BUUZ CalEthos Inc (PK)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2023

 

☐	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. 000-50331

 

CalEthos, Inc.

(Exact name of registrant as specified in its charter)

 

Nevada		98-0371433
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
11753 Willard Avenue Tustin, California		92782
(Address of Principal Executive Offices)		(Zip Code)

 

(714) 352-5315

(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. Yes ☒ No ☐

 

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). Yes ☒ No ☐

 

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

 

☐	Large accelerated filer	☐	Accelerated filer
☒	Non-accelerated filer	☒	Smaller reporting company
		☐	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 August 14, 2023, there were 14,495,621 outstanding shares of the registrant’s common stock, par value $0.001 per share.

 

 

 

TABLE OF CONTENTS

 

		PAGE
Cautionary Note Regarding Forward Looking Statements		iii
PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)
	Condensed Consolidated Balance Sheets as of June 30, 2023 (unaudited) and December 31, 2022	1
	Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2023 and 2022 (unaudited)	2
	Condensed Consolidated Statements of Changes in Stockholders’ Deficit for the three and six months ended June 30, 2023 and 2022 (unaudited).	3
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2023 and 2022 (unaudited)	4
	Notes to the Interim Unaudited Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	14
Item 4.	Controls and Procedures	15
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	16
Item 1A.	Risk Factors	16
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	16
Item 3.	Default Upon Senior Securities	16
Item 4.	Mine Safety Disclosures	16
Item 5.	Other Information	16
Item 6.	Exhibits	16
	Signatures	17

 

 

PART I - FINANCIAL INFORMATION

 

Item 1: Financial Statements

 

CalEthos, Inc.

For the Six Months Ended June 30, 2023

 

Index to the Condensed Consolidated Financial Statements

 

Contents	Page (s)
Condensed Consolidated Balance Sheets as of June 30, 2023 (unaudited) and December 31, 2022	1
Unaudited Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2023 and 2022	2
Unaudited Condensed Consolidated Statements of Stockholders’ Deficit for the three and six months ended June 30, 2023 and 2022	3
Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2023 and 2022	4
Notes to the Unaudited Condensed Consolidated Financial Statements	5

 

 

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, may address or relate to future events and expectations and, as such, constitutes “forward-looking statements” within the meaning of the Private Securities Litigation Act of 1995. Statements which are not historical reflect our current expectations and projections about our future results, performance, liquidity, financial condition, prospects and opportunities and are based upon information currently available to us and our management and their interpretation of what is believed to be significant factors affecting our business, including many assumptions regarding future events. Such forward-looking statements include statements regarding, among other things:

 

	●	our ability to implement our current stated business plans;
	●	our ability to retain key members of our management team;
	●	our future financing or acquisition plans and our ability to consummate any such transactions on favorable terms if at all;
	●	our anticipated needs for working capital; and
	●	our ability to establish a market for our common stock and operate as a public company.

 

Forward-looking statements, which involve assumptions and describe our future plans, strategies, and expectations, are generally identifiable by use of the words “may,” “should,” “would,” “could,” “scheduled,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” “seek,” or “project” or the negative of these words or other variations on these words or comparable terminology. Actual results, performance, liquidity, financial condition and results of operations, prospects and opportunities could differ materially and perhaps substantially from those expressed in, or implied by, these forward-looking statements as a result of various risks, uncertainties and other factors.

 

Readers should not place undue reliance on any forward-looking statements. Except as expressly required by the federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason.

 

 

CalEthos, Inc.

Condensed Consolidated Balance Sheets

 

		As of June 30, 2023				As of December 31,2022
		(Unaudited)
Assets
Current assets
Cash and cash equivalents		$	1,707,000			$	2,067,000
Prepaid and other current assets			10,000				4,000
Total current assets			1,717,000				2,071,000
Data center costs			233,000				-
Total assets		$	1,950,000			$	2,071,000
Liabilities and stockholders’ deficit
Current liabilities
Accounts payable and accrued expenses		$	808,000			$	540,000
Convertible promissory notes, net			4,613,000				4,613,000
Notes payable			61,000				61,000
Total current liabilities			5,482,000				5,214,000
Stockholders’ deficit
Series A convertible preferred stock, par value $0.001, 3,600,000 shares authorized; no shares issued and outstanding			-				-
Preferred stock, par value $0.001, 100,000,000 shares authorized; no shares issued and outstanding			-				-
Preferred stock, value			-				-
Common stock par value $0.001: 100,000,000 shares authorized; 14,495,621 and 24,495,621 shares issued and outstanding			14,000				24,000
Additional paid-in capital			11,514,000				11,480,000
Other comprehensive income			8,000				5,000
Stock subscription receivable			(2,000	)			(2,000	)
Accumulated deficit			(15,066,000	)			(14,650,000	)
Total stockholders’ deficit			(3,532,000	)			(3,143,000	)
Total liabilities and stockholders’ deficit		$	1,950,000			$	2,071,000

 

See accompanying notes to these Unaudited Condensed Consolidated Financial Statements.

 

 

CalEthos, Inc.

Unaudited Condensed Consolidated Statements of Operations

 

		2023				2022				2023				2022
		For the three months ended June 30,								For the six months ended June 30,
		2023				2022				2023				2022
Revenues		$	-			$	-			$	-			$	-
Operating Expenses
Professional fees			97,000				177,000				186,000				422,000
Equity-based compensation			24,000				3,206,000				24,000				6,376,000
General and administrative expenses			33,000				31,000				41,000				35,000
Impairment loss			-				154,000				-				154,000
Operating expense			154,000				3,568,000				251,000				6,987,000
Loss from operations			(154,000	)			(3,568,000	)			(251,000	)			(6,987,000	)
Other income (expenses)
Interest income			17,000				-				31,000				-
Gain on settlement of accounts payable			23,000				-				23,000				-
Financing costs			(103,000	)			(606,000	)			(219,000	)			(1,113,000	)
Total other expenses			(63,000	)			(606,000	)			(165,000	)			(1,113,000	)
Loss before provision for income taxes			(217,000	)			(4,174,000	)			(416,000	)			(8,100,000	)
Provision for income taxes			-				-				-				-
Net loss			(217,000	)			(4,174,000	)			(416,000	)			(8,100,000	)
Comprehensive loss
Foreign currency translation loss			1,000				2,000				3,000				(1,000	)
Comprehensive loss		$	(216,000	)		$	(4,172,000	)		$	(413,000	)		$	(8,101,000	)
Net loss per share - basic & diluted		$	(0.01	)		$	(0.16	)		$	(0.02	)		$	(0.31	)
Weighted average common shares outstanding - basic and diluted			14,495,621				25,995,621				14,495,621				25,995,621

 

See accompanying notes to these Unaudited Condensed Consolidated Financial Statements.

 

 

CalEthos, Inc.

Unaudited Condensed Consolidated Statements of Stockholders’ Deficit

For the Three and Six Months Ended June 30, 2023 and 2022

 

		Shares				Amount				Shares				Amount				Shares				Amount				Capital				Receivable				Income (Loss)				Deficit				(Deficit)
		Series A convertible preferred stock								Preferred Stock								Common Stock								Additional Paid-in				Stock Subscription				Other Comprehensive				Accumulated				Total Stockholders’
		Shares				Amount				Shares				Amount				Shares				Amount				Capital				Receivable				Income (Loss)				Deficit				(Deficit)
Balance, January 1, 2023			-			$	-				-			$	-				24,495,621			$	24,000			$	11,480,000			$	(2,000	)		$	5,000			$	(14,650,000	)		$	(3,143,000	)
Foreign currency translation income			-				-				-				-				-				-				-				-				2,000				-				2,000
Net loss			-				-				-				-				-				-				-				-				-				(199,000	)			(199,000	)
Balance March 31, 2023			-				-				-				-				24,495,621				24,000				11,480,000				(2,000	)			7,000				(14,849,000	)			(3,340,000	)
Fair value of equity-based compensation																											24,000																24,000
Cancellation of shares																			(10,000,000	)			(10,000	)			10,000																-
Foreign currency translation income			-				-				-				-				-				-				-				-				1,000				-				1,000
Net loss			-				-				-				-				-				-				-				-				-				(217,000	)			(217,000	)
Balance, June 30, 2023			-			$	-				-			$	-				14,495,621			$	14,000			$	11,514,000			$	(2,000	)		$	8,000			$	(15,066,000	)		$	(3,532,000	)
Balance, January 1, 2022			-			$	-				-			$	-				25,995,621			$	26,000			$	16,269,000			$	(2,000	)		$	(2,000	)		$	(16,831,000	)		$	(540,000	)
Equity-based compensation on restricted stock awards			-				-				-				-				-				-				3,170,000				-				-				-				3,170,000
Foreign currency translation loss			-				-				-				-				-				-				-				-				(3,000	)			-				(3,000	)
Net loss			-				-				-				-				-				-				-				-				-				(3,926,000	)			(3,926,000	)
Balance March 31, 2022			-				-				-				-				25,995,621				26,000				19,439,000				(2,000	)			(5,000	)			(20,757,000	)			(1,299,000	)
Equity-based compensation on restricted stock awards			-				-				-				-				-				-				3,206,000				-				-				-				3,206,000
Foreign currency translation income			-				-				-				-				-				-				-				-				2,000				-				2,000
Net loss			-				-				-				-				-				-				-				-				-				(4,174,000	)			(4,174,000	)
Balance, June 30, 2022			-			$	-				-			$	-				25,995,621			$	26,000			$	22,645,000			$	(2,000	)		$	(3,000	)		$	(24,931,000	)		$	(2,265,000	)

 

See accompanying notes to these Unaudited Condensed Consolidated Financial Statements.

