Cover
Cover - shares | 9 Months Ended | |
Sep. 30, 2023 | Nov. 15, 2023 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Document Period End Date | Sep. 30, 2023 | |
Document Fiscal Period Focus | Q3 | |
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 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) | Sep. 30, 2023 | Dec. 31, 2022 |
Current assets | ||
Cash and cash equivalents | $ 1,178,000 | $ 2,067,000 |
Prepaid and other current assets | 12,000 | 4,000 |
Total current assets | 1,190,000 | 2,071,000 |
Data center costs | 1,429,000 | |
Total assets | 2,619,000 | 2,071,000 |
Current liabilities | ||
Accounts payable and accrued expenses | 1,378,000 | 540,000 |
Convertible promissory notes, net | 4,613,000 | 4,613,000 |
Notes payable | 61,000 | 61,000 |
Total current liabilities | 6,052,000 | 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 | 11,711,000 | 11,480,000 |
Other comprehensive income | 8,000 | 5,000 |
Stock subscription receivable | (2,000) | (2,000) |
Accumulated deficit | (15,164,000) | (14,650,000) |
Total stockholders’ deficit | (3,433,000) | (3,143,000) |
Total liabilities and stockholders’ deficit | 2,619,000 | 2,071,000 |
Series A Convertible Preferred Stock [Member] | ||
Stockholders’ deficit | ||
Preferred stock,value |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Sep. 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 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
Income Statement [Abstract] | ||||
Revenues | ||||
Operating Expenses | ||||
Professional fees | 48,000 | 136,000 | 234,000 | 558,000 |
Restricted stock grants | 31,000 | (11,168,000) | 55,000 | (4,791,000) |
General and administrative expenses | 13,000 | 24,000 | 54,000 | 59,000 |
Impairment loss | 154,000 | |||
Operating (income) expenses | 92,000 | 11,008,000 | 343,000 | (4,020,000) |
(Loss)Income from operations | (92,000) | 11,008,000 | (343,000) | 4,020,000 |
Other income (expenses) | ||||
Interest income | 14,000 | 1,000 | 45,000 | 1,000 |
Gain on settlement of accounts payable | 23,000 | |||
Financing costs | (20,000) | (509,000) | (239,000) | (1,622,000) |
Total other expense | (6,000) | (508,000) | (171,000) | (1,621,000) |
(Loss) Income before provision for income taxes | (98,000) | 10,500,000 | (514,000) | 2,399,000 |
Provision for income taxes | ||||
Net income (loss) | $ (98,000) | $ 10,500,000 | $ (514,000) | $ 2,399,000 |
Net income (loss) per share - basic | $ (0.01) | $ 0.74 | $ (0.04) | $ 0.10 |
Net income (loss) per share - diluted | $ (0.01) | $ 0.56 | $ (0.04) | $ 0.08 |
Weighted average common shares outstanding - Basic | 14,495,621 | 14,176,349 | 14,495,621 | 24,769,518 |
Weighted average common shares outstanding - diluted | 14,495,621 | 18,953,625 | 14,495,621 | 29,546,794 |
Comprehensive loss: | ||||
Foreign currency translation adjustment | $ 20,000 | $ 19,000 | ||
Comprehensive (Loss) Income | $ (98,000) | $ 10,520,000 | $ (514,000) | $ 2,418,000 |
Condensed Consolidated Statem_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 (loss) | (3,000) | (3,000) | ||||||
Net income (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) | ||
End 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 (loss) | 19,000 | |||||||
Net income (loss) | 2,399,000 | |||||||
Ending balance, value at Sep. 30, 2022 | $ 15,000 | 11,488,000 | (2,000) | 17,000 | (14,431,000) | (2,913,000) | ||
End balance, shares at Sep. 30, 2022 | 14,495,621 | |||||||
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 (loss) | 2,000 | 2,000 | ||||||
Net income (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) | ||
End balance, shares at Jun. 30, 2022 | 25,995,621 | |||||||
Foreign currency translation income (loss) | 20,000 | 20,000 | ||||||
Net income (loss) | 10,500,000 | 10,500,000 | ||||||
Forfeiture of stock-based compensation | $ (11,000) | (11,157,000) | (11,168,000) | |||||
Forfeiture of stock-based compensation, shares | (11,500,000) | |||||||
Ending balance, value at Sep. 30, 2022 | $ 15,000 | 11,488,000 | (2,000) | 17,000 | (14,431,000) | (2,913,000) | ||
End balance, shares at Sep. 30, 2022 | 14,495,621 | |||||||
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 (loss) | 2,000 | 2,000 | ||||||
Net income (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) | ||
End 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 (loss) | ||||||||
Net income (loss) | (514,000) | |||||||
Ending balance, value at Sep. 30, 2023 | $ 14,000 | 11,711,000 | (2,000) | 8,000 | (15,164,000) | (3,433,000) | ||
