What changed in this filing

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Item 1. Financial Statements

2022-11-14 compared with 2022-08-15 · 278 added, 264 removed, 319 unchanged (63% of the section changed)

Financial Statements

the Six Months Ended June 30, 2022

the Nine Months Ended September 30, 2022

to the Condensed Consolidated Financial Statements

Condensed Consolidated Balance Sheets as of June 30, 2022 (unaudited) and December 31, 2021

Unaudited Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2022 and 2021

Unaudited Condensed Consolidated Statements of Stockholders’ Deficit for the three and six months ended June 30, 2022 and 2021

Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2022 and 2021

Unaudited Condensed Notes to the Consolidated Financial Statements

Condensed Consolidated Balance Sheets as of September 30, 2022 (unaudited) and December 31, 2021

Unaudited Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2022 and 2021

Condensed Consolidated Statements of Stockholders’ Deficit for each of the three quarters ended September 30, 2022 and

Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021

to the Unaudited Condensed Consolidated Financial Statements

NOTE REGARDING FORWARD-LOOKING STATEMENTS

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Consolidated Balance Sheets

As of June 30,

As of December 31,

September 30,

Current assets

Cash and cash equivalents

Prepaid expenses

Prepaid and other current expenses

Total current assets

2 unchanged sentences

Accounts payable and accrued expenses

Notes payable

Convertible promissory notes, net

Total liabilities

Commitments and contingencies (Note 6)

Notes payable

Total current liabilities

Stockholders’ deficit

4 unchanged sentences

Preferred stock, value

Common stock, par value $ 0.001 , 100,000,000 shares authorized;

25,995,621 shares issued and outstanding

Common stock par value $ 0.001 :

100,000,000 shares authorized;

14,495,621 and 25,995,621 shares issued and outstanding

Additional paid-in capital

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Condensed Consolidated Statements of Operations

For the Three Months Ended

For the Six Months Ended

Operating expenses

Professional fees

Stock based compensation

General and administrative expenses

Impairment loss

Total operating expenses

Loss from operations

the three months ended

September 30,

the nine months ended

September 30,

( 11,168,000 )

( 4,791,000 )

Other expenses

Financing costs

and administrative expenses

(income) expenses

( 11,008,000 )

Total other expenses

( 4,020,000 )

Income(loss) from operations

( 1,876,000 )

( 2,587,000 )

income (expenses)

( 1,622,000 )

other expense

( 1,621,000 )

(loss) before provision for income taxes

1 unchanged sentence

( 2,813,000 )

Provision for income taxes

for income taxes

income (loss)

$ ( 2,063,000 )

$ ( 2,813,000 )

Other comprehensive (loss) income

Comprehensive loss

Net income (loss) per share - basic

Net income (loss) per share - diluted

Weighted average common shares outstanding - Basic

Weighted average common shares outstanding - diluted

Comprehensive

income (loss)

$ ( 2,063,000 )

$ ( 2,813,000 )

currency translation adjustment

Comprehensive

income (loss)

$ ( 2,063,000 )

$ ( 2,813,000 )

Net loss per share

Weighted average common shares outstanding:

Basic and diluted

accompanying notes to these Unaudited Condensed Consolidated Financial Statements.

Condensed Consolidated Statements of Stockholders’ Deficit

the Three and Six Months Ended June 30, 2022

the Nine Months Ended September 30, 2022

Series A convertible preferred stock

Preferred Stock

Comprehensive

Stockholders’

January 1, 2022

Stockholders Equity

Income (Loss)

Balance, January 1, 2022

$ ( 16,831,000 )

$ ( 540,000 )

based compensation on restricted stock awards

currency translation loss

Restricted stock grants

Forgein currency translation income (loss)

( 3,926,000 )

March 31, 2022

Balance, March 31, 2022

( 20,757,000 )

( 1,299,000 )

based compensation on restricted stock awards

currency translation income

Restricted stock grants

Forgein currency translation income (loss)

( 4,174,000 )

June 30, 2022

Balance, June 30, 2022

( 24,931,000 )

( 2,265,000 )

the Three and Six Months Ended June 30, 2021

Preferred Stock

Forfeiture of stock-based compensation

( 11,500,000 )

( 11,157,000 )

( 11,168,000 )

Forgein currency translation income (loss)