 

 

CalEthos, Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

For the Six Months Ended June 30,

 

		2023				2022
Cash Flows From Operating Activities
Net loss		$	(416,000	)		$	(8,100,000	)
Adjustments to reconcile net loss to net cash used in operating activities:
Impairment			-				154,000
Amortization of convertible promissory note discounts			-				1,071,000
Fair value of equity-based compensation			24,000				6,376,000
Gain on settlement of accounts payable			(23,000	)			-
Changes in operating assets and liabilities
Prepaid expenses and other current assets			(6,000	)			(6,000	)
Accounts payable and accrued expenses			243,000				(8,000	)
Net Cash Used in Operating Activities			(178,000	)			(513,000	)
Cash Flows From Investing Activities
Data center costs			(184,000	)			-
Other assets			-				(107,000	)
Net Cash Used in Investing Activities			(184,000	)			(107,000	)
Cash Flows From Financing Activities
Repayments of Notes			-				(25,000	)
Net Cash Used in Financing Activities			-				(25,000	)
Effect of exchange rate changes on cash and cash equivalents			2,000				(1,000	)
Net decrease in Cash			(360,000	)			(646,000	)
Cash, Beginning of Period			2,067,000				3,047,000
Cash, End of Period		$	1,707,000			$	2,401,000
Supplemental disclosure of cash flow information:
Cash paid for interest		$	-			$	-
Cash paid for income taxes		$	-			$	-
Non-cash investing and financing activities - none			-				-
Accrued interest capitalized as data center cost		$	14,000			$	-

 

See accompanying notes to these Unaudited Condensed Consolidated Financial Statements.

 

 

CalEthos, Inc.

Notes to the Unaudited Condensed Consolidated Financial Statements

June 30, 2023

 

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 data center operation using the latest energy-efficient building materials and cooling technologies and to provide wholesale colocation 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 invest in or joint venture with other more-established companies already in the industry that would add value to the Company’s business strategy.

 

As of July 2022, the Company’s board of directors resolved to focus exclusively on developing a clean-energy-powered data center.

 

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 June 30, 2023 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 six-month periods ended June 30, 2023 and 2022. The results for the six months ended June 30, 2023 are not necessarily indicative of the results to be expected for the full year ending December 31, 2023 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, 2022, included in the Company’s annual report on Form 10-K filed with the SEC on April 17, 2023.

 

Liquidity and Going Concern

 

The Company incurred a net loss of approximately $416,000 for the six months ended June 30, 2023 and had an accumulated deficit of approximately $15,066,000 as of June 30, 2023. 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. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for one year from the issuance of these condensed consolidated financial statements.

 

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.

 

5

 

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 the development of its data center campus development, approvals for construction permits, construction times, delivery of critical equipment, market demand for the Company’s wholesale colocation data center services, the timing of customer commitments for data center space, the management of working capital, and payment terms and conditions for purchase of the Company’s 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 raise additional funding from investors or through other avenues, it may not be able to continue as a going concern. The accompanying unaudited condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable 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

 

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 three and six months ended June 30, 2023 and 2022 because their inclusion would be anti-dilutive. Common share equivalents amounted to 6,000,250 as of June 30, 2023.

 

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 – Data Center Costs

 

 DATA CENTER COSTS

On March 30, 2023, the Company signed an option agreement to acquire 80 acres of commercially-zoned land in Imperial County, California (the “Option”) for $3,360,000 (“Purchase Price”). The Option expires in September 2024. The Company paid a non-refundable deposit of $84,000 on the signing of the Option, which has been recognized as other assets in the condensed consolidated balance sheet. The Company is required to deposit an additional $84,000 into escrow (“Escrow Funds”) within 10 days after the execution of the purchase agreement. As of the issuance of these interim condensed consolidated financial statements, the escrow had not been set up. Once the escrow is set up, the Company will deposit the $84,000. If the Company does not exercise the Option by September 2024, the Escrow funds will be returned to the Company.

 

6

 

The Purchase Price is payable with a cash payment of $1,680,000 and the issuance of 840,000 shares of the Company’s common stock (the “Purchase Shares”). At the closing of the purchase (“Closing Date”), if the stock is trading at a value less than $1.00 per share, the Company is required to issue a promissory note in the amount of $840,000, payable on the third anniversary of the closing date, with an interest rate equal to the Secured Overnight Financing Rate plus 2.0%.

 

If the Purchase Shares are issued at the Closing Date, the Company has agreed to repurchase the Purchase Shares (the “Put Option”) under specific circumstances. However, the Put Option expires if the Company’s common stock trades above $2.00 per share for 120 consecutive days. If the Company’s common stock trades below $2.00 per share for 10 consecutive days, the Holder has the option for the Company to repurchase the Purchase Shares for $2.00 per share.

 

As of June 30, 2023, the Company has incurred and capitalized approximately $135,000 of cost for the development of the Data Center and capitalized approximately $14,000 of interest expense from the convertible promissory notes.

 

On June 23, 2023, the Company signed a contract with HDR Engineering, Inc. to provide site assessment and feasibility to connect critical resources for data center operations and develop a shovel-ready development plan for the Company’s initial 80-acre site. The Company plans to complete this development phase by the end of the third quarter of 2023 and the estimated cost to be approximately $500,000.

 

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

		June 30,				December 31,
		2023				2022
Accounts payable		$	231,000			$	186,000
Accrued expenses			19,000				28,000
Accrued interest			558,000				326,000
Accounts payable and accrued expenses		$	808,000			$	540,000

 

Accrued Interest

 

The following table presents the details of accrued interest as of the dates indicated:

 

SCHEDULE OF ACCRUED INTEREST

		June 30,				December 31,
		2023				2022
Notes payable		$	21,000			$	17,000
Convertible promissory notes			537,000				309,000
Balance, end of the year		$	558,000			$	326,000

 

Note 4 – Notes Payable

 

NOTES PAYABLE

The table below summarizes the transactions as of the dates indicated:

 

SCHEDULE OF NOTES PAYABLE

		June 30,				December 31,
		2023				2022
Balance, beginning of the year		$	61,000			$	61,000
Additions			–				–
Payments			–				–
Balance, end of the year		$	61,000			$	61,000

 

7

 

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 a 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 and interest amount outstanding under this note was $11,000 and $3,000, respectively, as of June 30, 2023.

 

On April 22, 2021, the Company issued a promissory note in the principal amount of $50,000. 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 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 and interest amount outstanding under this note was $50,000 and $14,000, respectively, as of June 30, 2023.

 

Interest expense on these notes payable amounted to $6,000 and $6,000 for the six months ended June 30, 2023 and June 30, 2022, respectively.

 

Note 5 – Convertible Promissory Notes

 

CONVERTIBLE PROMISSORY NOTES

Convertible promissory notes consisted of the following as of the dates indicated:

 

SCHEDULE OF CONVERTIBLE PROMISSORY NOTES

		June 30,				December 31,
		2023				2022
Principal
Balance, beginning of year		$	4,613,000			$	4,613,000
Additions			–				–
Balance, end of year			4,613,000				4,613,000
Discount
Balance, beginning of year			–				1,526,000
Additions			–				–
Amortization			–				(1,526,000	)
Balance, end of year			–				–
Net carrying amount		$	4,613,000			$	4,613,000

 

The effective interest rate used to amortize the debt discount for the six months ended June 30, 2022 ranged 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

		June 30,				December 31,
		2023				2022
Principal		$	4,613,000			$	4,613,000
Interest			538,000				309,000
Total			5,151,000				4,922,000
Conversion price per share			1.00 – 1.25				1.00 – 1.25
Potential future share			4,220,448				4,125,699

 

Interest expense on default convertible promissory notes amounted to $229,000 for the six months ended June 30, 2023, of which $14,000 was capitalized as data center cost. The interest expense and amortization of discount on default convertible promissory notes amounted to $37,000 and $1,071,000, respectively, for the six months ended June 30, 2022.

 

8

 

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. 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.