End balance, shares at Sep. 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 (loss) | 1,000 | 1,000 | ||||||
Net income (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) | ||
End balance, shares at Jun. 30, 2023 | 14,495,621 | |||||||
Foreign currency translation income (loss) | ||||||||
Net income (loss) | (98,000) | (98,000) | ||||||
Fair value of equity-based compensation | 197,000 | 197,000 | ||||||
Ending balance, value at Sep. 30, 2023 | $ 14,000 | $ 11,711,000 | $ (2,000) | $ 8,000 | $ (15,164,000) | $ (3,433,000) | ||
End balance, shares at Sep. 30, 2023 | 14,495,621 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||||
Sep. 30, 2023 | Mar. 31, 2023 | Sep. 30, 2022 | Mar. 31, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | Dec. 31, 2022 | |
Cash Flows From Operating Activities | |||||||
Net (loss) income | $ (98,000) | $ (199,000) | $ 10,500,000 | $ (3,926,000) | $ (514,000) | $ 2,399,000 | |
Adjustments to reconcile net income (loss) to net cash used in operating activities: | |||||||
Impairment | 154,000 | ||||||
Amortization of convertible promissory note discounts | 1,526,000 | ||||||
Forfeiture of restricted stock awards | (11,168,000) | ||||||
Equity-based compensation | 55,000 | 6,377,000 | |||||
Gain on settlement of accounts payable | (23,000) | ||||||
Changes in operating assets and liabilities | |||||||
Prepaid expenses and other current assets | (8,000) | 6,000 | |||||
Accounts payable and accrued expenses | 450,000 | 32,000 | |||||
Net Cash Used in Operating Activities | (40,000) | (674,000) | |||||
Cash Flows From Investing Activities | |||||||
Data center costs | (854,000) | ||||||
Other assets | (106,000) | ||||||
Net Cash Used in Investing Activities | (854,000) | (106,000) | |||||
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 | 5,000 | 7,000 | |||||
Net decrease in cash | (889,000) | (798,000) | |||||
Cash, beginning of period | $ 2,067,000 | $ 3,047,000 | 2,067,000 | 3,047,000 | 3,047,000 | ||
Cash, end of period | $ 1,178,000 | $ 2,249,000 | 1,178,000 | 2,249,000 | $ 2,067,000 | ||
Supplemental disclosure of cash flow information: | |||||||
Cash paid for interest | |||||||
Cash paid for income taxes | |||||||
Non-cash investing and financing activities | |||||||
Interest capitalized as data center cost | 113,000 | ||||||
Stock based compensation capitalized as data center cost | $ 166,000 |
ORGANIZATION AND ACCOUNTING POL
ORGANIZATION AND ACCOUNTING POLICIES | 9 Months Ended |
Sep. 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 10,000 100,000,000 89,000 100 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 December 31, 2022 condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by GAAP. These interim unaudited condensed consolidated financial statements, in the opinion of management, reflect all normal recurring adjustments necessary for a fair presentation of the financial position, results of operations and cash flows for the interim nine-month periods ended September 30, 2023 and 2022. The results for the nine months ended September 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 $ 514,000 15,164,000 no 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 services; the uncertainty of product development and generation of revenues; dependence on outside sources of financing; risks associated with research and development; dependence on third-party suppliers and collaborators; protection of intellectual property; and competition with larger, better-capitalized companies. Ultimately, the attainment of profitable operations is dependent on future events, including obtaining adequate financing to fund the Company’s operations and generating a level of revenues adequate to support the Company’s cost structure. The Company will need to raise debt or equity financing in the future in order to continue its operations and achieve its growth targets. However, there can be no assurance that such financing will be available in sufficient amounts and on acceptable terms, when and if needed, or at all. The precise amount and timing of the funding needs cannot be determined accurately at this time, and will depend on a number of factors, including the development of the Company’s 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 Securities that could potentially dilute loss per share in the future were not included in the computation of diluted loss per share for the three and nine months ended September 30, 2023 and 2022 because their inclusion would be anti-dilutive. Common share equivalents amounted to 14,495,621 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. |
