | | |
| - | |
| |
| | | |
| | | |
| | | |
| | |
Denominator for diluted EPS | |
| 18,953,625 | | |
| 17,602,886 | | |
| 29,546,794 | | |
| 17,282,889 | |
| |
| | | |
| | | |
| | | |
| | |
Basic EPS | |
$ | 0.74 | | |
$ | (0.12 | ) | |
$ | 0.10 | | |
$ | (0.16 | ) |
Diluted EPS | |
$ | 0.56 | | |
$ | (0.12 | ) | |
$ | 0.08 | | |
$ | (0.16 | ) |
Securities
that could potentially dilute loss per share in the future were not included in the computation of diluted loss per share for the
three and nine months ended September 30, 2021 because their inclusion would be anti-dilutive. Common share equivalents amounted to 3,942,608
for warrants, 4,612,607
for convertible notes and 11,500,000
for restricted stock units for total of 20,055,215
as of September 30, 2021. For the three and nine months ended September 30, 2022, the Company had
4,777,276 dilutive securities.
Note
9 – Subsequent Events
SUBSEQUENT EVENTS
The
Company has evaluated all events that occurred after the balance sheet date through the date when the financial statements were issued
to determine if they must be reported. The management of the Company determined there are no reportable events.