 

Employment Agreement

 

In June 2023, the Company executed an employment agreement (“Employment Agreement”) to employ an individual to be the Company’s President and Chief Operating Officer (“Executive”). As compensation for services rendered, the Executive will be paid a base salary of $250,000 per annum. The Executive’s base salary may be increased as certain milestones are met, such as 1) when the necessary governmental permits are granted to start construction of the Data Center, 2) once the Data Center is operational and at least 25% of the planned MW’s of collation capacity is leased. Also, at the discretion of the Company, following each calendar year of continued employment, the Executive shall be eligible to receive a discretionary bonus of up to fifty percent ( 50%) of Executive’s Base Salary during the first year of employment, up to seventy-five percent (75%) of Executive’s then-current Base Salary during the second year of employment, and up to one-hundred percent (100%) of Executive’s then-current Base Salary during Executive’s third year of employment (the “Bonus”). Payment of the Bonus will be based on achieving certain goals and performance criteria established by the Company. In addition, the Executive was granted options to purchase 600,000 and 1,900,000 shares of the Company’s common stock (see Note 7 – Stockholders Deficit) for further information.

 

The Employment Agreement also provides for certain severance benefits upon termination by the Company without “cause” or by the Executive for good reason. In the event of a termination by the Company without cause or by the Executive for good reason after the first full year of employment, the Executive would be entitled to (i) continued payment of the base salary for the lesser of six months or the remaining term of the Employment Agreement, subject to the Executive signing a timely and effective separation agreement containing a release of all claims against the Company and other customary terms; provided, however, that if such termination is between the 91^st day and the end of the first year of employment, the Executive will be entitled to a pro-rata portion of such payment.

 

Note 7 – Stockholders Deficit

 

STOCKHOLDERS DEFICIT

Stock options

 

As part of the Employment Agreement, as defined in Note 6 – Commitments and Contingencies, the executive was granted an incentive stock option (“Incentive Option”) and a non-qualified stock option (“Non-Qual Option”) (collectively “Stock Options”) to purchase 600,000 and 1,900,000, respectively, shares of the Company’s common stock for $0.50 per share. The Stock Options are exercisable for a period of seven years from the date of grant, which was June 19, 2023 (“Grant Date”).

 

The Incentive Option shall vest and become exercisable as follows: (i) options to purchase up to 200,000 shares of Common Stock shall vest and become exercisable on the first anniversary of the Grant Date; (ii) options to purchase up to 200,000 shares of Common Stock shall vest and become exercisable on the second anniversary of the Grant Date; and (iii) options to purchase up to 200,000 shares of Common Stock shall vest and become exercisable on the third anniversary of the Grant Date; provided that the Optionee is an employee in good standing with the Company on such applicable vesting date. The Incentive Option Grant Date fair value of $600,000 was calculated using the Black Scholes fair value option-pricing model with key input variables provided by management, as of the date of issuance: volatility of 339%, the fair value of common stock $0.50, estimated life of 5 years, risk-free rate of 3.99% and dividend rate of $0. For the three months ended June 30, 2023, the Company recorded compensation expenses of approximately $6,000.

 

9

 

The Non-Qual Option shall vest and become exercisable as follows:

 

	(1)	216,666 Shares on each of the first two anniversaries of the Grant Date and 216,668 shares on the third anniversary of the Grant Date, provided that the Optionee is an employee or Board member in good standing with the Company on such applicable vesting date.
	(2)	the remaining 1,250,000 shares based on the Company completing the following milestones:

 

	a.	250,000 shares upon completion of the initial site development plan and Data Center design, and submission of a complete set of plans to Imperial County Planning and Development Department for approvals and permits.
	b.	250,000 shares upon the Company receiving permits necessary to start construction of the data center site and facilities (including but not limited to power substation, water delivery, pumping, storage and on-site distribution systems, fiber conduit lines and communications systems, and on-site roads, water, power and communications grid, warehousing, offices, administration, support and security buildings, perimeter walls and security systems).
	c.	250,000 shares upon the completion of construction of a complete data center facility and receipt of an occupancy permit for such facility, either for a Data Center facility to be built as a “build to suit” building for a hyperscale company or as a wholesale colocation building for enterprise IT customers.
	d.	500,000 shares upon signing a build-to-suit contract or one or more contracts being signed for 50% or more of a constructed and operational wholesale colocation facility’s capacity.

 

The Company’s management has accounted for the Non-Qual Option in accordance with ASC 718 – Stock Compensation (“ASC 718”). ASC 718 requires the Company to estimate the service period over which the compensation cost will be recognized. Management has estimated that the first development phase (a) will be completed by March 31, 2024, the second development phase (b) by September 30, 2024, the third development phase (c) by March 31, 2025 and the fourth development phase by September 30, 2025. 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 Non-Qual Option Grant Date fair value of $550,000 was calculated using the Black Scholes fair value option-pricing model with key input variables provided by management, as of the date of issuance: volatility range of 137% to 176%, the fair value of common stock $0.50, estimated life range of 3.9 years to 4.5 years, risk-free rate range of 4.7% to 5.2% and dividend rate of $0. For the three months ended June 30, 2023, the Company recorded compensation expenses of approximately $18,000.

 

As of June 30, 2023, the Company had 2,500,000 stock options outstanding, of which all were unvested, with weighted average remaining life, strike price and grant date fair value of 7 years, $0.50 and $0.47, respectively, and intrinsic value of nil.

 

Warrants

 

During the six months ending June 30, 2023, 84,304 warrants expired. As of June 30, 2023, the remaining outstanding balance of warrants is 1,684,000, with a weighted average exercise price of $1.84, average remaining life of 0.46 years, weighed average grant date fair value of approximately $0.47

 

Note 8 – 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.

 

 

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, 2022.

 

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

 

As of the filing of this Report, it is our plan to continue our focus on building a large-scale, clean-energy-powered, data center operation using the latest energy-efficient cooling technologies and to provide wholesale colocation services to enterprise IT and hyperscale customers. To implement this plan, we have optioned 80 acres of land for the initial phase of development and contracted HDR Engineering, Inc., a data center architect and engineering firm (“HDR”) to provide master planning services that include site feasibility and a shovel-ready site development plan. In addition, we are having on-going discussions and negotiations to acquire clean energy from the local power utility and nearby geothermal power plants and solar farms and contracting a network engineering firm to evaluate and engineer various paths to run conduit for accessing close-by internet fiber networks.

 

On June 23, 2023 we engaged HDR to complete a feasibility study and site development master plan. Once the plan is developed, we will submit plans to authorities for approval and for permits to start construction. We expect, based on all related factors, that a submittable plan, which will include civil engineering, data center and infrastructure design and construction schedule, will take approximately three to six months to complete. Once submitted to the appropriate governmental departments and agencies for approval, it is expected that it could take another three months or more before we receive the required permits to start construction, and that the construction could take another six to twelve months to complete depending on supply chain issues at the time for data center, electrical and communication connectivity components of the data center build.

 

As we move through the development process to build a clean-energy powered data center operation, we will continue to refine and finalize the courses of action needed to implement our business plan and operations. As a result, management has not fully determined our actual short-term or long-term capital requirements, which management expects to be substantial.

 

It is anticipated that we will incur significant expenses in the implementation of our business plan as described herein, and that we will require substantial financing to complete the development and construction of the planned data center operation. A failure to obtain this necessary capital when required on acceptable terms, or at all, could force us to delay, limit, reduce, or terminate our development plans, any commercialization efforts and any 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. In addition, we 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 funding, however, may not be available when required 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 it is required, our ability to commence and grow our proposed business operations, to support our business and to respond to business challenges could be significantly limited.

 

We currently have only limited capital with which to pay these anticipated expenses. To fund our business plan going forward, we intend to raise funds from investors by issuing common stock, preferred stock and/or debt securities.

 

 

Results of Operations

 

The table summarizes the results of operations for the three and six months ended June 30:

 

		For the Three Months Ended June 30,								For the Six Months Ended June 30,
		2023				2022				2023				2022
Revenues		$	-			$	-			$	-			$	-
Operating expenses
Professional fees			97,000				177,000				186,000				422,000
Equity-based compensation			24,000				3,206,000				24,000				6,376,000
General and administrative expenses			33,000				31,000				41,000				35,000
Impairment loss			-				154,000				-				154,000
Total operating expenses			154,000				3,568,000				251,000				6,987,000
Loss from operations			(154,000	)			(3,568,000	)			(251,000	)			(6,987,000	)
Other income (expenses)
Interest income			17,000				-				31,000				-
Gain on settlement of debt			23,000				-				23,000				-
Financing costs			(103,000	)			(606,000	)			(219,000	)			(1,113,000	)
Total other expenses			(63,000	)			(606,000	)			(165,000	)			(1,113,000	)
Loss before provision for income taxes			(217,000	)			(4,174,000	)			(416,000	)			(8,100,000	)
Provision for income taxes			-				-				-				-
Net loss		$	(217,000	)		$	(4,174,000	)		$	(416,000	)		$	(8,100,000	)

 

Revenues

 

The Company had no revenues for the three and six months ended June 30, 2023 and 2022.