Balance, Sep 30, 2022

$ ( 14,431,000 )

$ ( 2,913,000 )

For the Nine Months Ended September 30, 2021

Series A convertible preferred stock

Preferred Stock

Stock Subscription

Comprehensive

Stockholders’

Stockholders Equity

Income (Loss)

Balance, January 1, 2021

1 unchanged sentence

$ ( 1,323,000 )

Relative fair value of warrants issued with convertible promissory note

Relative fair value of warrants issued with convertible promissory notes

Stock options issued for services

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Stock options issued for services

Stock issued on exercise for warrants

Stock issued on exercise of warrants

Balance June 30, 2021

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( 1,289,000 )

Relative fair value of warrants issued with convertible promissory notes

Stock-based compensation

Restricted stock grants

( 2,063,000 )

Balance September 30, 2021

$ ( 12,895,000 )

accompanying notes to these Unaudited Condensed Consolidated Financial Statements.

Condensed Consolidated Statements of Cash Flows

the Six Months Ended June 30,

For the nine months ended

September 30,

Cash Flows From Operating Activities

$ ( 2,813,000 )

$ ( 750,000 )

Adjustments to reconcile net loss to net cash used in operating activities:

Impairment of intangible and other assets

Amortization of convertible promissory note discounts

Fair value of equity-based compensation

Forfeiture of restricted stock grants

( 11,168,000 )

Accretion of compensation cost for restricted stock awards

Changes in operating assets and liabilities

Prepaid expenses

Prepaid expenses and other current assets

Accounts payable and accrued expenses

Net Cash Used in Operating Activities

Cash flows from investing activity

Net cash used in investing activity

Cash Flows From Investing Activities

Net Cash Used in Investing Activities

Cash Flows From Financing Activities

1 unchanged sentence

Proceeds from the issuance of notes payable

Proceeds from the exercise of warrants

Repayment of notes payable

Net cash provided by (used in) financing activities

Repayments of Notes

Net Cash (Used in) Provided by Financing Activities

Effect of exchange rate changes on cash and cash equivalents

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accompanying notes to these Unaudited Condensed Consolidated Financial Statements.

Condensed Notes to the Consolidated Financial Statements

to Unaudited Condensed Consolidated Financial Statements

1 – Organization and Accounting Policies

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(the “Company” or “we”) was incorporated on March 20, 2002 under the laws of the State of Nevada.

of June 30, 2022, the Company’s principal business had been the development of, with a plan to manufacture, high-performance computer

systems that are scalable, upgradeable and cost effective for processing cryptocurrencies, tokens and blockchain-based transactions.

The Company had also been developing a plan to build a clean-energy-powered, containerized, immersion-cooled data center that the Company

would use for crypto-currency mining and to provide data center colocation services to other mining and enterprise customers.

if other opportunities warranted, the Company planned to acquire assets and all or part of other companies operating in the high-density

computing industry or to invest or joint venture with other more-established companies already in the industry that would add value to

the Company’s business strategy.

July 2022, due to the declining state of the bitcoin mining industry and market, the Company’s board of directors resolved to discontinue

the development in South Korea of the Company’s 5 nanometer ASIC chip and containerized, immersion-cooled bitcoin mining computer

system and to focus exclusively on developing the clean-energy-powered data center segment of its business strategy.

Company is implementing its plan to build a clean-energy-powered, containerized, immersion-cooled data center that provides wholesale

colocation data center services to enterprise IT and hyperscale customers.

In addition, the Company may acquire assets and all or part

of other companies operating in the high-density computing industry or to invest or joint venture with other more-established companies

already in the industry that would add value to the Company’s business strategy.

July 2022, due to the declining state of the bitcoin mining industry and market for its planned products, the Company’s board

of directors resolved to discontinue the development in South Korea of the Company’s 5 nanometer ASIC chip and containerized,

immersion-cooled bitcoin mining computer system and to focus exclusively on developing the clean-energy-powered data center segment

of its business strategy.

The Company has suspended operations of its South Korean subsidiary and will decide in the next

twelve months whether to use it to develop other products or dissolve it.

to Certificate of Incorporation

1 unchanged sentence

name to AIQ Blockchain, Inc.