DATA CENTER COSTS
DATA CENTER COSTS | 9 Months Ended |
Sep. 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 3,360,000 84,000 84,000 84,000 The Purchase Price is payable with a cash payment of $ 1,680,000 840,000 1.00 840,000 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 September 30, 2023, the Company has incurred costs of approximately $ 1,232,000 113,000 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 completed this development phase in October 2023 with an estimated cost of approximately $ 525,000 |
ACCOUNTS PAYABLE AND ACCRUED EX
ACCOUNTS PAYABLE AND ACCRUED EXPENSES | 9 Months Ended |
Sep. 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 September 30, December 31, 2023 2022 Accounts payable $ 508,000 $ 186,000 Accrued expenses 193,000 28,000 Accrued interest 677,000 326,000 Accounts payable and accrued expenses $ 1,378,000 $ 540,000 Accrued Interest The following table presents the details of accrued interest as of the dates indicated: SCHEDULE OF ACCRUED INTEREST September 30, December 31, 2023 2022 Notes payable $ 23,000 $ 17,000 Convertible promissory notes 654,000 309,000 Balance, end of period $ 677,000 $ 326,000 |
NOTES PAYABLE
NOTES PAYABLE | 9 Months Ended |
Sep. 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 September 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 10 100,000 11,000 5,000 On April 22, 2021, the Company issued a promissory note in the principal amount of $ 50,000 10 April 22, 2022 15 50,000 18,000 Interest expense on these notes payable amounted to $ 9,000 9,000 |
CONVERTIBLE PROMISSORY NOTES
CONVERTIBLE PROMISSORY NOTES | 9 Months Ended |
Sep. 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 September 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 nine months ended September 30, 2023 and 2022 ranged from 4.76 64.60 Potential future shares to be issued on conversion of the notes as of the dates indicated are as follows: SCHEDULE OF POTENTIAL FUTURE SHARES ISSUANCE OF CONVERSION NOTES September 30, December 31, 2023 2022 Principal $ 4,613,000 $ 4,613,000 Interest 652,000 309,000 Total 5,265,000 4,922,000 Conversion price per share 1.00 1.25 1.00 1.25 Potential future share 4,212,000 4,125,699 Interest expense on default convertible promissory notes amounted to $ 343,000 113,000 |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Sep. 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 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 600,000 1,900,000 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 |
STOCKHOLDERS DEFICIT
STOCKHOLDERS DEFICIT | 9 Months Ended |
Sep. 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 1,900,000 0.50 The Incentive Option shall vest and become exercisable as follows: (i) options to purchase up to 200,000 200,000 200,000 600,000 339 0.50 5 3.99 0 221,000 221,000 166,000 55,000 The Non-Qual Option shall vest and become exercisable as follows: (1) 216,666 216,668 (2) the remaining 1,250,000 a. 250,000 b. 250,000 c. 250,000 d. 500,000 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 $ 550,000 137 176 0.50 3.9 4.5 4.7 5.2 0 18,000 As of September 30, 2023, the Company had 2,500,000 7 0.50 0.47 Warrants During the nine months ending September 30, 2023, 89,804 1,678,500 1.86 0.39 0.47 |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 9 Months Ended |
Sep. 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. |
ORGANIZATION AND ACCOUNTING P_2
ORGANIZATION AND ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Sep. 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 10,000 100,000,000 89,000 100 |
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 December 31, 2022 condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by GAAP. These interim unaudited condensed consolidated financial statements, in the opinion of management, reflect all normal recurring adjustments necessary for a fair presentation of the financial position, results of operations and cash flows for the interim nine-month periods ended September 30, 2023 and 2022. The results for the nine months ended September 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 $ 514,000 15,164,000 no 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 services; the uncertainty of product development and generation of revenues; dependence on outside sources of financing; risks associated with research and development; dependence on third-party suppliers and collaborators; protection of intellectual property; and