 

Expenses

 

Operating expenses for the three and six months ended June 30, 2023 were $154,000 and $251,000, respectively, compared to $3,568,000 and $6,987,000 for the three and six months ended June 30, 2022, respectively. The decrease in both the three and six month June 30, 2023 operating expenses was attributable to both the decline in our professional fees and equity-based compensation.

 

Liquidity and Capital Resources

 

The Company’s financial position as of June 30, 2023 and December 31, 2022 were as follows:

 

Working Capital Deficit

 

		June 30, 2023				December 31, 2022
		(Unaudited)
Current assets		$	1,717,000			$	2,071,000
Current liabilities			5,482,000				5,214,000
Working capital deficit		$	(3,765,000	)		$	(3,143,000	)

 

The Company’s working capital deficit increased by $622,000 as of June 30, 2023 from $3,143,000 as of December 31, 2022. The decline was due to the use of approximately $178,000 for operating expenses and $184,000 for data center development costs, and the increase in our accounts payable and accrued expense of approximately $268,000.

 

 

Cash Flows

 

		For the Six Months Ended June 30,
		2023				2022
Net cash used in operating activities		$	(178,000	)		$	(513,000	)
Net cash used in investing activities			(184,000	)			(107,000	)
Net cash provided by (used in) financing activities			-				(25,000	)
Effect of exchange rate changes			2,000				(1,000	)
Increase (decrease) in Cash during the Period			(360,000	)			(646,000	)
Cash, Beginning of Period			2,067,000				3,047,000
Cash, End of Period		$	1,707,000			$	2,401,000

 

Cash flows used in operating activities

 

Net cash used in operating activities decreased by $335,000 during the six months ended June 30, 2023 from $513,000 for six months ended June 30, 2022. The decrease resulted from the reduction in our operating expense related to professional fees during the six months ended June 30, 2023.

 

Cash flows used in investing activity

 

Net cash used in investing activity increased by $77,000 during the six months ended June 30, 2023 from $107,000 for the six months ended June 30, 2022. The increase resulted from the expenditures during the six months ended June 30, 2023 for the development activities for our data center project.

 

Cash flows used in financing activities

 

Net cash used in financing activities decreased by $25,000 during the six months ended June 30, 2023 as compared to $25,000 for the six months ended June 30, 2022. The decrease resulted from our not making any repayments of our outstanding notes payable.

 

Capital Requirements

 

We estimate that we will require up to $2 million for expenses and operating costs to complete the development of a comprehensive plan for our planned clean-energy powered, containerized, immersion-cooled data center operation. Once the plans are approved for construction by the requisite authorities, we estimate the initial phase of our planned data center operation will cost between $60 to $75 million to build.

 

Past the plan development phase, we will need to raise capital in order to build our planned operations and achieve our growth targets, which we plan to raise from investors by issuing common stock, preferred stock and/or debt securities. However, there can be no assurance that such financing will be available in sufficient amounts and on acceptable terms when it is needed. The precise amount and timing of our funding needs cannot be determined accurately at this time, and will depend on a number of factors, including but not limited to the condition of the capital market, investor interest in our business plan, demand for our services by enterprise customers, the timing of approvals from authorities to start construction, the management of working capital, and reasonable payment terms and conditions for the purchase of the goods and services we will need to build our data center operation.

 

Critical Accounting Policies

 

The preparation of condensed consolidated financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated 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 its 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 foreign subsidiary, 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.

 

Debt and Debt Discounts

 

In accordance with ASC 470-20, Debt with Conversion and Other Options, we first allocate the cash proceeds of the notes between the notes and the warrants on a relative fair value basis. Secondly, 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 consolidated 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.

 

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 it 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

 

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.

 

Off-Balance Sheet Arrangements

 

As of June 30, 2023, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K.

 

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 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 June 30, 2023, our disclosure controls and procedures were not effective.

 

The material weakness related to internal control over financial reporting that was identified at June 30, 2022 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 June 30, 2023 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.

 

 

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 period covered by this report that would be required to be disclosed pursuant to Item 701 of Regulation S-K.

 

Repurchases of Shares or of Company Equity Securities

 

None.

 

Item 3. Default Upon Senior Securities

 

As of June 30, 2023, we had notes payable of $61,000, convertible promissory notes payable of $4,613,000 and accrued interest of $558,000, all of which were past due and all of which were in default. See Notes 4 and 5 to our accompanying unaudited condensed consolidated financial statements.

 

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:

 

Exhibit Number		Description
31.1		Certification of the Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification of the Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certifications of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certifications of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		Inline XBRL Instance Document.
101.SCH		Inline XBRL Taxonomy Extension Schema Document.
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

 

 

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: August 14, 2023	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

 

 

 

Exhibit 31.1

 

Certification of Chief Executive Officer

Pursuant to Rule 13a-14(a)

 

I, Michael Campbell, certify that:

 

1. I have reviewed this Quarterly Report on Form 10-Q of CalEthos, Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: August 14, 2023

 

By:	/s/ Michael Campbell
Name:	Michael Campbell
Title:	Chief Executive Officer

 

 

 

Exhibit 31.2

 

Certification of Principal Financial Officer

Pursuant to Rule 13a-14(a)

 

I, Dean S Skupen, certify that:

 

1. I have reviewed this Quarterly Report on Form 10-Q of CalEthos, Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: August 14, 2023

 

By:	/s/ Dean S Skupen
Name:	Dean S Skupen
Title:	Chief Financial Officer

 

 

 

 

Exhibit 32.1

 

CALETHOS, INC.

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of CalEthos, Inc. (the “Company”) on Form 10-Q for the period ending June 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael Campbell, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

 

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

 

By:	/s/ Michael Campbell
Name:	Michael Campbell
Title:	Chief Executive Officer

 

Date: August 14, 2023

 

 

 

 

Exhibit 32.2

 

CALETHOS, INC.

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of CalEthos, Inc. (the “Company”) on Form 10-Q for the period ending June 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Dean S Skupen, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

 

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

 

By:	/s/ Dean S Skupen
Name:	Dean S Skupen
Title:	Chief Financial Officer

 

Date: August 14, 2023

 

 

v3.23.2

Cover - shares	6 Months Ended
	Jun. 30, 2023	Aug. 14, 2023
Cover [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Quarterly Report	true
Document Transition Report	false
Document Period End Date	Jun. 30, 2023
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2023
Current Fiscal Year End Date	--12-31
Entity File Number	000-50331
Entity Registrant Name	CalEthos, Inc.
Entity Central Index Key	0001174891
Entity Tax Identification Number	98-0371433
Entity Incorporation, State or Country Code	NV
Entity Address, Address Line One	11753 Willard Avenue
Entity Address, City or Town	Tustin
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	92782
City Area Code	(714)
Local Phone Number	352-5315
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		14,495,621

v3.23.2

Condensed Consolidated Balance Sheets - USD ($)	Jun. 30, 2023	Dec. 31, 2022
Current assets
Cash and cash equivalents	$ 1,707,000	$ 2,067,000
Prepaid and other current assets	10,000	4,000
Total current assets	1,717,000	2,071,000
Data center costs	233,000
Total assets	1,950,000	2,071,000
Current liabilities
Accounts payable and accrued expenses	808,000	540,000
Convertible promissory notes, net	4,613,000	4,613,000
Notes payable	61,000	61,000
Total current liabilities	5,482,000	5,214,000
Stockholders’ deficit
Preferred stock, value
Common stock par value $0.001: 100,000,000 shares authorized; 14,495,621 and 24,495,621 shares issued and outstanding	14,000	24,000
Additional paid-in capital	11,514,000	11,480,000
Other comprehensive income	8,000	5,000
Stock subscription receivable	(2,000)	(2,000)
Accumulated deficit	(15,066,000)	(14,650,000)
Total stockholders’ deficit	(3,532,000)	(3,143,000)
Total liabilities and stockholders’ deficit	1,950,000	2,071,000
Series A Convertible Preferred Stock [Member]
Stockholders’ deficit
Preferred stock, value

v3.23.2

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Jun. 30, 2023	Dec. 31, 2022
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	100,000,000	100,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	14,495,621	24,495,621
Common stock, shares outstanding	14,495,621	24,495,621
Series A Convertible Preferred Stock [Member]
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	3,600,000	3,600,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0