The name change has not yet been effected, and on July 2022, FINRA was notified that CalEthos was no longer changing

its name or symbol and that the application was being withdrawn.

Incorporation

of Korean entity

The name change has not yet been effected, and on July 2022, FINRA was notified that the Company was no longer

changing its name or symbol and that the application was being withdrawn.

November 5, 2021, AIQ System Inc.

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$ 89,000 for 100 % ownership of AIQ.

is in the business of (1) developing and manufacturing computer chips and system, (2) importing and exporting semiconductors and electronic

products, (3) wholesale and retail business of semiconductors and electronic products, and (4) any and all business activities incidental

to the foregoing activities.

of Presentation

1 unchanged sentence

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.

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 six-months period ended June 30, 2022 and 2021.

The results for the six months ended June 30, 2022 are not necessarily

indicative of the results to be expected for the full year ending December 31, 2022 or for any future period.

unaudited Condensed Consolidated Financial Statements should be read in conjunction with our audited Consolidated Financial Statements

have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and

pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”).

Certain information and note

disclosures normally included in the Company’s annual financial statements have been condensed or omitted.

The September 30, 2022

condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required

These interim unaudited condensed consolidated financial statements, in the opinion of management, reflect all normal recurring

adjustments necessary for a fair presentation of the financial position, results of operations and cash flows for the interim nine-months

period ended September 30, 2022 and 2021.

The results for the nine months ended September 30, 2022 are not necessarily indicative of

the results to be expected for the full year ending December 31, 2022 or for any future period.

unaudited Condensed Consolidated Financial Statements should be read in conjunction with the Company’s audited Consolidated Financial Statements

and the notes thereto for the year ended December 31, 2021, included in the Company’s annual report on Form 10-K filed with the

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and Going Concern

Company incurred a net loss of approximately $ 8,100,000 for the six months ended June 30, 2022 and had an accumulated deficit of approximately

$ 24,931,000 as of June 30, 2022.

Company incurred net income of approximately $ 2,399,000

for the nine months ended September 30, 2022, of which $ 4,791,000

was attributable to a non cash transaction for the reversal of compensation for restricted stock units, and had an accumulated deficit of approximately $ 14,431,000

as of September 30, 2022.

The Company has financed its activities principally through debt and equity financing and shareholder

contributions.

Management expects to incur additional losses and cash outflows in the foreseeable future in connection with its operating

Management expects to incur additional losses and cash outflows in the foreseeable future in connection with its

operating activities.

Company’s condensed consolidated financial statements have been presented on a going concern basis, which contemplates the realization

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stock equivalents would have the effect of being anti-dilutive in the computation of net loss per share.

that could potentially dilute loss per share in the future were not included in the computation of diluted loss per share for the six

months ended June 30, 2022 and 2021 because their inclusion would be anti-dilutive.

Common share equivalents amounted to 18,920,915 and

1,525,214 as of June 30, 2022 and 2021, respectively.

Accounting Pronouncements

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or “PICOCEL”) to develop a FPGA based Bitcoin mining simulation system.

The Agreement is expected to be completed within

6 weeks for a total contract price of 198,000,000

Korean Won (“KRW”) or approximately

Total payments made to PICOCEL as of June 30, 2022 amounted to approximately $ 69,000 .

On March 17, 2022, the Company and PICOCEL entered into a mutual agreement to cancel and terminate the Agreement.

As of the date of the

termination, PICOCEL has completed the first phase of the Agreement upon delivery of the SHA-256 code and FPGA board simulator resulting

in a reclassification of deposits amounting to $ 69,000

under other assets to intangible assets as of

June 30, 2022.

The Agreement was expected to be completed within

6 weeks for a total contract price of 198,000,000 Korean Won (“KRW”) or approximately $ 167,000 .

Total payments made to PICOCEL

as of September 30, 2022 amounted to approximately $ 69,000 .

On March 17, 2022, the Company and PICOCEL entered into a mutual agreement

to cancel and terminate the Agreement.

As of the date of the termination, PICOCEL had completed the first phase of the Agreement upon

delivery of the SHA-256 code and FPGA board simulator.

April 5, 2022, AIQ entered into a Technology Development Agreement (the “Agreement”) with NNS, Co., Ltd.

1 unchanged sentence

or “NNS”) to develop a FPGA based Bitcoin mining simulation system.