competition with larger, better-capitalized companies. Ultimately, the attainment of profitable operations is dependent on future events, including obtaining adequate financing to fund the Company’s operations and generating a level of revenues adequate to support the Company’s cost structure. The Company will need to raise debt or equity financing in the future in order to continue its operations and achieve its growth targets. However, there can be no assurance that such financing will be available in sufficient amounts and on acceptable terms, when and if needed, or at all. The precise amount and timing of the funding needs cannot be determined accurately at this time, and will depend on a number of factors, including the development of the Company’s 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 Securities that could potentially dilute loss per share in the future were not included in the computation of diluted loss per share for the three and nine months ended September 30, 2023 and 2022 because their inclusion would be anti-dilutive. Common share equivalents amounted to 14,495,621 |
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. |
ACCOUNTS PAYABLE AND ACCRUED _2
ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Tables) | 9 Months Ended |
Sep. 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 September 30, December 31, 2023 2022 Accounts payable $ 508,000 $ 186,000 Accrued expenses 193,000 28,000 Accrued interest 677,000 326,000 Accounts payable and accrued expenses $ 1,378,000 $ 540,000 |
SCHEDULE OF ACCRUED INTEREST | The following table presents the details of accrued interest as of the dates indicated: SCHEDULE OF ACCRUED INTEREST September 30, December 31, 2023 2022 Notes payable $ 23,000 $ 17,000 Convertible promissory notes 654,000 309,000 Balance, end of period $ 677,000 $ 326,000 |
NOTES PAYABLE (Tables)
NOTES PAYABLE (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Notes Payable | |
SCHEDULE OF NOTES PAYABLE | The table below summarizes the transactions as of the dates indicated: SCHEDULE OF NOTES PAYABLE September 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 |
CONVERTIBLE PROMISSORY NOTES (T
CONVERTIBLE PROMISSORY NOTES (Tables) | 9 Months Ended |
Sep. 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 September 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 September 30, December 31, 2023 2022 Principal $ 4,613,000 $ 4,613,000 Interest 652,000 309,000 Total 5,265,000 4,922,000 Conversion price per share 1.00 1.25 1.00 1.25 Potential future share 4,212,000 4,125,699 |
ORGANIZATION AND ACCOUNTING P_3
ORGANIZATION AND ACCOUNTING POLICIES (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||||||||
Nov. 05, 2021 | Sep. 30, 2023 | Jun. 30, 2023 | Mar. 31, 2023 | Sep. 30, 2022 | Jun. 30, 2022 | Mar. 31, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | Dec. 31, 2022 | |
Number of common shares authorized to issued | 100,000,000 | 100,000,000 | 100,000,000 | |||||||
Net loss | $ 98,000 | $ 217,000 | $ 199,000 | $ (10,500,000) | $ 4,174,000 | $ 3,926,000 | $ 514,000 | $ (2,399,000) | ||
Accumulated deficit | $ 15,164,000 | 15,164,000 | $ 14,650,000 | |||||||
Recurring revenue from operation | $ 0 | |||||||||
Antidilutive securities | 14,495,621 | |||||||||
KOREA, REPUBLIC OF | ||||||||||
Number of shares issued | 10,000 | |||||||||
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% |
DATA CENTER COSTS (Details Narr
DATA CENTER COSTS (Details Narrative) | 9 Months Ended | ||||
Jun. 23, 2023 USD ($) | Mar. 30, 2023 USD ($) a $ / shares shares | Sep. 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 | 1,232,000 | ||||
Interest expense | $ 113,000 | ||||
Payments to acquire asset | $ 525,000 | ||||
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 | ||||
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 | ||||
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 $2.00 per share. | ||||
Option Agreement [Member] | Secured Overnight Financing Rate (SOFR) Overnight Index Swap Rate [Member] | |||||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | |||||
Interest rate, stated percentage | 200% |
SCHEDULE OF ACCOUNTS PAYABLE AN
SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Details) - USD ($) | Sep. 30, 2023 | Dec. 31, 2022 |
Payables and Accruals [Abstract] | ||
Accounts payable | $ 508,000 | $ 186,000 |
Accrued expenses | 193,000 | 28,000 |
Accrued interest | 677,000 | 326,000 |
Accounts payable and accrued expenses | $ 1,378,000 | $ 540,000 |
SCHEDULE OF ACCRUED INTEREST (D