v3.23.2

Condensed Consolidated Statements of Operations (Unaudited) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Income Statement [Abstract]
Revenues
Operating Expenses
Professional fees	97,000	177,000	186,000	422,000
Equity-based compensation	24,000	3,206,000	24,000	6,376,000
General and administrative expenses	33,000	31,000	41,000	35,000
Impairment loss		154,000		154,000
Operating expense	154,000	3,568,000	251,000	6,987,000
Loss from operations	(154,000)	(3,568,000)	(251,000)	(6,987,000)
Other income (expenses)
Interest income	17,000		31,000
Gain on settlement of accounts payable	23,000		23,000
Financing costs	(103,000)	(606,000)	(219,000)	(1,113,000)
Total other expenses	(63,000)	(606,000)	(165,000)	(1,113,000)
Loss before provision for income taxes	(217,000)	(4,174,000)	(416,000)	(8,100,000)
Provision for income taxes
Net loss	(217,000)	(4,174,000)	(416,000)	(8,100,000)
Comprehensive loss
Foreign currency translation loss	1,000	2,000	3,000	(1,000)
Comprehensive loss	$ (216,000)	$ (4,172,000)	$ (413,000)	$ (8,101,000)
Net loss per share - basic	$ (0.01)	$ (0.16)	$ (0.02)	$ (0.31)
Net loss per share - diluted	$ (0.01)	$ (0.16)	$ (0.02)	$ (0.31)
Weighted Average Number of Shares Outstanding, Basic	14,495,621	25,995,621	14,495,621	25,995,621
Weighted Average Number of Shares Outstanding, Diluted	14,495,621	25,995,621	14,495,621	25,995,621

v3.23.2

Condensed Consolidated Statements of Stockholders' Deficit (Unaudited) - USD ($)	Preferred Stock [Member] Series A Convertible Preferred Stock [Member]	Preferred Stock [Member]	Common Stock [Member]	Additional Paid-in Capital [Member]	Stock Subscription Receivable [Member]	AOCI Attributable to Parent [Member]	Retained Earnings [Member]	Total
Beginning balance, value at Dec. 31, 2021			$ 26,000	$ 16,269,000	$ (2,000)	$ (2,000)	$ (16,831,000)	$ (540,000)
Beginning balance, shares at Dec. 31, 2021			25,995,621
Foreign currency translation income						(3,000)		(3,000)
Net loss							(3,926,000)	(3,926,000)
Equity-based compensation on restricted stock awards				3,170,000				3,170,000
Ending balance, value at Mar. 31, 2022			$ 26,000	19,439,000	(2,000)	(5,000)	(20,757,000)	(1,299,000)
Ending balance, shares at Mar. 31, 2022			25,995,621
Beginning balance, value at Dec. 31, 2021			$ 26,000	16,269,000	(2,000)	(2,000)	(16,831,000)	(540,000)
Beginning balance, shares at Dec. 31, 2021			25,995,621
Foreign currency translation income								(1,000)
Net loss								(8,100,000)
Ending balance, value at Jun. 30, 2022			$ 26,000	22,645,000	(2,000)	(3,000)	(24,931,000)	(2,265,000)
Ending balance, shares at Jun. 30, 2022			25,995,621
Beginning balance, value at Mar. 31, 2022			$ 26,000	19,439,000	(2,000)	(5,000)	(20,757,000)	(1,299,000)
Beginning balance, shares at Mar. 31, 2022			25,995,621
Foreign currency translation income						2,000		2,000
Net loss							(4,174,000)	(4,174,000)
Equity-based compensation on restricted stock awards				3,206,000				3,206,000
Ending balance, value at Jun. 30, 2022			$ 26,000	22,645,000	(2,000)	(3,000)	(24,931,000)	(2,265,000)
Ending balance, shares at Jun. 30, 2022			25,995,621
Beginning balance, value at Dec. 31, 2022			$ 24,000	11,480,000	(2,000)	5,000	(14,650,000)	(3,143,000)
Beginning balance, shares at Dec. 31, 2022			24,495,621
Foreign currency translation income						2,000		2,000
Net loss							(199,000)	(199,000)
Ending balance, value at Mar. 31, 2023			$ 24,000	11,480,000	(2,000)	7,000	(14,849,000)	(3,340,000)
Ending balance, shares at Mar. 31, 2023			24,495,621
Beginning balance, value at Dec. 31, 2022			$ 24,000	11,480,000	(2,000)	5,000	(14,650,000)	(3,143,000)
Beginning balance, shares at Dec. 31, 2022			24,495,621
Foreign currency translation income								3,000
Net loss								(416,000)
Ending balance, value at Jun. 30, 2023			$ 14,000	11,514,000	(2,000)	8,000	(15,066,000)	(3,532,000)
Ending balance, shares at Jun. 30, 2023			14,495,621
Beginning balance, value at Mar. 31, 2023			$ 24,000	11,480,000	(2,000)	7,000	(14,849,000)	(3,340,000)
Beginning balance, shares at Mar. 31, 2023			24,495,621
Foreign currency translation income						1,000		1,000
Net loss							(217,000)	(217,000)
Fair value of equity-based compensation				24,000				24,000
Cancellation of shares			$ (10,000)	10,000
Cancellation of stock, shares			(10,000,000)
Ending balance, value at Jun. 30, 2023			$ 14,000	$ 11,514,000	$ (2,000)	$ 8,000	$ (15,066,000)	$ (3,532,000)
Ending balance, shares at Jun. 30, 2023			14,495,621

v3.23.2

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	3 Months Ended				6 Months Ended		12 Months Ended
	Jun. 30, 2023	Mar. 31, 2023	Jun. 30, 2022	Mar. 31, 2022	Jun. 30, 2023	Jun. 30, 2022	Dec. 31, 2022
Cash Flows From Operating Activities
Net loss	$ (217,000)	$ (199,000)	$ (4,174,000)	$ (3,926,000)	$ (416,000)	$ (8,100,000)
Adjustments to reconcile net loss to net cash used in operating activities:
Impairment			154,000			154,000
Amortization of convertible promissory note discounts						1,071,000
Fair value of equity-based compensation					24,000	6,376,000
Gain on settlement of accounts payable	(23,000)				(23,000)
Changes in operating assets and liabilities
Prepaid expenses and other current assets					(6,000)	(6,000)
Accounts payable and accrued expenses					243,000	(8,000)
Net Cash Used in Operating Activities					(178,000)	(513,000)
Cash Flows From Investing Activities
Data center costs					(184,000)
Other assets						(107,000)
Net Cash Used in Investing Activities					(184,000)	(107,000)
Cash Flows From Financing Activities
Repayments of Notes						(25,000)
Net Cash Used in Financing Activities						(25,000)
Effect of exchange rate changes on cash and cash equivalents					2,000	(1,000)
Net decrease in Cash					(360,000)	(646,000)
Cash, Beginning of Period		$ 2,067,000		$ 3,047,000	2,067,000	3,047,000	3,047,000
Cash, End of Period	$ 1,707,000		$ 2,401,000		1,707,000	2,401,000	$ 2,067,000
Supplemental disclosure of cash flow information:
Cash paid for interest
Cash paid for income taxes
Non-cash investing and financing activities - none
Accrued interest capitalized as data center cost					$ 14,000

v3.23.2

ORGANIZATION AND ACCOUNTING POLICIES	6 Months Ended
	Jun. 30, 2023
Accounting Policies [Abstract]
ORGANIZATION AND ACCOUNTING POLICIES	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 data center operation using the latest energy-efficient building materials and cooling technologies and to provide wholesale colocation 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 invest in or joint venture with other more-established companies already in the industry that would add value to the Company’s business strategy.   As of July 2022, the Company’s board of directors resolved to focus exclusively on developing a clean-energy-powered data center.   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 June 30, 2023 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 six-month periods ended June 30, 2023 and 2022. The results for the six months ended June 30, 2023 are not necessarily indicative of the results to be expected for the full year ending December 31, 2023 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, 2022, included in the Company’s annual report on Form 10-K filed with the SEC on April 17, 2023.   Liquidity and Going Concern   The Company incurred a net loss of approximately $416,000 for the six months ended June 30, 2023 and had an accumulated deficit of approximately $15,066,000 as of June 30, 2023. 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. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for one year from the issuance of these condensed consolidated financial statements.   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 the development of its data center campus development, approvals for construction permits, construction times, delivery of critical equipment, market demand for the Company’s wholesale colocation data center services, the timing of customer commitments for data center space, the management of working capital, and payment terms and conditions for purchase of the Company’s 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 raise additional funding from investors or through other avenues, it may not be able to continue as a going concern. The accompanying unaudited condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable 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   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 three and six months ended June 30, 2023 and 2022 because their inclusion would be anti-dilutive. Common share equivalents amounted to 6,000,250 as of June 30, 2023.   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.