The Agreement is expected to be completed within 9 weeks

The Agreement was expected to be completed within 9 weeks

for a total contract price of 99,000,000 KRW, including 9,000,000 KRW VAT, or approximately $ 82,000 .

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Within 5 days after all conditions are met as stated in “Schedule B – Statement of Work”

of 90,000,000 KRW or approximately $ 69,000 was made to NNS as of June 30, 2022 which is presented as other assets in the condensed consolidated

balance sheet.

During the six months ended June 30, 2022, the Bitcoin

market was in a constant decline, and since the ASIC chip being developed by AIQ was planned to be used for Bitcoin mining machines, management

believes that there is an impairment indicator as of June 30, 2022.

Management plans to discontinue the operations of AIQ subsequent to

June 30, 2022 and no more future cash flows are expected from AIQ.

See Note 8 – Subsequent Events for more details.

of 90,000,000 KRW or approximately $ 69,000 was made to NNS as of September 30, 2022 which was expensed and included in in the condensed

consolidated statement of operations.

the six months ended June 30, 2022, the Bitcoin market was in a constant decline, and since the ASIC chip being developed by AIQ was

planned to be used for Bitcoin mining machines, management believes that there is an impairment indicator as of June 30, 2022.

plans to discontinue the operations of AIQ subsequent to June 30, 2022 and no more future cash flows are expected from AIQ.

of impairment include significant underperformance relative to historical or projected future operating results, significant changes

1 unchanged sentence

or economic trends.

When indications of impairment arise for a particular asset or group of assets, we assess the future

recoverability of the carrying value of the asset (or asset group) based on an undiscounted cash flow analysis.

If the carrying

value exceeds projected, net, undiscounted cash flows, an additional analysis is performed to determine the asset’

(or asset group), typically a discounted cashflow analysis, and an impairment charge is recorded for the excess of carrying value

over fair value.

of June 30, 2022, intangibles and other assets were fully impaired.

Impairment loss amounted to $ 154,000 ,

inclusive of a $ 12,000 impairment of prepaid VAT related to the services provided by PICOCEL and NNS.

table below summarizes the impairment loss for the six months ended June 30, 2022:

When indications of impairment arise for a particular asset or group of assets, we assess the future recoverability

of the carrying value of the asset (or asset group) based on an undiscounted cash flow analysis.

If the carrying value exceeds projected,

net, undiscounted cash flows, an additional analysis is performed to determine the asset’ (or asset group), typically a discounted

cashflow analysis, and an impairment charge is recorded for the excess of carrying value over fair value.

of September 30, 2022, intangibles and other assets were fully impaired.

Impairment loss amounted to $ 154,000 , inclusive of a $ 12,000

impairment of prepaid VAT related to the services provided by PICOCEL and NNS.

table below summarizes the impairment loss for the nine months ended September 30, 2022:

SCHEDULE OF IMPAIRMENT LOSS

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SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUED EXPENSES

September 30,

Accounts payable

4 unchanged sentences

SCHEDULE OF ACCRUED INTEREST

September 30,

Notes payable

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SCHEDULE OF NOTES PAYABLE

September 30,

Balance, beginning of the year

Balance, end of the year

On July 7, 2020, the Company issued a promissory note

in the principal amount of $ 11,000 .

July 7, 2020, the Company issued a promissory note in the principal amount of $ 11,000 .

The note is noninterest bearing.

The principal is due on or before March 11, 2022.

During any event

of default under the note, the interest rate shall increase to 10 % per annum.

Events of default include failure to pay principal or interest,

breach of covenants, breach of representations and warranties, borrower’s assignment of substantial part of its property or business,

any money judgment, writ, or similar process shall be entered or filed against the borrower or any subsidiary of the borrower or any of

its properties or other assets for more than $ 100,000 , bankruptcy, liquidation of business, and cessation of operations.

The principal

amount outstanding under this note was $ 11,000 as of June 30, 2022.

Interest accrued as of June 30, 2022 is $ 2,000 .

January 11, 2021, the Company issued a promissory note in the principal amount of $ 15,000 .

The interest on this note shall accrue beginning

from the date of issuance, at an interest rate of 8 % per annum.

The principal and any accrued interest are payable on or before March

During any event of default under the note, the interest rate shall increase to 10 % per annum.