SCHEDULE OF ACCRUED INTEREST (Details) - USD ($) | Sep. 30, 2023 | Dec. 31, 2022 |
Payables and Accruals [Abstract] | ||
Notes payable | $ 23,000 | $ 17,000 |
Convertible promissory notes | 654,000 | 309,000 |
Balance, end of the year | $ 677,000 | $ 326,000 |
SCHEDULE OF NOTES PAYABLE (Deta
SCHEDULE OF NOTES PAYABLE (Details) - USD ($) | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2023 | Sep. 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 |
NOTES PAYABLE (Details Narrativ
NOTES PAYABLE (Details Narrative) - USD ($) | 9 Months Ended | ||||
Apr. 22, 2021 | Jul. 07, 2020 | Sep. 30, 2023 | Sep. 30, 2022 | Dec. 31, 2022 | |
Short-Term Debt [Line Items] | |||||
Accrued interest | $ 677,000 | $ 326,000 | |||
Promissory Note [Member] | |||||
Short-Term Debt [Line Items] | |||||
Debt instrument, face amount | $ 11,000 | 11,000 | |||
Increase in interest rate | 10% | ||||
Accrued interest | 5,000 | ||||
Interest expense, debt | 9,000 | $ 9,000 | |||
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% | ||||
Accrued interest | $ 18,000 | ||||
Debt instrument interest rate | 10% | ||||
Debt instrument, maturity date | Apr. 22, 2022 |
SCHEDULE OF CONVERTIBLE PROMISS
SCHEDULE OF CONVERTIBLE PROMISSORY NOTES (Details) - Convertible Notes Payable [Member] - USD ($) | 9 Months Ended | 12 Months Ended |
Sep. 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 |
SCHEDULE OF POTENTIAL FUTURE SH
SCHEDULE OF POTENTIAL FUTURE SHARES ISSUANCE OF CONVERSION NOTES (Details) - USD ($) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2023 | Dec. 31, 2022 | |
Debt Instrument [Line Items] | ||
Principal | $ 4,613,000 | $ 4,613,000 |
Interest | 652,000 | 309,000 |
Total | $ 5,265,000 | $ 4,922,000 |
Potential future share | 4,212,000 | 4,125,699 |
Minimum [Member] | ||
Debt Instrument [Line Items] | ||
Conversion price per share | $ 1 | $ 1 |
Maximum [Member] | ||
Debt Instrument [Line Items] | ||
Conversion price per share | $ 1.25 | $ 1.25 |
CONVERTIBLE PROMISSORY NOTES (D
CONVERTIBLE PROMISSORY NOTES (Details Narrative) - USD ($) | 9 Months Ended | |
Sep. 30, 2023 | Sep. 30, 2022 | |
Short-Term Debt [Line Items] | ||
Interest expense | $ 1,232,000 | |
Convertible Notes Payable [Member] | ||
Short-Term Debt [Line Items] | ||
Default interest expense | 343,000 | |
Interest expense | $ 113,000 | |
Convertible Notes Payable [Member] | Minimum [Member] | ||
Short-Term Debt [Line Items] | ||
Effective interest rate debt discount percentage | 4.76% | 4.76% |
Convertible Notes Payable [Member] | Maximum [Member] | ||
Short-Term Debt [Line Items] | ||
Effective interest rate debt discount percentage | 64.60% | 64.60% |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($) | 1 Months Ended | 9 Months Ended |
Jun. 30, 2023 | Sep. 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 |
STOCKHOLDERS DEFICIT (Details N
STOCKHOLDERS DEFICIT (Details Narrative) - USD ($) | 1 Months Ended | 3 Months Ended | 9 Months Ended | |
Jun. 30, 2023 | Sep. 30, 2023 | Sep. 30, 2023 | Sep. 30, 2022 | |
Subsidiary, Sale of Stock [Line Items] | ||||
Stock option plan expense | $ 221,000 | |||
Stock based compensation capitalized as data center cost | 166,000 | |||
Compensation expense | $ 55,000 | |||
Stock options outstanding | 2,500,000 | 2,500,000 | ||
Average remaining life | 7 years | |||
Remaining outstanding balance | 1,678,500 | 1,678,500 | ||
Weighted average exercise price | $ 1.86 | $ 1.86 | ||
Average remaining life | 4 months 20 days | 4 months 20 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 | ||
Volatality percentage | 339% | |||
Estimated life | 5 years | |||
Risk free rate | 3.99% | |||
Dividend rate | 0% | |||
Common Stock [Member] | First Anniversary Grant Date [Member] | ||||
Subsidiary, Sale of Stock [Line Items] | ||||
Common stock vested and exercised | 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 | ||
Common Stock [Member] | Third Anniversary Grant Date [Member] | ||||
Subsidiary, Sale of Stock [Line Items] | ||||
Common stock vested and exercised | 200,000 | 200,000 | ||
Warrant [Member] | ||||
Subsidiary, Sale of Stock [Line Items] | ||||
Weighted average fair value | $ 0.47 | |||
Warrant shares expired | 89,804 | |||
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 | ||
Granted option fair value | $ 550,000 | $ 550,000 | ||
Dividend rate | 0% | |||
Volatality percentage, minimum | 137% | |||
Volatality percentage, maximum | 176% | |||
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 | ||
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 |