v3.23.2

DATA CENTER COSTS	6 Months Ended
	Jun. 30, 2023
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
DATA CENTER COSTS	Note 2 – Data Center Costs    DATA CENTER COSTS On March 30, 2023, the Company signed an option agreement to acquire 80 acres of commercially-zoned land in Imperial County, California (the “Option”) for $3,360,000 (“Purchase Price”). The Option expires in September 2024. The Company paid a non-refundable deposit of $84,000 on the signing of the Option, which has been recognized as other assets in the condensed consolidated balance sheet. The Company is required to deposit an additional $84,000 into escrow (“Escrow Funds”) within 10 days after the execution of the purchase agreement. As of the issuance of these interim condensed consolidated financial statements, the escrow had not been set up. Once the escrow is set up, the Company will deposit the $84,000. If the Company does not exercise the Option by September 2024, the Escrow funds will be returned to the Company.     The Purchase Price is payable with a cash payment of $1,680,000 and the issuance of 840,000 shares of the Company’s common stock (the “Purchase Shares”). At the closing of the purchase (“Closing Date”), if the stock is trading at a value less than $1.00 per share, the Company is required to issue a promissory note in the amount of $840,000, payable on the third anniversary of the closing date, with an interest rate equal to the Secured Overnight Financing Rate plus 2.0%.   If the Purchase Shares are issued at the Closing Date, the Company has agreed to repurchase the Purchase Shares (the “Put Option”) under specific circumstances. However, the Put Option expires if the Company’s common stock trades above $2.00 per share for 120 consecutive days. If the Company’s common stock trades below $2.00 per share for 10 consecutive days, the Holder has the option for the Company to repurchase the Purchase Shares for $2.00 per share.   As of June 30, 2023, the Company has incurred and capitalized approximately $135,000 of cost for the development of the Data Center and capitalized approximately $14,000 of interest expense from the convertible promissory notes.   On June 23, 2023, the Company signed a contract with HDR Engineering, Inc. to provide site assessment and feasibility to connect critical resources for data center operations and develop a shovel-ready development plan for the Company’s initial 80-acre site. The Company plans to complete this development phase by the end of the third quarter of 2023 and the estimated cost to be approximately $500,000.

v3.23.2

ACCOUNTS PAYABLE AND ACCRUED EXPENSES	6 Months Ended
	Jun. 30, 2023
Payables and Accruals [Abstract]
ACCOUNTS PAYABLE AND ACCRUED EXPENSES	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     June 30,     December 31,       2023     2022   Accounts payable   $ 231,000     $ 186,000   Accrued expenses     19,000       28,000   Accrued interest     558,000       326,000   Accounts payable and accrued expenses   $ 808,000     $ 540,000     Accrued Interest   The following table presents the details of accrued interest as of the dates indicated:   SCHEDULE OF ACCRUED INTEREST     June 30,     December 31,       2023     2022   Notes payable   $ 21,000     $ 17,000   Convertible promissory notes     537,000       309,000   Balance, end of the year   $ 558,000     $ 326,000

v3.23.2

NOTES PAYABLE	6 Months Ended
	Jun. 30, 2023
Notes Payable
NOTES PAYABLE	Note 4 – Notes Payable   NOTES PAYABLE The table below summarizes the transactions as of the dates indicated:   SCHEDULE OF NOTES PAYABLE     June 30,     December 31,       2023     2022   Balance, beginning of the year   $ 61,000     $ 61,000   Additions     –       –   Payments     –       –   Balance, end of the year   $ 61,000     $ 61,000       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 a 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 and interest amount outstanding under this note was $11,000 and $3,000, respectively, as of June 30, 2023.   On April 22, 2021, the Company issued a promissory note in the principal amount of $50,000. 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 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 and interest amount outstanding under this note was $50,000 and $14,000, respectively, as of June 30, 2023.   Interest expense on these notes payable amounted to $6,000 and $6,000 for the six months ended June 30, 2023 and June 30, 2022, respectively.

v3.23.2

CONVERTIBLE PROMISSORY NOTES	6 Months Ended
	Jun. 30, 2023
Debt Disclosure [Abstract]
CONVERTIBLE PROMISSORY NOTES	Note 5 – Convertible Promissory Notes   CONVERTIBLE PROMISSORY NOTES Convertible promissory notes consisted of the following as of the dates indicated:   SCHEDULE OF CONVERTIBLE PROMISSORY NOTES     June 30,     December 31,       2023     2022   Principal                 Balance, beginning of year   $ 4,613,000     $ 4,613,000   Additions     –       –   Balance, end of year     4,613,000       4,613,000                     Discount                 Balance, beginning of year     –       1,526,000   Additions     –       –   Amortization     –       (1,526,000 ) Balance, end of year     –       –   Net carrying amount   $ 4,613,000     $ 4,613,000     The effective interest rate used to amortize the debt discount for the six months ended June 30, 2022 ranged 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     June 30,     December 31,       2023     2022   Principal   $ 4,613,000     $ 4,613,000   Interest     538,000       309,000   Total     5,151,000       4,922,000   Conversion price per share     1.00 – 1.25       1.00 – 1.25   Potential future share     4,220,448       4,125,699     Interest expense on default convertible promissory notes amounted to $229,000 for the six months ended June 30, 2023, of which $14,000 was capitalized as data center cost. The interest expense and amortization of discount on default convertible promissory notes amounted to $37,000 and $1,071,000, respectively, for the six months ended June 30, 2022.

v3.23.2

COMMITMENTS AND CONTINGENCIES	6 Months Ended
	Jun. 30, 2023
Commitments and Contingencies Disclosure [Abstract]
COMMITMENTS AND CONTINGENCIES	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. 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.   Employment Agreement   In June 2023, the Company executed an employment agreement (“Employment Agreement”) to employ an individual to be the Company’s President and Chief Operating Officer (“Executive”). As compensation for services rendered, the Executive will be paid a base salary of $250,000 per annum. The Executive’s base salary may be increased as certain milestones are met, such as 1) when the necessary governmental permits are granted to start construction of the Data Center, 2) once the Data Center is operational and at least 25% of the planned MW’s of collation capacity is leased. Also, at the discretion of the Company, following each calendar year of continued employment, the Executive shall be eligible to receive a discretionary bonus of up to fifty percent ( 50%) of Executive’s Base Salary during the first year of employment, up to seventy-five percent (75%) of Executive’s then-current Base Salary during the second year of employment, and up to one-hundred percent (100%) of Executive’s then-current Base Salary during Executive’s third year of employment (the “Bonus”). Payment of the Bonus will be based on achieving certain goals and performance criteria established by the Company. In addition, the Executive was granted options to purchase 600,000 and 1,900,000 shares of the Company’s common stock (see Note 7 – Stockholders Deficit) for further information.   The Employment Agreement also provides for certain severance benefits upon termination by the Company without “cause” or by the Executive for good reason. In the event of a termination by the Company without cause or by the Executive for good reason after the first full year of employment, the Executive would be entitled to (i) continued payment of the base salary for the lesser of six months or the remaining term of the Employment Agreement, subject to the Executive signing a timely and effective separation agreement containing a release of all claims against the Company and other customary terms; provided, however, that if such termination is between the 91st day and the end of the first year of employment, the Executive will be entitled to a pro-rata portion of such payment.

v3.23.2

STOCKHOLDERS DEFICIT	6 Months Ended
	Jun. 30, 2023
Equity [Abstract]
STOCKHOLDERS DEFICIT	Note 7 – Stockholders Deficit   STOCKHOLDERS DEFICIT Stock options   As part of the Employment Agreement, as defined in Note 6 – Commitments and Contingencies, the executive was granted an incentive stock option (“Incentive Option”) and a non-qualified stock option (“Non-Qual Option”) (collectively “Stock Options”) to purchase 600,000 and 1,900,000, respectively, shares of the Company’s common stock for $0.50 per share. The Stock Options are exercisable for a period of seven years from the date of grant, which was June 19, 2023 (“Grant Date”).   The Incentive Option shall vest and become exercisable as follows: (i) options to purchase up to 200,000 shares of Common Stock shall vest and become exercisable on the first anniversary of the Grant Date; (ii) options to purchase up to 200,000 shares of Common Stock shall vest and become exercisable on the second anniversary of the Grant Date; and (iii) options to purchase up to 200,000 shares of Common Stock shall vest and become exercisable on the third anniversary of the Grant Date; provided that the Optionee is an employee in good standing with the Company on such applicable vesting date. The Incentive Option Grant Date fair value of $600,000 was calculated using the Black Scholes fair value option-pricing model with key input variables provided by management, as of the date of issuance: volatility of 339%, the fair value of common stock $0.50, estimated life of 5 years, risk-free rate of 3.99% and dividend rate of $0. For the three months ended June 30, 2023, the Company recorded compensation expenses of approximately $6,000.     The Non-Qual Option shall vest and become exercisable as follows:     (1) 216,666 Shares on each of the first two anniversaries of the Grant Date and 216,668 shares on the third anniversary of the Grant Date, provided that the Optionee is an employee or Board member in good standing with the Company on such applicable vesting date.         (2) the remaining 1,250,000 shares based on the Company completing the following milestones:     a. 250,000 shares upon completion of the initial site development plan and Data Center design, and submission of a complete set of plans to Imperial County Planning and Development Department for approvals and permits.   b. 250,000 shares upon the Company receiving permits necessary to start construction of the data center site and facilities (including but not limited to power substation, water delivery, pumping, storage and on-site distribution systems, fiber conduit lines and communications systems, and on-site roads, water, power and communications grid, warehousing, offices, administration, support and security buildings, perimeter walls and security systems).   c. 250,000 shares upon the completion of construction of a complete data center facility and receipt of an occupancy permit for such facility, either for a Data Center facility to be built as a “build to suit” building for a hyperscale company or as a wholesale colocation building for enterprise IT customers.   d. 500,000 shares upon signing a build-to-suit contract or one or more contracts being signed for 50% or more of a constructed and operational wholesale colocation facility’s capacity.   The Company’s management has accounted for the Non-Qual Option in accordance with ASC 718 – Stock Compensation (“ASC 718”). ASC 718 requires the Company to estimate the service period over which the compensation cost will be recognized. Management has estimated that the first development phase (a) will be completed by March 31, 2024, the second development phase (b) by September 30, 2024, the third development phase (c) by March 31, 2025 and the fourth development phase by September 30, 2025. 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 Non-Qual Option Grant Date fair value of $550,000 was calculated using the Black Scholes fair value option-pricing model with key input variables provided by management, as of the date of issuance: volatility range of 137% to 176%, the fair value of common stock $0.50, estimated life range of 3.9 years to 4.5 years, risk-free rate range of 4.7% to 5.2% and dividend rate of $0. For the three months ended June 30, 2023, the Company recorded compensation expenses of approximately $18,000.   As of June 30, 2023, the Company had 2,500,000 stock options outstanding, of which all were unvested, with weighted average remaining life, strike price and grant date fair value of 7 years, $0.50 and $0.47, respectively, and intrinsic value of nil.   Warrants   During the six months ending June 30, 2023, 84,304 warrants expired. As of June 30, 2023, the remaining outstanding balance of warrants is 1,684,000, with a weighted average exercise price of $1.84, average remaining life of 0.46 years, weighed average grant date fair value of approximately $0.47