Events of default include failure

to pay principal or interest, breach of covenants, breach of representations and warranties, borrower’s assignment of substantial

part of its property or business, any money judgment, writ, or similar process shall be entered or filed against the borrower or any

subsidiary of the borrower or any of its properties or other assets for more than $ 100,000 , bankruptcy, liquidation of business, and

cessation of operations.

The principal and the accrued interest amounting to $ 15,000 and $ 1,000 , respectively, was settled on October

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 %

Events of default include failure to pay principal or interest, breach of covenants, breach of representations and

warranties, borrower’s assignment of substantial part of its property or business, any money judgment, writ, or similar

process shall be entered or filed against the borrower or any subsidiary of the borrower or any of its properties or other assets

for more than $ 100,000 ,

bankruptcy, liquidation of business, and cessation of operations.

The principal amount outstanding under this note was $ 11,000

as of September 30, 2022.

The note principal and interest are past due, therefore in default.

For the nine months ended September

30, 2022 the Company has accrued approximately $ 2,000

of default interest.

February 19, 2021, the Company issued a promissory note in the principal amount of $ 25,000 .

The interest on the unpaid principal balance

accrues at a rate of 10 % per annum.

The principal and any accrued interest shall be paid in a single installment on or before February

accrued at a rate of 10 % per annum.

The principal and any accrued interest was to be paid in a single installment on or before February

If the Company fails to pay the balance of this note in full on the due date or fails to make any payment due within 15 days

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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 8 % per annum.

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 8 % per annum during the default.

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 accrued interest under this note was settled on September 16, 2021.

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 shall be paid in a single installment on or before April 22,

If the Company fails to pay the balance of this note in full on the date or fails to make any payments due within 15 days of the

due date, any unpaid principal shall accrue interest at the rate of 15 % per annum during the default.

Events of default include failure

to make any payment including accrued interest when due, voluntary, or involuntary petition of bankruptcy, appointment of a receiver,

custodian, trustee or similar party to take possession of the Company’s assets or property, or assignment made by the Company for

the benefit of creditors.

The principal amount outstanding under this note was $ 50,000 as of June 30, 2022.

Interest accrued as of June

30, 2022 is $ 7,000 .

July 1, 2021, the Company issued a promissory note in the principal amount of $ 25,000 .

The interest on the unpaid principal balance accrues

at a rate of 10 % per annum.

The principal and any accrued interest shall be paid in a single installment on or before July 1, 2022 .

the Company fails to pay the balance of this note in full on the date or fails to make any payments due within 15 days of the due date,

any unpaid principal shall accrue interest at the rate of 15 % per annum during the default (default interest).

Events of default include

failure to make any payment including accrued interest when due, voluntary, or involuntary petition of bankruptcy, appointment of a receiver,

custodian, trustee or similar party to take possession of the Company’s assets or property, or assignment made by the Company for

the benefit of creditors.

The principal amount outstanding under this note was $ 25,000 as of June 30, 2022.

Interest accrued as of June

30, 2022 is $ 2,000 .

The interest on the unpaid principal balance accrued at a rate of 10 %

The principal and any accrued interest was to be paid in a single installment on or before April

If the Company fails to pay the balance of this note in full on the date or fails to make any payments due within

15 days of the due date, any unpaid principal shall accrue interest at the rate of 15 %

per annum during the default.

Events of default include failure to make any payment including accrued interest when due, voluntary,

or involuntary petition of bankruptcy, appointment of a receiver, custodian, trustee or similar party to take possession of the

Company’s assets or property, or assignment made by the Company for the benefit of creditors.

The principal amount outstanding

under this note was $ 50,000

as of September 30, 2022.

The note principal and interest are past due, therefore in default.

Interest accrued, including default

interest, as of September 30, 2022 is $ 8,000 .

July 1, 2021, the Company issued a promissory note in the principal amount of $ 25,000 .

The interest on the unpaid principal balance accrues

at a rate of 8 % per annum.

The principal and any accrued interest shall be paid in a single installment on or before October 12, 2021 .

The principal amount of this note was settled on September 16, 2021.

August 10, 2021, the Company issued a promissory note in the principal amount of $ 7,000 .

The interest on the unpaid principal balance

accrues at a rate of 8 % per annum.