v3.23.2

SUBSEQUENT EVENTS	6 Months Ended
	Jun. 30, 2023
Subsequent Events [Abstract]
SUBSEQUENT EVENTS	Note 8 – 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.

v3.23.2

ORGANIZATION AND ACCOUNTING POLICIES (Policies)	6 Months Ended
	Jun. 30, 2023
Accounting Policies [Abstract]
Korean entity	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	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 June 30, 2023 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 six-month periods ended June 30, 2023 and 2022. The results for the six months ended June 30, 2023 are not necessarily indicative of the results to be expected for the full year ending December 31, 2023 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, 2022, included in the Company’s annual report on Form 10-K filed with the SEC on April 17, 2023.
Liquidity and Going Concern	Liquidity and Going Concern   The Company incurred a net loss of approximately $416,000 for the six months ended June 30, 2023 and had an accumulated deficit of approximately $15,066,000 as of June 30, 2023. 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. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for one year from the issuance of these condensed consolidated financial statements.   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 the development of its data center campus development, approvals for construction permits, construction times, delivery of critical equipment, market demand for the Company’s wholesale colocation data center services, the timing of customer commitments for data center space, the management of working capital, and payment terms and conditions for purchase of the Company’s 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 raise additional funding from investors or through other avenues, it may not be able to continue as a going concern. The accompanying unaudited condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
COVID-19	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	Earnings Per Share   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 three and six months ended June 30, 2023 and 2022 because their inclusion would be anti-dilutive. Common share equivalents amounted to 6,000,250 as of June 30, 2023.
Recent Accounting Pronouncements	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.

v3.23.2

ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Tables)	6 Months Ended
	Jun. 30, 2023
Payables and Accruals [Abstract]
SCHEDULE OF 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     June 30,     December 31,       2023     2022   Accounts payable   $ 231,000     $ 186,000   Accrued expenses     19,000       28,000   Accrued interest     558,000       326,000   Accounts payable and accrued expenses   $ 808,000     $ 540,000
SCHEDULE OF ACCRUED INTEREST	The following table presents the details of accrued interest as of the dates indicated:   SCHEDULE OF ACCRUED INTEREST     June 30,     December 31,       2023     2022   Notes payable   $ 21,000     $ 17,000   Convertible promissory notes     537,000       309,000   Balance, end of the year   $ 558,000     $ 326,000

v3.23.2

NOTES PAYABLE (Tables)	6 Months Ended
	Jun. 30, 2023
Notes Payable
SCHEDULE OF NOTES PAYABLE	The table below summarizes the transactions as of the dates indicated:   SCHEDULE OF NOTES PAYABLE     June 30,     December 31,       2023     2022   Balance, beginning of the year   $ 61,000     $ 61,000   Additions     –       –   Payments     –       –   Balance, end of the year   $ 61,000     $ 61,000

v3.23.2

CONVERTIBLE PROMISSORY NOTES (Tables)	6 Months Ended
	Jun. 30, 2023
Debt Disclosure [Abstract]
SCHEDULE OF CONVERTIBLE PROMISSORY NOTES	Convertible promissory notes consisted of the following as of the dates indicated:   SCHEDULE OF CONVERTIBLE PROMISSORY NOTES     June 30,     December 31,       2023     2022   Principal                 Balance, beginning of year   $ 4,613,000     $ 4,613,000   Additions     –       –   Balance, end of year     4,613,000       4,613,000                     Discount                 Balance, beginning of year     –       1,526,000   Additions     –       –   Amortization     –       (1,526,000 ) Balance, end of year     –       –   Net carrying amount   $ 4,613,000     $ 4,613,000
SCHEDULE OF POTENTIAL FUTURE SHARES ISSUANCE OF CONVERSION NOTES	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     June 30,     December 31,       2023     2022   Principal   $ 4,613,000     $ 4,613,000   Interest     538,000       309,000   Total     5,151,000       4,922,000   Conversion price per share     1.00 – 1.25       1.00 – 1.25   Potential future share     4,220,448       4,125,699

v3.23.2

ORGANIZATION AND ACCOUNTING POLICIES (Details Narrative) - USD ($)		3 Months Ended				6 Months Ended
	Nov. 05, 2021	Jun. 30, 2023	Mar. 31, 2023	Jun. 30, 2022	Mar. 31, 2022	Jun. 30, 2023	Jun. 30, 2022	Dec. 31, 2022
Number of common shares authorized to issued		100,000,000				100,000,000		100,000,000
Number of shares issued	10,000
Net Income (Loss) Attributable to Parent		$ 217,000	$ 199,000	$ 4,174,000	$ 3,926,000	$ 416,000	$ 8,100,000
Retained Earnings (Accumulated Deficit)		$ 15,066,000				$ 15,066,000		$ 14,650,000
Antidilutive securities						6,000,250
AIQ System Inc. [Member]
Number of common shares authorized to issued	3,000,000
AIQ System Inc. [Member] | KOREA, REPUBLIC OF
Number of shares issued	100,000,000
Number of shares issued, value	$ 89,000
Ownership percentage	100.00%

v3.23.2

DATA CENTER COSTS (Details Narrative)			6 Months Ended
	Jun. 23, 2023 USD ($)	Mar. 30, 2023 USD ($) a $ / shares shares	Jun. 30, 2023 USD ($)	Dec. 31, 2022 USD ($)	Dec. 31, 2021 USD ($)
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Escrow funds		$ 84,000
Purchase price payable with issuance of share			$ 61,000	$ 61,000	$ 61,000
Development costs			135,000
Interest expense			$ 14,000
Payments to Acquire Property, Plant, and Equipment	$ 500,000
Option Agreement [Member]
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Number of acres of commercially zoned land | a		80
Purchase price		$ 3,360,000
Option expiration description		September 2024
Non-refundable deposit		$ 84,000
Escrow funds		84,000
Purchase price payable with cash payment		$ 1,680,000
Purchase price payable with issuance of share | shares		840,000
Shares issued price per share | $ / shares		$ 1.00
Purchase price payable with issuance of share		$ 840,000
Repurchase description of shares		However, the Put Option expires if the Company’s common stock trades above $2.00 per share for 120 consecutive days. If the Company’s common stock trades below $2.00 per share for 10 consecutive days, the Holder has the option for the Company to repurchase the Purchase Shares for $2.00 per share.
Option Agreement [Member] | Secured Overnight Financing Rate (SOFR) Overnight Index Swap Rate [Member]
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Interest rate, stated percentage		200.00%

v3.23.2

SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Details) - USD ($)	Jun. 30, 2023	Dec. 31, 2022
Payables and Accruals [Abstract]
Accounts payable	$ 231,000	$ 186,000
Accrued expenses	19,000	28,000
Accrued interest	558,000	326,000
Accounts payable and accrued expenses	$ 808,000	$ 540,000

v3.23.2

SCHEDULE OF ACCRUED INTEREST (Details) - USD ($)	Jun. 30, 2023	Dec. 31, 2022
Payables and Accruals [Abstract]
Notes payable	$ 21,000	$ 17,000
Convertible promissory notes	537,000	309,000
Balance, end of the year	$ 558,000	$ 326,000

v3.23.2

SCHEDULE OF NOTES PAYABLE (Details) - USD ($)	6 Months Ended		12 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Dec. 31, 2022
Notes Payable
Balance, beginning of the year	$ 61,000	$ 61,000	$ 61,000
Additions
Payments		$ (25,000)
Balance, end of the year	$ 61,000		$ 61,000

v3.23.2

NOTES PAYABLE (Details Narrative) - USD ($)			6 Months Ended
	Apr. 22, 2021	Jul. 07, 2020	Jun. 30, 2023	Jun. 30, 2022	Dec. 31, 2022	Apr. 21, 2021
Short-Term Debt [Line Items]
Accrued interest			$ 558,000		$ 326,000
Promissory Note [Member]
Short-Term Debt [Line Items]
Debt instrument, face amount		$ 11,000	11,000
Increase in interest rate		10.00%
Accrued interest			3,000
Interest expense, debt			6,000	$ 6,000
Promissory Note [Member] | Borrower [Member]
Short-Term Debt [Line Items]
Debt instrument, periodic payment		$ 100,000
Promissory Note One [Member]
Short-Term Debt [Line Items]
Debt instrument, face amount	$ 50,000		50,000
Increase in interest rate	15.00%
Accrued interest			$ 14,000
Debt instrument interest rate						10.00%
Debt instrument, maturity date	Apr. 22, 2022

v3.23.2

SCHEDULE OF CONVERTIBLE PROMISSORY NOTES (Details) - Convertible Notes Payable [Member] - USD ($)	6 Months Ended	12 Months Ended
	Jun. 30, 2023	Dec. 31, 2022
Short-Term Debt [Line Items]
Balance, beginning of year	$ 4,613,000	$ 4,613,000
Additions
Balance, end of year	4,613,000	4,613,000
Balance, beginning of year		1,526,000
Additions
Amortization		(1,526,000)
Balance, end of year
Net carrying amount	$ 4,613,000	$ 4,613,000

v3.23.2

SCHEDULE OF POTENTIAL FUTURE SHARES ISSUANCE OF CONVERSION NOTES (Details) - USD ($)	6 Months Ended	12 Months Ended
	Jun. 30, 2023	Dec. 31, 2022
Debt Instrument [Line Items]
Principal	$ 4,613,000	$ 4,613,000
Interest	538,000	309,000
Total	$ 5,151,000	$ 4,922,000
Potential future share	4,220,448	4,125,699
Minimum [Member]
Debt Instrument [Line Items]
Conversion price per share	$ 1.00	$ 1.00
Maximum [Member]
Debt Instrument [Line Items]
Conversion price per share	$ 1.25	$ 1.25

v3.23.2

CONVERTIBLE PROMISSORY NOTES (Details Narrative) - USD ($)	6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Short-Term Debt [Line Items]
Interest expense	$ 135,000
Interest expense	14,000
Amortization of debt discount		$ 1,071,000
Convertible Notes Payable [Member]
Short-Term Debt [Line Items]
Default interest expense	229,000
Interest expense	$ 14,000
Interest expense		37,000
Amortization of debt discount		$ 1,071,000
Convertible Notes Payable [Member] | Minimum [Member]
Short-Term Debt [Line Items]
Effective interest rate debt discount percentage		4.76%
Convertible Notes Payable [Member] | Maximum [Member]
Short-Term Debt [Line Items]
Effective interest rate debt discount percentage		64.60%

v3.23.2

COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($)	1 Months Ended	6 Months Ended
	Jun. 30, 2023	Jun. 30, 2023
Deferred Compensation Arrangement with Individual, Excluding Share-Based Payments and Postretirement Benefits [Line Items]
Employee salary compensation	1) when the necessary governmental permits are granted to start construction of the Data Center, 2) once the Data Center is operational and at least 25% of the planned MW’s of collation capacity is leased. Also, at the discretion of the Company, following each calendar year of continued employment, the Executive shall be eligible to receive a discretionary bonus of up to fifty percent ( 50%) of Executive’s Base Salary during the first year of employment, up to seventy-five percent (75%) of Executive’s then-current Base Salary during the second year of employment, and up to one-hundred percent (100%) of Executive’s then-current Base Salary during Executive’s third year of employment (the “Bonus”). Payment of the Bonus will be based on achieving certain goals and performance criteria established by the Company
Incentive Option [Member]
Deferred Compensation Arrangement with Individual, Excluding Share-Based Payments and Postretirement Benefits [Line Items]
Share option granted to purchase	600,000	600,000
Non Qual Option [Member]
Deferred Compensation Arrangement with Individual, Excluding Share-Based Payments and Postretirement Benefits [Line Items]
Share option granted to purchase	1,900,000	1,900,000
Chief Executive Officer [Member]
Deferred Compensation Arrangement with Individual, Excluding Share-Based Payments and Postretirement Benefits [Line Items]
Base salary	$ 250,000

v3.23.2

STOCKHOLDERS DEFICIT (Details Narrative) - USD ($)		1 Months Ended	3 Months Ended	6 Months Ended
	Nov. 05, 2021	Jun. 30, 2023	Jun. 30, 2023	Jun. 30, 2023
Subsidiary, Sale of Stock [Line Items]
Compensation expense			$ 6,000
Stock issued during period, shares	10,000
Stock options outstanding		2,500,000	2,500,000	2,500,000
Average remaining life				7 years
Remaining outstanding balance		1,684,000	1,684,000	1,684,000
Weighted average exercise price		$ 1.84	$ 1.84	$ 1.84
Average remaining life		5 months 15 days	5 months 15 days	5 months 15 days
Minimum [Member]
Subsidiary, Sale of Stock [Line Items]
Weighted average fair value				$ 0.47
Maximum [Member]
Subsidiary, Sale of Stock [Line Items]
Weighted average fair value				$ 0.50
Initial Site Development [Member]
Subsidiary, Sale of Stock [Line Items]
Stock issued during period, shares				250,000
Permits Construction [Member]
Subsidiary, Sale of Stock [Line Items]
Stock issued during period, shares				250,000
Completion Of Construction [Member]
Subsidiary, Sale of Stock [Line Items]
Stock issued during period, shares				250,000
Build To Suit [Member]
Subsidiary, Sale of Stock [Line Items]
Stock issued during period, shares				500,000
Common Stock [Member]
Subsidiary, Sale of Stock [Line Items]
Common stock per share				$ 0.50
Granted option fair value		$ 600,000	$ 600,000	$ 600,000
Volatality percentage				339.00%
Estimated life				5 years
Risk free rate				3.99%
Dividend rate				0.00%
Common Stock [Member] | First Anniversary Grant Date [Member]
Subsidiary, Sale of Stock [Line Items]
Common stock vested and exercised		200,000	200,000	200,000
Common Stock [Member] | Second Anniversary Grant Date [Member]
Subsidiary, Sale of Stock [Line Items]
Common stock vested and exercised		200,000	200,000	200,000
Common Stock [Member] | Third Anniversary Grant Date [Member]
Subsidiary, Sale of Stock [Line Items]
Common stock vested and exercised		200,000	200,000	200,000
Warrant [Member]
Subsidiary, Sale of Stock [Line Items]
Weighted average fair value				$ 0.47
Warrant shares expired				84,304
Incentive Option [Member]
Subsidiary, Sale of Stock [Line Items]
Share option granted to purchase		600,000		600,000
Non Qual Option [Member]
Subsidiary, Sale of Stock [Line Items]
Share option granted to purchase		1,900,000		1,900,000
Compensation expense			$ 18,000
Non Qual Option [Member] | Common Stock [Member]
Subsidiary, Sale of Stock [Line Items]
Common stock per share				$ 0.50
Common stock vested and exercised		1,250,000	1,250,000	1,250,000
Granted option fair value		$ 550,000	$ 550,000	$ 550,000
Dividend rate				0.00%
Volatality percentage, minimum				137.00%
Volatality percentage, maximum				176.00%
Risk free rate, minimum				4.70%
Risk free rate, maximum				5.20%
Non Qual Option [Member] | Common Stock [Member] | Minimum [Member]
Subsidiary, Sale of Stock [Line Items]
Estimated life				3 years 10 months 24 days
Non Qual Option [Member] | Common Stock [Member] | Maximum [Member]
Subsidiary, Sale of Stock [Line Items]
Estimated life				4 years 6 months
Non Qual Option [Member] | Common Stock [Member] | Third Anniversary Grant Date [Member]
Subsidiary, Sale of Stock [Line Items]
Common stock vested and exercised		216,668	216,668	216,668
Non Qual Option [Member] | Common Stock [Member] | First And Second Anniversary Grant Date [Member]
Subsidiary, Sale of Stock [Line Items]
Common stock vested and exercised		216,666	216,666	216,666

---