The principal and any accrued interest shall be paid in a single installment on or before November

10, 2021 .The principal amount of this note was settled on September 16, 2021.

August 2021, the Company issued four promissory notes to a single lender in the aggregate principal amount of $ 14,000 .

The interest on

the unpaid principal balance of these notes accrues at a rate of 8 % per annum.

The principal for each note shall be paid in a single

installment during November 2021.

If the Company fails to pay the balance of these notes 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 8 % per annum during the default.

of default include failure to make any payment including accrued interest when due, voluntary, or involuntary petition of bankruptcy,

appointment of a receiver, custodian, trustee, or similar party to take possession of the Company’s assets or property, or assignment

made by the Company for the benefit of creditors.

The principal amount outstanding under these notes was $ 13,500 as of September 30,

The principal and the accrued interest aggregating to $ 14,000 was settled in October 2021.

expense on notes payable amounted to $ 6,000 and $ 3,000 for the six months ended June 30, 2022 and 2021, respectively.

The interest on the unpaid principal balance accrues at a rate of 10 %

The principal and any accrued interest was to be paid in a single installment on or before July

If the Company fails to pay the balance of this note in full on the date or fails to make any payments due within 15

days of the due date, any unpaid principal shall accrue interest at the rate of 15 %

per annum during the default (default interest).

Events of default include failure to make any payment including accrued interest

when due, voluntary, or involuntary petition of bankruptcy, appointment of a receiver, custodian, trustee or similar party to take

possession of the Company’s assets or property, or assignment made by the Company for the benefit of creditors.

The principal

amount outstanding under this note was $ 25,000

as of September 30, 2022.

The note principal and interest are past due, therefore in default.

Interest accrued, including default

interest, as of September 30, 2022 is $ 3,000 .

expense on notes payable amounted to $ 3,000

for the three and nine months ended September 30, 2022, respectively, and $ 4,000 and $ 8,000 for the three and nine months ended September 30,

2021, respectively.

5 – Convertible Promissory Notes

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maturity will accrue interest at rate of 10 % per annum (default interest).

Interest accrued as of June 30, 2022 is $ 2,000 .

The principal

amount and all accrued interest are convertible into shares of the Company’s common stock, as of the date of issuance, at a rate

of $ 1.00 and $ 1.25 per share (“Conversion Rate”), respectively.

The Conversion Rate is adjustable if, at any time when any

principal amount of the Notes remains unpaid or unconverted, the Company issues or sells any shares of the Company’s common stock

for no consideration or for a consideration per share (before deduction of reasonable expenses or commissions or underwriting discounts

Interest accrued as of September 30, 2022 is $ 35,000 .

principal amount and all accrued interest are convertible into shares of the Company’s common stock, as of the date of issuance,

at a rate of $ 1.00 and $ 1.25 per share (“Conversion Rate”), respectively.

The Conversion Rate is adjustable if, at any time

when any principal amount of the Notes remains unpaid or unconverted, the Company issues or sells any shares of the Company’s common

stock for no consideration or for a consideration per share (before deduction of reasonable expenses or commissions or underwriting discounts

or allowances in connection therewith), which is less than the Conversion Rate in effect on the date of such issuance (or deemed issuance)

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or termination of the business of the Company .

The note principal and interest are past due, therefore in default.

connection with the issuance of the Notes, the Company issued to the purchasers of the Notes stock purchase warrants (the “Warrants”)

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derivative in accordance with ASC 815-15 Derivatives and Hedging .

cost recognized for the amortization of debt discount was approximately $ 1,071,000 and $ 7,000 for the six months ended June 30, 2022

cost recognized for the amortization of debt discount was approximately $ 1,526,000 and $ 170,000 for the nine months ended September 30,

2022 and 2021, respectively.

1 unchanged sentence

SCHEDULE OF CONVERTIBLE PROMISSORY NOTES

September 30,

Balance, beginning of year

Balance, end of year

Balance, end of period

Balance, beginning of year

( 1,526,000 )

Balance, end of year

Balance, end of period

Net carrying amount

interest rate used to amortize the debt discount for the six months ended June 30, 2022 and 2021 ranges from 4.76 % to 64.60 %.

The unamortized

debt discounts will be amortized within one year as of June 30, 2022 and 2021, respectively.

interest rate used to amortize the debt discount for the nine months ended September 30, 2022 and 2021 ranges from 4.76 % to 64.60 %.

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,

Conversion price per share

Potential future share

expense on default convertible promissory notes amounted to $ 37,000 and $ 30,000 for the six months ended June 30, 2022 and 2021, respectively.

default interest expense for the convertible promissory notes amounted to $ 88,000 and $ 48,000 for the nine months ended September 30,

2022 and 2021, respectively.

6 – Commitments and contingencies

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and other wage-related claims.

In the complaint, the plaintiff claims he worked under a consulting agreement as Vice President of Brand

In the complaint, the plaintiff claimed he worked under a consulting agreement as Vice President of Brand

Management of our company and was to be paid $ 4,000 per month and to receive an option to purchase 50,000 shares of our common stock

that was to vest quarterly over the term of the agreement.

In the complaint, the plaintiff alleges that, on or around March 27, 2020,

we ceased paying the plaintiff despite the plaintiff’s continuing efforts on behalf of our company and that we agreed to continue

to accrue his monthly retainer amount until such time that we received at least $ 100,000 in funding.

Plaintiff further alleges that he

In the complaint, the plaintiff alleged that, on or around March 27, 2020,

the Company ceased paying the plaintiff despite the plaintiff’s continuing efforts on behalf of our company and that the Company agreed to continue

to accrue his monthly retainer amount until such time that the Company received at least $ 100,000 in funding.

Plaintiff further alleged that he

continued to work for our company for 38 additional weeks in reliance on our promise of payment.

The plaintiff claims that our refusal

The plaintiff claimed that our refusal

to make the promised payments amounts to violations of the California labor laws and seeks damages in excess of $ 450,000 .

5 unchanged sentences

STOCKHOLDERS DEFICIT

January 2021, the Company’s President and a member of the Board of Directors, resigned as an officer and director of the Company

(“Termination Agreement”).

Part of the Termination Agreement stipulates the return of 3,674,330 shares of the Company’s

common stock (“Cancelled Shares”).

The Cancelled Shares were returned and cancelled on April 20, 2021.

March 2021, the Company’s Chief Executive Officer (“CEO’) agreed to forgive approximately $ 68,000 due to him, which

was treated as contributed paid in capital.

March 2021, the Company’s Chief Financial Officer agreed to reduce the amounts due to him from approximately $ 128,000 to $ 30,000 .

For the reduction of $ 98,000 , the Company will issue 75,000 shares of common stock.

The remaining liability of $ 30,000 will be paid in

Common Stock Awards

1 unchanged sentence

pursuant to which the Company issued to the consultants shares of common stock of the Company in exchange for their future services.

The Awards have an initial term of one year, which shall be automatically renewed on a year-to-year basis unless either party gives a

The Awards had an initial term of one year, which was to be automatically renewed on a year-to-year basis unless either party gave a

written notice of termination.

2 unchanged sentences

entity, which is owned by the Company’s CEO and majority shareholder, was granted 1,500,000 restricted share awards.

Company’s management has accounted for the Award Grants as restricted stock compensation 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 two development phases will be completed within 15 months and the Foundry Mask

will be completed within 6 months for a total of 21 months service period.

Compensation cost will be recognized ratably over 21 months

and in the same manner had the Company paid in cash.

The estimated service period will be adjusted for changes in actual and expected

completion dates.

Any such change will be recognized prospectively, and the remaining deferred compensation will be recognized over the

remaining service period.

of June 30, 2022, a total of 11,500,000 shares were issued to the consultants.

The value was $ 1.93 per share on the date of issuance

(“Grant Date”) for an aggregate fair value of $ 22,195,000

The Company’s management accounted for the Award Grants as restricted

stock compensation in accordance with ASC 718 – Stock Compensation (“ASC 718”).

ASC 718 required the Company to estimate

the service period over which the compensation cost would be recognized.

Management had estimated that the first two development phases

would be completed within 15 months and the Foundry Mask would be completed within 6 months for a total of 21 months service period.

cost was to be recognized ratably over 21 months and in the same manner had the Company paid in cash.

The estimated service period would

be adjusted for changes in actual and expected completion dates.

Any such change was to be recognized prospectively, and the remaining

deferred compensation was to be recognized over the remaining service period.

Company issued restricted stock grants totaling 10,000,000

shares to Hyuncheol (Peter) Kim, the Company’s former Chief Technology Officer, and 1,500,000

to a M1 Advisors LLC, a company owned by the Company’s chief executive officer.

The value was $ 1.93

per share on the date of issuance (“Grant Date”) for an aggregate fair value of $ 22,195,000

stock-based award compensation was recorded as an increase in deferred compensation expense, common stock, and additional paid-in capital

in the Company’s books at the time of the grant.

table below summarizes the transactions related to the Company restricted stock awards as of June 30, 2022:

July 27, 2022, the Company sent Hyuncheol (Peter) Kim, the Company’s former Chief Technology Officer, a letter notifying him

that the Company’s Board of Directors had resolved to discontinue the Company’s 5 nanometer ASIC chip and bitcoin mining

machine project and that his consulting agreement will terminate at the end of August 2022.

The restricted stock grant issued in

connection with the consulting agreement will also be cancelled.

at the end of August 2022, the Company cancelled the restricted stock grant issued to M1 Advisors LLC.

table below summarizes the transactions related to the Company restricted stock awards as of September 30, 2022:

SCHEDULE OF COMPANY RESTRICTED STOCK AWARDS

1 unchanged sentence

( 11,168,000 )

Balance as of June 30, 2022

based compensation expense for the three and six months ended June 30, 2022 amounted to $ 3,206,000

and $ 6,376,000 ,

respectively.

Stock based compensation expense for the three and six months ended June 30, 2021 amounted to $ 561,000 and $ 575,000 ,

respectively.

of June 30, 2022, a total of 253,000 warrants expired.

( 11,500,000 )

( 11,027,000 )

Balance as of September 30, 2022

stock grant compensation expense for the three and nine months ended September 30, 2022, is as follows:

OF RESTRICTED STOCK GRANT COMPENSATION EXPENSE

September 30,

2022 Accretion expense

Reversal of 2021 accretion expense

( 4,791,000 )

Reversal of 2022 accretion expense

( 6,377,000 )

Restricted stock grant compensation

$ ( 11,168,000 )

$ ( 4,791,000 )

of September 30, 2022, a total of 253,000 warrants expired.

8 – Earnings (Loss) Per Share

(LOSS) PER SHARE

following table sets forth the computation of basic and diluted earnings (loss) per share

OF EARNINGS PER SHARE BASIC AND DILUTED

For the three Months Ended September 30,

For the Nine Months Ended September 30,

Net income (loss)

$ ( 2,063,000 )

$ ( 2,813,000 )

Effect of dilutive instruments

Convertible notes interest expense

Numerator for diluted EPS

( 2,063,000 )

( 2,813,000 )

Denominator - for basic EPS

Effect of dilutive instruments

Convertible notes

Dilutive potential common shares

Denominator for diluted EPS

that could potentially dilute loss per share in the future were not included in the computation of diluted loss per share for the

three and nine months ended September 30, 2021 because their inclusion would be anti-dilutive.

Common share equivalents amounted to 3,942,608

for warrants, 4,612,607

for convertible notes and 11,500,000

for restricted stock units for total of 20,055,215

as of September 30, 2021.

For the three and nine months ended September 30, 2022, the Company had

4,777,276 dilutive securities.

9 – Subsequent Events

2 unchanged sentences

to determine if they must be reported.

The management of the Company determined the following reportable events:

July 25, 2022, the Board of Directors of the Company resolved to discontinue the development of the Company’s 5 nanometer

ASIC chip and bitcoin mining machines, to close its South Korean subsidiary, AIQ Systems, Inc., and to pursue other opportunities to

provide solutions for the high-density computing industry, including the development of a clean-energy-powered, containerized, immersion-cooled

July 27, 2022, the Company sent Hyuncheol (Peter) Kim, the Company’s Chief Technology Officer, a letter notifying him that the

Company’s Board of Directors had resolved to discontinue the Company’s 5 nanometer ASIC chip and bitcoin mining machine project

and that his consulting agreement will terminate at the end of August 2022.

Restricted shares issued in connection with the consulting agreement will also be cancelled.

The management of the Company determined there are no reportable events.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements