What changed in this filing

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Item 9A. Controls and Procedures

2025-04-02 compared with 2024-04-09 · 791 added, 614 removed, 932 unchanged (60% of the section changed)

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Prior to INVO Bioscience,

Shun served as Chief Financial Officer of Eastside Distilling (NASDAQ:

Shum served as Chief Financial Officer of Eastside Distilling (NASDAQ:

EAST) from October 2015 to November 2019.

Prior to joining

Eastside, Mr.

Eastside, from October 2008 until April 2015, Mr.

Shum was an employee and a member of the board of directors of XZERES Corp.

(OTCQB:XPWR), a global renewable energy company,

from October 2008 until April 2015, where he served in various officer roles, including Chief Operating Officer from September 2014 until

(OTCQB:XPWR),

a global renewable energy company, where he served in various officer roles, including Chief Operating Officer from September 2014 until

April 2015, Chief Financial Officer, Principal Accounting Officer and Secretary from April 2010 until September 2014 (under former name,

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do not have a standing Compensation Committee.

Presently, the salary and benefits of our executive officers are determined by our

entire board of directors.

As we continue to develop our data center and commence selling colocation services, we expect to

increase the size of our board to include independent directors who will approve the compensation arrangements with our executive officers.

Presently, the salary and benefits of our executive officers are determined by our entire

board of directors.

As we continue to develop our data center and commence selling colocation services, we expect to increase the size

of our board to include independent directors who will approve the compensation arrangements with our executive officers.

also do not have a Nominating Committee as we have not adopted any procedures by which security holders may recommend nominees to our

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of this Annual Report.

Delinquent Section

16(a) Reports

Section 16(a) of the Exchange

Act requires our executive officers, directors and persons who beneficially own more than 10% of our common stock to file with the SEC

reports of their ownership and changes in their ownership of our common stock.

To our knowledge, based solely on review of the copies

of such reports and amendments to such reports with respect to the year ended December 31, 2023 filed with the SEC, all required Section

16 reports under the Exchange Act for our directors, executive officers and beneficial owners of greater than 10% of our common stock

were filed on a timely basis during the year ended December 31, 2023, except for (i) late Form 3 filings for Joel Stone and Dean Skupen,

(ii) late Form 4 filings for Michael Campbell, Sean Fortenot and Steven Shum, and (iii) late Schedule 13D filings for Michael Campbell

and Sean Fortenot.

As of the date of the filing of this annual report, all such Form 3, Form 4 and Schedule 13D filings have been made.

Section 16(a) Reports

16(a) of the Exchange Act requires our executive officers, directors and persons who beneficially own more than 10% of our common

stock to file with the SEC reports of their ownership and changes in their ownership of our common stock.

To our knowledge, based

solely on review of the copies of such reports and amendments to such reports with respect to the year ended December 31, 2024 filed

with the SEC, all required Section 16 reports under the Exchange Act for our directors, executive officers and beneficial owners of

greater than 10% of our common stock were filed on a timely basis during the year ended December 31, 2024, except for a late Form 4

filing for Michael Campbell.

As of the date of the filing of this annual report, such Form 4 filing has been

Compensation.

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COMPENSATION TABLE

and Principal Position

Option/Warrant

Awards (4) ($)

Incentive Plan Compensation ($)

Deferred Compensation Earnings

Other Compensation ($)

Executive Officer

and Chief Operating Officer (2)

Name and Principal Position

Stock Awards ($)

Option/Warrant Awards (4) ($)

Non-Equity Incentive Plan Compensation ($)

Nonqualified Deferred Compensation Earnings

All Other Compensation ($)

Michael Campbell

Chief Executive Officer

President and Chief Operating Officer (2)

Chief Financial

amounts earned by Mr.

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Pursuant to the terms of the Employment Agreement, Mr.

Stone will receive (i) an annual

base salary of $250,000, which amount may be increased upon our reaching certain benchmarks described in the Employment Agreement, as

determined in our sole discretion;

(ii) an initial option grant of seven-year options to purchase 2,500,000 shares of our common stock

for a purchase price of $0.50 per share, of which the right to purchase up to 1,250,000 shares will vest in equal installments over a

period of three years and the right to purchase up to 1,250,000 shares will vest upon our completing certain milestones that are set

out in the Employment Agreement;

Stone received or will receive

(i) an annual base salary of $250,000, which amount may be increased upon our reaching certain benchmarks described in the Employment

Agreement, as determined in our sole discretion;

(ii) an initial option grant of seven-year options to purchase 2,500,000 shares of our

common stock for a purchase price of $0.50 per share, of which the right to purchase up to 1,250,000 shares will vest in equal installments

over a period of three years and the right to purchase up to 1,250,000 shares will vest upon our completing certain milestones that are

set out in the Employment Agreement;

and (iii) the right to participate in all benefit plans offered to our senior executive officers.

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customary non-competition covenants and non-solicitation covenants with respect to our employees, consultants and customers.

October 20, 2018, we entered into a consulting agreement with DSS Consulting Corporation, a corporation controlled by Dean Skupen,

our Chief Financial Officer (“DSS Consulting”), pursuant to which DSS Consulting agreed to continue to provide

consulting services to our company and to cause Mr.

October 20, 2018, we entered into a consulting agreement with DSS Consulting Corporation, a corporation controlled by Dean Skupen, our

Chief Financial Officer (“DSS Consulting”), pursuant to which DSS Consulting agreed to continue to provide consulting services

to our company and to cause Mr.

Skupen to serve as our Chief Financial Officer.

The agreement with DSS

Consulting will continue until terminated by either party.

Pursuant to such agreement, DSS Consulting was issued 250,000 shares of

common stock in March 2019 and DSS Consulting will be paid a monthly consulting fee in the amount of $5,000.

The consulting

agreement contains customary confidentiality restrictions and work-product provisions, as well as customary non-competition

covenants and non-solicitation covenants with respect to our employees, consultants and customers.

The agreement with DSS Consulting will continue until

terminated by either party.

Pursuant to such agreement, DSS Consulting was issued 250,000 shares of common stock in March 2019 and DSS

Consulting will be paid a monthly consulting fee in the amount of $5,000.

The consulting agreement contains customary confidentiality

restrictions and work-product provisions, as well as customary non-competition covenants and non-solicitation covenants with respect

to our employees, consultants and customers.

Compensation Plan Information

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stock, stock units and other forms of awards including cash awards.

of December 31, 2023, options to purchase an aggregate of 6,854,000 shares of common stock had been made under the Equity Plan, and 3,146,000

of December 31, 2024, options to purchase an aggregate of 8,204,000 shares of common stock had been granted under the Equity Plan, and 1,796,000

shares authorized under the Equity Plan remained available for award purposes.

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The Equity Plan authorizes awards of stock options and restricted shares of common stock.

stock option is the right to purchase shares of common stock at a future date at a specified price per share (the “Exercise Price”).

The per share Exercise Price of an option generally may not be less than the fair market value of a share of common stock on the date

The maximum term of an option is ten years from the date of grant.

An option may either be an incentive stock option or a nonqualified

stock option.

Incentive stock option benefits are taxed differently from nonqualified stock options, as described under “Federal

Income Tax Consequences of Awards Under the Plan” below.

Incentive stock options are also subject to more restrictive terms and

are limited in amount by the U.S.

stock option is the right to purchase shares of common stock at a future date at a specified price per share.

The per share exercise

price of an option generally may not be less than the fair market value of a share of common stock on the date of grant.

term of an option is ten years from the date of grant.

An option may either be an incentive stock option or a nonqualified stock option.

Incentive stock option benefits are taxed differently from nonqualified stock options, as described under “Federal Income Tax Consequences

of Awards Under the Plan” below.

Incentive stock options are also subject to more restrictive terms and are limited in amount by

Internal Revenue Code (the “Code”) and the Equity Plan.

Incentive stock options may only

be granted to employees of our company or a subsidiary.

Incentive stock options may only be granted to employees

of our company or a subsidiary.

shares are shares of common stock granted to Equity Plan participants, subject to such restrictions, terms and conditions, if any, as

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The Equity Plan does not limit the authority of the Board or any committee to grant awards or authorize

any other compensation, with or without reference to the our common stock, under any other plan or authority.

any other compensation, with or without reference to our common stock, under any other plan or authority.

of or Changes to the Equity Plan .

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as a result of an award under the Equity Plan.

following table sets forth information relating to stock option grants made to our named executive officers during the fiscal year ended

December 31, 2023.

of Option/Warrant

Michael Campbell (2)

Michael Campbell

the aggregate fair value computed in accordance with the provisions of the Financial Accounting Standard Board Accounting Standards

Codification Topic 718, or ASC 718.

See Note 2 to our consolidated financial statements for the year ended December 31, 2023 included

in this report regarding assumptions underlying the valuation of equity awards.

These amounts reflect the accounting cost for these

stock options and do not reflect the actual economic value that may be realized by the named executive officer upon the vesting of

the stock options, the exercise of the stock options, or the sale of the common stock underlying such stock options.

Represents options/warrants granted to M1 Advisors LLC, a company controlled by Michael Campbell.

equity awards or grants were made to our named executive officers during the fiscal year ended December 31, 2024.

Equity Awards at Fiscal Year-End

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on December 6, 2023.

Represents fully-vested options/warrants granted to M1 Advisors LLC,

a company controlled by Michael Campbell.

Represents fully-vested options/warrants granted to M1 Advisors LLC, a company controlled by Michael Campbell.

on December 6, 2023.

One third vest on 1 st anniversary of grant date, one third

on the 2 nd anniversary of grant date and one third on the 3rd anniversary of grant

One third vest on 1 st anniversary of grant date, one third on the 2 nd anniversary of grant

date and one third on the 3rd anniversary of grant date.

on December 6, 2023.

These options vest at various times based on the achievement of various

performance milestones.

These options vest at various times based on the achievement of various performance milestones.

on June 19, 2023.

These options vest at various times based on the achievement of various

performance milestones.

These options vest at various times based on the achievement of various performance milestones.

on June 19, 2023.

One third vest on 1 st anniversary of grant date, one third on

the 2 nd anniversary of grant date and one third on the 3rd anniversary of grant

One third vest on 1 st anniversary of grant date, one third on the 2 nd anniversary of grant

date and one third on the 3rd anniversary of grant date.

Option Exercises

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implement a cash compensation program for our board members in the future.

The following table sets forth the director compensation we accrued in the year ended December 31, 2023 (excluding compensation

to our executive officers set forth in the summary compensation table above).

Option/warrants

the aggregate fair value computed in accordance with the provisions of the Financial Accounting Standard Board Accounting Standards

Codification Topic 718, or ASC 718.

See Note 2 to our consolidated financial statements for the year ended December 31, 2023 included

in this report regarding assumptions underlying the valuation of equity awards.

These amounts reflect the accounting cost for these

stock options and do not reflect the actual economic value that may be realized by the named director upon the vesting of the stock

options, the exercise of the stock options, or the sale of the common stock underlying such stock options.

We did not grant any compensatory equity awards to our directors during the year ended December 31, 2024.

we intend to implement a program for the grant of equity awards to our board members in the future.

and Retirement Plans

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Name and Address of Beneficial Owner

and Nature of Beneficial Ownership

Amount and Nature of Beneficial Ownership

Percent of Class(1)

M1 Advisors LLC (2)

Michael Campbell (2)

Joel Stone (3)

Dean Skupen (4)

Steven Shum (5)

Nanosha LLC 5)

Sean Fontenot (6)

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of March 15, 2025, there were 25,730,540 shares of common stock outstanding.

Except as indicated in the footnotes to this table,

we believe that all persons named in the table have sole voting and investment power with respect to all common stock shown as beneficially

Except as indicated in the footnotes to this table, we believe

that all persons named in the table have sole voting and investment power with respect to all common stock shown as beneficially

owned by them.

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upon the exercise of options or warrants or other rights to acquire common stock.

Each beneficial owner’s percentage ownership

Each beneficial owner’s percentage of ownership

is determined by assuming that options and warrants that are held by such person (but not those held by any other person) and which

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not constitute an admission of beneficial ownership.

Represents (i) 8,954,199 shares of common stock owned of record by M1 Advisors LLC, a company controlled by Michael Campbell, (ii) currently-exercisable

warrants to purchase 2,054,801 shares of common stock owned of record by M1 Advisors LLC, and (iii) currently-exercisable stock options

to purchase 500,000 shares of common stock owned by Michael Campbell.

The address of Michael Campbell and M1 Advisors LLC is 11753 Willard

Avenue, Tustin, CA 92782.

Campbell has sole voting and investment power over the shares held by M1 Advisors LLC.

Represents (i) 8,854,199 shares of common stock owned of record by M1 Advisors

LLC, a company controlled by Michael Campbell, (ii) currently-exercisable warrants to purchase 3,545,801 shares of common stock owned

of record by M1 Advisors LLC, (iii) currently-exercisable stock options to purchase 500,000 shares of common stock owned by M1 Advisors

LLC, and (iv) currently-exercisable stock options to purchase 166,667 shares of common stock owned by Michael Campbell.

The address of

Michael Campbell and M1 Advisors LLC is 11753 Willard Avenue, Tustin, CA 92782.

Campbell has sole voting and investment power over

the shares held by M1 Advisors LLC.

Represents currently-exercisable stock options to purchase 583,333 shares

of common stock owned by Joel Stone.

shares of common stock owned of record by DSS Consulting Corporation, a company controlled by Dean Skupen.

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address is 30 N Gould Street, Suite 12829, Sharidan, WY 82801 Mr.

Skupen has sole voting and investment power over the shares held by DSS

Consulting Corporation.

(i) 196,010 shares of common stock owned of record by Core Fund Management, LP, a company controlled by Steven Shum, (ii) 4,655 shares

of common stock owned by Steven Shum and (iii) currently-exercisable stock options to purchase 404,000 shares of common stock owned by

Skupen has sole voting and investment power over the shares held

by DSS Consulting Corporation.

(i) 161,010 shares of common stock owned of record by Core Fund Management, LP, a company controlled by Steven Shum and (ii) currently exercisable stock options to purchase 404,000 shares of common stock owned

by Steven Shum.

The address of Core Fund Management, LP is 1515 SW 5th Avenue, Suite 606, Portland, OR 97201.

Shum has sole voting and

investment power over the shares held by Core Fund Management.

Shum has sole voting

and investment power over the shares held by Core Fund Management.

(i) 9,074,386 shares of common stock owned of record by Nanosha LLC, a company controlled by Sean Fortenot, (ii) currently exercisable

warrants to purchase 2,200,000 shares of common stock owned of record by Nanosha LLC, and (iii) currently-exercisable stock options

to purchase 750,000 shares of common stock owned by Sean Fortenot.

The address of Nanosha Investments, LLC is 1202 Walnut Avenue,

Long Beach, CA 90813.

warrants to purchase 4,458,877 shares of common stock owned of record by Nanosha LLC, and (iii) currently-exercisable stock options to

purchase 750,000 shares of common stock owned by Nanosha LLC.

The address of Nanosha Investments LLC is 1202 Walnut Avenue, Long Beach,

Fontenot has sole voting and investment power over the securities held by Nanosha Investments, LLC.

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February 12, 2024, Nanosha made a loan to us in the amount of $1,000,000 in consideration for which we issued to Nanosha a promissory

note in the principal amount of $1,000,000 that bears interest at the rate of 10% per annum and matures on May 30, 2024 and a five-year

warrant to purchase up to 200,000 shares of common stock with an initial exercise price of $0.50 per share.

No payments have been made

on the promissory note.

note in the principal amount of $1,000,000 that bore interest at the rate of 10% per annum and originally matured on May 30, 2024 and

a five-year warrant to purchase up to 200,000 shares of common stock with an initial exercise price of $0.50 per share.

On May 30, 2024,

we issued to Nanosha a five-year warrant to acquire 300,000 shares of common stock with an exercise price of $3.50 per share in consideration

for the agreement of Nanosha to extend the maturity date of our promissory note from May 30, 2024 to August 31, 2024 and on August 31,

2024, we issued to Nanosha a five-year warrant to acquire 300,000 shares of common stock with an exercise price of $3.80 per share in

consideration for the agreement of Nanosha to extend the maturity date of our promissory note from August 31, 2024 to December 31, 2024.

December 15, 2024, we entered into an exchange subscription agreement with Nanosha pursuant to which Nanosha exchanged (i) the promissory

note we issued to Nanosha on February 12, 2024 in the principal amount of $1,000,000, and (ii)

the warrants we issued to Nanosha on May 30, 2024 and August 31, 2024 for the purchase of an aggregate of 600,000 shares of common stock,

for (a) 500,000 shares of common stock and (b) a five-year warrant to purchase an aggregate of 2,258,877 shares of common stock for a

purchase price of $2.00 per share.

In connection with such exchange, we paid accrued interest on the exchanged promissory note in the amount of $105,918

Accountant Fees And Services.

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by the independent accountant in connection with statutory and regulatory filings or engagements for these periods were as follows:

For the Years ended December 31,

Fees and Audit Related Fees

the Years ended December 31,

Audit Fees and Audit Related Fees

All Other Fees

the above table, “audit fees” are fees billed by our company’s external auditor for services provided in auditing our

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Financial Statement Schedules.

Articles of Incorporation (incorporated by reference to Exhibit 3.1 to our Registration Statement on Form SB-2 filed on July 5, 2002).

Certificate of Change filed with the Nevada Secretary of State on December 20, 2005 (incorporated by reference to Exhibit 99.1 to our Current Report on Form 8-K filed on December 29, 2005).

Articles of Merger filed with the Nevada Secretary of State on February 6, 2006 (incorporated by reference to Exhibit 2.1 to our Current Report on Form 8-K filed on February 9, 2006).

Certificate of Amendment filed with the Nevada Secretary of State on November 27, 2006 (incorporated by reference from Exhibit 99.1 to Current Report on Form 8-K filed on November 30, 2006).

Articles of Merger filed with the Nevada Secretary of State on February 6, 2006 (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K filed on February 9, 2006).

Articles of Merger filed with the Nevada Secretary of State on July 15, 2013 (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K filed on July 19, 2013).

Certificate of Change filed with the Nevada Secretary of State on August 28, 2018 (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K filed on August 29, 2018).

Certificate of Designation of Series A Preferred Stock filed with the Nevada Secretary of State on September 12, 2018 (incorporated by reference to Exhibit 3.2 to our Current Report on Form 8-K filed on September 14, 2018).

Amendment to Certificate of Designation After Issuance of Class or Series filed with the Nevada Secretary of State on October 29, 2018 (incorporated by reference to Exhibit 2.1 to our Current Report on Form 8-K filed on October 29, 2018).

Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 to our Quarterly Report of Form 10-Q filed on May 15, 2024).

Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to our Current Report on Form 8-K filed on July 19, 2013).

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and Joel Stone (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on June 27, 2023).

Form of Promissory Note dated February 12, 2024 of CalEthos Inc.

to Nanosha Investments LLC.

Warrant dated December 6, 2023 of CalEthos issued to M1 Advisors LLC.

Warrant dated February 12, 2024 of CalEthos Inc.

issued to Nanosha Investments LLC.

(incorporated by reference to Exhibit 10.5 to our Annual Report on Form 10-K filed on April 9, 2024.

Warrant dated December 15, 2024 of CalEthos Inc.

issued to Nanosha Investments LLC.

Code of Conduct and Ethics of CalEthos Inc.

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to the requirements of the Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to

be signed on its behalf by the undersigned, thereunto duly authorized on the 9 th day of April 2024.

be signed on its behalf by the undersigned, thereunto duly authorized on the 1st day of April 2025.

Michael Campbell

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April 1, 2025

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

the Board of Directors and Stockholders of

on the Financial Statements

have audited the accompanying consolidated balance sheets of CalEthos Inc., (the “Company”) as of December 31, 2023 and 2022,

the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity (deficit) and cash flows

for each of the years in the two-year period ended December 31, 2023, and the related notes and schedules (collectively referred to as

the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material

respects, the financial position of the Company as of December 31, 2023 and 2022, and the consolidated results of its operations and

its cash flows for each of the two years in the period ended December 31, 2023 in conformity with accounting principles generally accepted

in the United States of America.

Exhibits, Financial Statement Schedules.

(a) The following documents are filed as part of this

Report of Independent Registered Public Accounting Firm (PCAOB 587 );

Consolidated Balance Sheets as of December 31, 2024 and 2023

Consolidated Statements of Operations and Comprehensive Loss for the Years Ended December 31, 2024 and 2023

Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2024 and 2023

Consolidated Statements of Cash Flows for the Years Ended December 31, 2024 and 2023

Notes to Consolidated Financial Statements

REPORT OF INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

CalEthos, Inc.

Opinion on the Financial

We have audited the accompanying consolidated balance sheets of CalEthos Inc., (the “Company”) as of December 31, 2024 and

2023, the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity and cash

flows for each of the years in the two-year period ended December 31, 2024, and the related notes and schedules (collectively referred

to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all

material respects, the financial position of the Company as of December 31, 2024 and 2023, and the consolidated results of its operations

and its cash flows for each of the two years in the period ended December 31, 2024 in conformity with accounting principles generally

accepted in the United States of America.

Company’s Ability to Continue as a Going Concern

accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern.

in Note 1 to the accompanying consolidated financial statements, although the Company has net income it is primarily attributable to

non-cash reversal of compensation for restricted stock units, has generated negative cash flows from operating activities, has an accumulated

deficit and has stated that substantial doubt exists about Company’s ability to continue as a going concern.

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern.

in Note 1 to the accompanying consolidated financial statements, although the Company has net income it is primarily attributable to non-cash

reversal of compensation for restricted stock units, has generated negative cash flows from operating activities, has an accumulated deficit

and has stated that substantial doubt exists about Company’s ability to continue as a going concern.

Management’s evaluation

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statements do not include any adjustments that might result from the outcome of this uncertainty.

financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s

financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board

(United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

conducted our audits in accordance with the standards of the PCAOB.

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the

Company’s financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting

Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain

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Accordingly, we express no such opinion.

audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error

or fraud, and performing procedures that respond to those risks.

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estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits

provide a reasonable basis for our opinion.

We believe that our audits provide

a reasonable basis for our opinion.

Audit Matters

critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required

The critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required

to be communicated to the audit committee and that:

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and (2) involved our especially challenging, subjective or complex judgments.

determined that there are no critical audit matters.

have served as the Company’s auditor since 2018.

CalEthos, Inc.

Consolidated Balance Sheets

As of December 31,

RBSM determined there were no CAM’s for the audit

of the year ended December 31, 2024.

We have served as the Company’s

auditor since 2018.

April 1, 2025

Balance Sheets

of December 31,

Current assets

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Total current assets

Data center costs

Liabilities and stockholders’ equity (deficit)

Data center Campus costs

Liabilities and stockholders’ equity

Current liabilities

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Convertible promissory notes, net

Notes payable

Notes payable, net of discount

Total current liabilities

Stockholders’ equity (deficit)

Convertible debentures, net

Total liabilities

Stockholders’ equity

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, par value $ 0.001 , 100,000,000 shares authorized, no shares issued and outstanding

Preferred stock, value

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100,000,000 shares authorized;

and 24,495,621 shares issued

and outstanding

25,730,540 and 24,345,598 shares issued and outstanding

Additional paid-in capital

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( 19,280,000 )

Total stockholders’ equity (deficit)

( 3,143,000 )

Total liabilities and stockholders’ equity (deficit)

CalEthos, Inc.

Consolidated Statements of Operations and Comprehensive (Loss) Income

For the Year Ended December 31,

Total stockholders’ equity

Total liabilities and stockholders’ equity

accompanying notes are an integral part of these consolidated financial statements.

Statements of Operations and Comprehensive Loss

the Years Ended December 31.

Operating Expenses

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Equity-based compensation

( 4,791,000 )

General and administrative expenses

Data center campus cost - abandonment

Payroll and related expense

Impairment loss

Operating expense

Total operating expenses

Loss from operations

( 1,407,000 )

(Loss) income from operations

( 3,465,000 )

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Interest income

Gain on settlement of debt

Financing costs

Financing costs – related party

( 2,398,000 )

Loss on extinguishment of debt

Gain on settlement of accounts payable

Loss on extinguishment of notes payable – related party

( 2,317,000 )

Loss on extinguishment of convertible promissory notes

( 6,468,000 )

Total other expenses

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( 1,165,000 )

(Loss) income before provision for income taxes

Loss before provision for income taxes

( 12,590,000 )

( 4,630,000 )

Provision for income taxes

Net (loss) income

( 12,590,000 )

Net (loss) income per share - Basic

Net (loss) income per share - Diluted

Weighted Average common shares outstanding - Basic

Weighted Average common shares outstanding - Diluted

Comprehensive (loss) income

Net (loss) income

( 4,630,000 )

Foreign currency translation gain

Net loss per share - Basic and Diluted

Weighted Average common shares outstanding - Basic and Diluted

Comprehensive (loss) income

( 12,590,000 )

CalEthos, Inc.

Statement of Changes in Stockholders’ Equity

For the Years Ended December 31, 2023 and 2022

Income (Loss)

A convertible preferred stock

Comprehensive

Stockholders Equity

Income (Loss)

Balance December 31, 2021

( 4,630,000 )

$ ( 540,000 )

Equity-based compensation

Forfeiture of equity-based compensation

( 1,500,000 )

Foreign currency translation gain

Comprehensive loss

$ ( 12,590,000 )

$ ( 4,626,000 )

Foreign currency translation income

accompanying notes are an integral part of these consolidated financial statements.

Consolidated Statements of Stockholders’ Equity

the Years Ended December 31, 2024 and 2023

Series A convertible preferred stock

Preferred Stock

Additional Paid-in

Stock Subscription

Other Comprehensive

Total Stockholders’

Balance December 31, 2022

1 unchanged sentence

$ ( 3,143,000 )

Cancellation of shares

( 10,000,000 )

Shares issued for extinguishment of convertible debentures

Equity-based compensation

Foreign currency translation income (loss)

( 4,630,000 )

Cancellation of shares equity-based compensation

( 4,630,000 )

Shares issued for extinguishment of debt

Equity-based compensation

Foreign currency translation income

Balance December 31, 2023

( 19,280,000 )

Net income (loss)

Shares issued for extinguishment of Convertible Debentures and accrued interest

Warrants issued for note payable extension

Shares issued for extinguishment of notes payable

Warrants issued for extinguishment of notes payable

Proceeds for stock subscription receivable

Equity-based compensation

( 12,590,000 )

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$ ( 31,870,000 )

CalEthos, Inc.

Consolidated Statements of Cash Flows

For the Years Ended December 31,

accompanying notes are an integral part of these consolidated financial statements.

Statements of Cashflow

the Years Ended December 31,

Cash Flows From Operating Activities

Net (loss) income

$ ( 12,590,000 )

Adjustments to reconcile net (loss) income to net cash used in operating activities:

Amortization of convertible promissory note discounts

Forfeiture of restricted stock awards

$ ( 4,630,000 )

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

Amortization of note payable discounts

Amortization of debt issuance cost

Fair value of equity-based compensation

Gain on settlement of accounts payable

Loss on extinguishment of notes payable – related party

Loss on extinguishment of debt

Write off of development cost

Changes in operating assets and liabilities

3 unchanged sentences

Cash Flows From Investing Activities

Project development cost

Date center campus development cost

( 1,467,000 )

( 1,730,000 )

Net Cash Used in Investing Activities

( 1,467,000 )

( 1,730,000 )

Cash Flows From Financing Activities

Repayments of notes payable

Net Cash Used in Financing Activities

Cash proceeds from issuance of convertible debentures

Cost for issuance of convertible debentures

Proceeds from stock subscription receivable

Cash proceeds for issuances of notes payable

Net Cash Provided by Financing Activities

Effect of exchange rate changes on cash and cash equivalents

Net decrease in Cash

Net decrease in cash and cash equivalents

( 1,759,000 )

Cash, Beginning of Period

Cash, End of Period

Cash and cash equivalents, beginning of period

Cash and cash equivalents, end of period

Supplemental disclosure of cash flow information:

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Non-cash investing and financing activities

Common stock and warrants issued for extinguishment of notes payable

Note payable converted to equity

Capitalized interest – project development cost

Convertible debentures accrued interest converted to equity

Equity-based compensation capitalized

Common stock issued from forgiven debt

accompanying notes are an integral part of these consolidated financial statements.

to the Consolidated Financial Statements

For the Years Ended December 31, 2023

the Years Ended December 31, 2024 and 2023

1 – Organization and Accounting Policies

1 unchanged sentence

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

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.

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

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

Center Campus”).

As such, the Company is implementing its plan to build aa large-scale, data center campus vertically integrated with onsite geothermal

power production In addition, the Company may acquire assets and all or part of other companies operating in the clean energy or data

center infrastructure industries 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.

November 5, 2021, AIQ System Inc.

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accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the

United States of America (“GAAP”).

United States of America (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (the

of Consolidation

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to continue as a going concern for one year from the issuance of these consolidated financial statements.

Company’s 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.

Company’s 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.

Company is subject to a number of risks similar to those of other similar stage companies, including dependence on key individuals;

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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

of factors, including the development of the Company’s data center campus, 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

The Company believes its cash balances and cash flow from operations will not be sufficient to fund its operations and growth

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from investors or through other avenues, it may not be able to continue as a going concern.

The accompanying audited consolidated

financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

preparation of consolidated financial statements in conformity with GAAP and requires management to make estimates and assumptions that

affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated

financial statements and the reported amounts of revenue and expenses during the reporting periods.

The accompanying consolidated financial

statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

Segment Reporting

The Company adopted FASB issued ASU 2023-07, “Segment

Reporting (ASC Topic 280) for the annual reporting period ended December 31, 2024.

The most significant provision was for the Company

to disclose significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”), who is

All expense categories on the Consolidated Statements of Operations are significant and there are no other significant segment

expenses that would require disclosure.

The Company’s CODM, reviews financial information presented on a consolidated basis for

the purpose of making operating decisions, allocating resources, assessing financial performance and making strategic decisions related

to headcount and capital expenditures.

The CODM regularly reviews net loss as reported on the Company’s consolidated statements

of operations.

The CODM uses net loss as the measure of profit or loss to allocate resources and assess performance.

Since the Company operates as one reportable segment,

all financial information required by “Segment Reporting” can be found in the accompanying consolidated financial statements.

The CODM does not review segment assets at a level other than that presented in the Company’s consolidated balance sheets.

are no intra-entity sales or transfers, and no significant expense categories regularly provided to the CODM beyond those disclosed in

the Consolidated Statements of Operations.

preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect

the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial

statements and the reported amounts of revenue and expenses during the reporting periods.

Currency Translation

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There are three levels of inputs that may be used to measure fair value:

1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

2 - Other inputs that are directly or indirectly observable in the marketplace.

3 - Unobservable inputs which are supported by little or no market activity.

inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

inputs that are directly or indirectly observable in the marketplace.

inputs which are supported by little or no market activity.

fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when

measuring fair value.

of and for the year ended December 31, 2023, the Company had no assets or liabilities that require fair value measurement.

of and for the years ended December 31, 2024 and 2023, the Company had no assets or liabilities that require fair value measurement.

and Cash Equivalents

Company considers all highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents.

Cash and cash equivalents are recorded at cost, which approximates its fair value.

Cash and cash equivalents are recorded at cost, which approximates their fair value.

The Company maintains its cash and cash equivalents

3 unchanged sentences

As of December 31, 2024 and 2023, the Company had approximately $ 34,000 and $ 22,000 , respectively, in excess of the federal insurance

limit, respectively.

expenses are assets held by the Company, which are expected to be realized and consumed within twelve months after the reporting period.

center cost is stated at cost, which includes the cost incurred to complete phase I of our data center development plan.

Phase I costs

include the option payment for the land and the cost of consulting firms to provide power and connectivity assessments, feasibility studies,

engineering plans, and project benchmarking.

Also data center cost includes internal cost such as payroll related cost and debt interest

expenses are assets held by the Company that are expected to be realized and consumed within twelve months after the reporting period.

Center Campus Costs

center cost is stated at cost, which includes the cost incurred to complete phase I of the Company’s data center development plan.

Phase I costs include the option payment for the land and the cost of consulting firms to provide power and connectivity assessments,

feasibility studies, engineering plans, and project benchmarking.

Data center cost also includes internal cost such as payroll-related

cost and debt interest cost.

accordance with ASC 360-10-35, the Company reviews the carrying amounts of data center cost when events or changes in circumstances indicate

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section 850-10 for the identification of related parties and disclosure of related-party transactions.

to ASC section 850-10-20 the related parties include (a.) affiliates of the Company (“Affiliate” means, with respect to any

specified Person, any other Person that, directly or indirectly through one or more intermediaries, controls, is controlled by or is

under common control with such Person, as such terms are used in and construed under Rule 405 under the Securities Act);

to ASC section 850-10-20, the related parties include (a.) affiliates of the Company (“Affiliate” means, with respect to

any specified Person, any other Person that, directly or indirectly through one or more intermediaries, controls, is controlled by or

is under common control with such Person, as such terms are used in and construed under Rule 405 under the Securities Act);

(b.) entities

41 unchanged sentences

contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed.

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.

Company accounts for its stock-based compensation under ASC 718, “ Compensation – Stock Compensation ” using the

fair value-based method.

Under this method, compensation cost is measured at the grant date based on the value of the award and is recognized

over the service period, which is usually the vesting period.

This guidance establishes standards for the accounting for transactions

in which an entity exchanges its equity instruments for goods or services.

It also addresses transactions in which an entity incurs liabilities

1 unchanged sentence

the issuance of those equity instruments.

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

Company accounts for income taxes in accordance with ASC 740, Income Taxes , deferred tax assets and liabilities are computed based

on the difference between the financial reporting and income tax bases of assets and liabilities using the enacted marginal tax rate.

ASC 740 requires that the net deferred tax asset be reduced by a valuation allowance if, based on the weight of available evidence, it

is more likely than not that some portion or all of the net deferred tax asset will not be realized.

Company accounts for income taxes using an asset and liability approach, which requires the recognition of taxes payable or refundable

for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in the

Company’s financial statements or tax returns.

The measurement of current and deferred tax assets and liabilities is based on provisions

of enacted tax laws;

the effects of future changes in tax laws or rates are not anticipated.

If necessary, the measurement of deferred

tax assets is reduced by the amount of any tax benefits that are not expected to be realized based on available evidence.

Company has adopted guidance related to the accounting for uncertainty in income taxes which prescribes rules for recognition, measurement

and classification in the financial statements of tax positions taken or expected to be taken in a tax return.

The guidance prescribes

a two-step approach which involves evaluating whether a tax position will be more likely than not (greater than 50 percent likelihood)

sustained upon examination based on the technical merits of the position.

The second step requires that any tax position that meets the

more likely than not recognition threshold be measured and recognized in the financial statements at the largest amount of benefit that

is a greater than 50 percent likelihood of being realized upon settlement.

Company’s policy is to recognize interest and penalties, if any, related to unrecognized tax benefits in income tax expense.

Company is not currently under examination by any taxing authority nor has the Company been notified of a pending examination.

of limitations for which the Company is generally no longer subject to federal or state income tax examinations by tax authorities is

for years before 2013.

Company uses the fair value method for equity instruments granted to non-employees and use the BSM model for measuring the fair value

The stock-based fair value compensation is determined as of the date of the grant (measurement date) and is recognized over

the vesting periods.

Company uses ASC 260, “ Earnings Per Share ” for calculating the basic and diluted earnings (loss) per share.

6 unchanged sentences

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

following table sets forth the computation of basic and diluted earnings (loss) per share for the years ended December 31,:

SCHEDULE OF COMPUTATION OF BASIC AND DILUTED EARNINGS (LOSS) PER SHARE

Net (loss) income

$ ( 4,630,000 )

Effect of dilutive instruments – convertible notes interest

Numerator for diluted EPS

$ ( 4,630,000 )

Denominator – for basic EPS

Effect of dilutive instruments

Convertible promissory notes and accrued interest

Restricted stock units

Warrants issued for services

Dilutive potential common shares

Denominator for diluted EPS

Basic earnings per share

Diluted earnings 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 year

ended December 31, 2023 because their inclusion would be anti-dilutive.

Common stock equivalents amounted to 13,484,743 for the year

ended December 31, 2023.

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

ended December 31, 2024 and 2023 because their inclusion would be anti-dilutive.

Common stock equivalents amounted to 11,326,178 and

nil for the years ended December 31, 2024 and 2023, respectively.

Accounting Pronouncements

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 consolidated financial condition or the results of its operations.

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

consolidated financial condition or the results of its operations.

In October 2023, the FASB issued

ASU 2023-06, Disclosure Improvements:

Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative.

amendments in this Update modify the disclosure or presentation requirements of a variety of Topics in the Codification.

Certain of the

amendments represent clarifications to, or technical corrections of the current requirements.

Each amendment in the ASU will only become

effective if the SEC removes the related disclosure or presentation requirement from its existing regulations by June 30, 2027.

currently evaluating the impact that the adoption of the provisions of the ASU will have on our consolidated financial statements.

amendments in this ASU are not expected to have a material impact on the results of operations or financial position.

In November 2023, the FASB issued

ASU 2023-07, “Segment Reporting (ASC Topic 280):

Improvements to Reportable Segment Disclosures.” The amendments require the

disclosure of significant segment expenses as well as expanded interim disclosures, along with other changes to segment disclosure requirements.

The standard will be effective for fiscal years beginning after December 15, 2023, and interim periods beginning on or after December

We have implemented the provisions of the ASU 2023-07.

On December 14, 2023, the FASB

issued ASU No.

2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures (“ASU 2023-09”).

ASU 2023-09 requires

entities to disclose specific rate reconciliations, amount of income taxes separated by federal and individual jurisdiction, and the amount

of income (loss) from continuing operations before income tax expense (benefit) disaggregated between federal, state, and foreign.

new standard is effective for the Company for its fiscal year beginning January 1, 2025, with early adoption permitted.

The Company is

currently evaluating the impact of adopting the standard.

In November 2024, the FASB issued

ASU 2024-03, “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40)”.

amendments require the disclosure of specified information about certain costs and expenses including purchases of inventory, employee

compensation, depreciation, intangible asset amortization, and depreciation, depletion, and amortization recognized as part of oil and

gas producing activities.

It also requires the disclosure of a qualitative description of the amounts remaining in relevant expense captions

that are not separately disaggregated quantitatively as well as the total amount of selling expenses and, in annual reporting periods,

an entity’s definition of selling expenses.

The standard will be effective for fiscal years beginning after December 15, 2026, and

interim reporting periods beginning after December 15, 2027.

We are currently evaluating the impact that the adoption of the provisions

of the ASU will have on our consolidated financial statements.

We are currently evaluating the impact that the adoption of the provisions

of the ASU will have on our consolidated financial statements.

2 – Data Center Costs

DATA CENTER COSTS

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 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 consolidated financial statements, the escrow had not been set

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.

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 %.

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.

of December 31, 2023, the Company has incurred costs of approximately $ 2,262,000

for the development of the Data Center, which includes approximately $ 196,000

of capitalized interest related to the convertible promissory notes.

3 – Accounts Payable and Accrued Expenses

ACCOUNTS PAYABLE AND ACCRUED EXPENSES

following table summarizes the Company’s accounts payable and accrued expense balances as of December 31,:

OF ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable

Accrued expenses

Accrued interest

Accounts payable and accrued expenses

following table presents the details of accrued interest as of December 31,:

OF ACCRUED INTEREST

Notes payable

Convertible promissory notes

Balance, end of period

July 22, 2024, the Company entered into an option agreement (“Option”) to acquire for a purchase price of $ 5,000,000 a 315 -acre

parcel of land (“New Property”) in Imperial County, California to be used for the development of the Company’s Data

Center Campus.

With the execution of the Option, the Company paid a non-refundable deposit of $ 50,000 .

The Option has an initial term

of one year and may be extended for an additional six-month period by the payment of $ 75,000 on or before July 21, 2025.

March 30, 2023, the Company signed an option agreement (“Initial Option”) to acquire 80 acres of commercially-zoned land

(“Initial Property”) in Imperial County, California for $ 3,360,000 (“Purchase Price”).

The Initial Property was

optioned to be the land used for the Company’s Data Center Campus.

The Company paid a non-refundable deposit of $ 84,000 on the

signing of the Initial Option.

On July 24, 2024 (“Termination Date”), the Company terminated (“Termination”)

the Initial Option as the Company believes the New Property is better suited for the Company’s Data Center Campus project.

of the Termination Date, the Company had approximately $ 4,158,000 of cost (“DCC Cost”) for the Data Center Campus project.

In accordance with ASC 790 and 360, the Company is required to determine the amount of DCC Cost (“Option Cost”) associated

with the Initial Property.

The Option Cost is required to be exposed on the date the Company abandoned the Initial Option.

has determined the date of abandonment was the Termination Date.

As of the Termination Date, the Company had approximately $ 344,000 of

The remaining DCC Cost are related to the development activities to the overall Data Center Campus, as such are not cost

associated with the Initial Property.

of December 31, 2024, the Company has incurred DCC Cost of approximately $ 5,849,000 , which includes approximately $ 284,000 of capitalized

interest related to the interest calculated for the funds, from the Notes payable and Convertible promissory notes, used for the DCC

development expenditures.

3 – Notes Payable

NOTES PAYABLE

table below summarizes the transactions for the year ended December 31,:

payable transactions for the year ended December 31, are summarized as follows:

OF NOTES PAYABLE

Balance, beginning of the year

Balance, end of the year

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.

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 $ 4,000 , respectively,

as of December 31, 2023.

April 22, 2021, the Company issued a promissory note in the principal amount of $ 50,000 (“2021 Note”).

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.

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 $ 11,000 and $ 7,000 , respectively,

December 31, 2023.

December 2023, the Company offer the 2021 Note holder to convert, without a time limit, the principal and interest into the Company’s

common stock at a price of $ 0.96 per share.

The holder agreed to convert the principal and interest of approximately $ 50,000 and $ 17,000 ,

respectively, (total $ 67,000 ) for 196,010 shares of the Company’s common stock with a fair market value of approximately $ 188,000

as of the date of conversions.

As the terms of the conversion the Holders did not provide any concession to the Company and there was

not an inducement to Holders to convert, because the offer did not have a time limit, the Company has accounted for the conversion in

accordance with ASC 470-50-40-4.

The difference between the fair value of the consideration paid of approximately $ 188,000 and the liability

of $ 67,000 was approximately $ 121,000 , which was accounted for a loss on liability settlement.

The loss on settlement was recorded as

loss on extinguishment of debt on the statement of operations for the year ended December 31, 2023.

expense on these notes payable amounted to $ 9,000 and $ 14,000 for the years ended December 31, 2023 and 2022, respectively.

5 – Convertible Promissory Notes

CONVERTIBLE PROMISSORY NOTES

promissory notes consisted of the following as of December 31,:

OF CONVERTIBLE PROMISSORY NOTES

Balance, beginning of year

( 4,272,000 )

Balance, end of year

Balance, beginning of year

Balance, beginning of the period

Additions – related party

Settlement – related party

( 1,000,000 )

Balance, end of year

Balance, end of the period

Balance, beginning of the period

Additions – related party

Amortization – related party

Balance, end of the period

Net carrying amount

effective interest rate used to amortize the debt discount for the year ended December 31, 2022 ranged from 4.76 % to 64.60 %.

December 2023, the Company offered each of the Convertible Promissory Note holders (“Holders”) to convert, without a

time limit, the principal and interest into the Company’s common stock at a price ranging from $ 0.51

As of December 31, 2023 approximately five of the Holders agreed to convert principal and interest of approximately,

and $ 634,000 ,

respectively, (total $ 4,906,000 )

for 9,656,019

shares of the Company’s common stock with a fair market value of approximately $ 5,771,000

as of the date of conversions.

As the terms of the conversion was not in accordance with the original conversion feature, the

Holders did not provide any concession to the Company and there was not an inducement to Holders to convert, because the offer did

not have a time limit, the Company has accounted for the conversion in accordance with ASC 470-50-40-4.

difference between the fair value of the consideration paid of approximately $ 5,771,000

and the liability of $ 4,906,000

was approximately $ 865,000 ,

February 2024, the Company issued a promissory note (“Promissory Note”) in the principal amount of $ 1,000,000 that bears

interest at the rate of 10 % per annum and originally matured on May 31, 2024 (“Maturity Date”).

It also issued a five -year

warrant to purchase up to 200,000 shares of common stock with an initial exercise price of $ 0.50 per share (“Finance Warrant”).

accordance with ASC 470 - Debt , the Company has allocated $ 1,000,000 of cash proceeds on a relative fair value to the Promissory

Note and the Finance Warrant.

The Finance Warrant was valued using the Black Scholes option pricing model for a total fair value of approximately

$ 1,389,000 based on a 2.5 -year term, volatility of 159 %, a risk-free equivalent yield of 4.1 %, and a stock price of $ 7.21 .

Warrant was ascribed a relative fair value of approximately $ 581,000 .

the Maturity Date, the holder of the Promissory Note agreed to extend the Maturity Date to August 31, 2024 (“Extension Maturity”).

As consideration for the Extension, the Company issued to the holder a warrant to purchase 300,000 shares of the Company’s common

stock with an initial exercise price of $ 3.50 per share (“Extension Warrant”).

Extension Warrant was valued using the Black Scholes option pricing model for a total fair value of approximately $ 853,000 based on a

2.5 -year term, volatility of 163 %, a risk-free equivalent yield of 4.3 %, and a stock price of $ 3.5 .

The fair value of $ 853,000 was recorded

as a debt discount to be amortized over the Extension period of three months.

As of December 31, 2024, the Company had amortized approximately

$ 853,000 of the value of the Extension Warrant.

the Extension Maturity date, the holder of the Promissory Note agreed to extend the Extension Maturity to December 31, 2024 (“Additional

As consideration for the Additional Extension date, the Company issued to the holder a warrant to purchase 300,000

shares of the Company’s common stock with an initial exercise price of $ 3.80 per share (“Additional Extension Warrant”).

Additional Extension Warrant was valued using the Black Scholes option pricing model for a total fair value of approximately $ 921,000

based on a 2.5 -year term, volatility of 162 %, a risk-free equivalent yield of 3.8 %, and a stock price of $ 3.80 .

The fair value of $ 921,000

was recorded as a debt discount to be amortized over the Additional Extension period of four months.

As of December 31, 2024, the Company

had amortized approximately $ 921,000 of the value of the Extension Warrant.

December 15, 2024 (“Exchange Date”), the Company entered into an exchange agreement (“Exchange Agreement”)

to settle the Promissory Note based on the Exchange Agreement, the Promissory Note was extinguished, as of the Exchange Date and the

Extension Warrant and Additional Extension Warrants (collectively “The Extension Warrants”) were cancelled .

exchange the Company (i) made a payment of $100,000 for the accrued and unpaid interest, (ii) issued 500,000 shares of the

Company’s common stock with a fair value of $ 1.75

per share (based on the Company’s closing on the Exchange Date) (“Exchange Shares”), and issued a warrant to purchase 2,258,877

shares of the Company’s common stock as a price of $ 2.00

per share for a period of five

years (“Exchange Warrant’).

On the Exchange Date the Exchange Warrant had a fair value of $ 3,196,000

calculated using the Black Scholes fair value option-pricing model with key input variables provided by management:

volatility of 166 %,

the fair value of common stock $ 1.75 ,

estimated life range 2.5

years, risk-free rate of 4.25 %

and dividend rate of nil .

Company accounted for the Exchange agreement in accordance with ASC 470 – Debt.

Therefore, the Company incurred a $ 2,317,000

loss on extinguishment, which was the difference between the fair value of The Extension Warrants compared to the aggregate fair

value of the Exchange Warrants and Exchange

The loss on extinguishment of note payable – related party was

calculated as follows:

OF LOSS ON EXTINGUISHMENT OF NOTE PAYABLE RELATED PARTY

Loan - principal balance

Value The Extension Warrants - cancelled

Total Consideration

Share received

Common stock value

Value of Exchange Warrant

Value received

Loss on extinguishment of note payable – related party

the Exchange Date the 600,000 Extension Warrants had a fair value of $ 755,000

calculated using the Black Scholes fair value option-pricing model with key input variables provided by management:

volatility of 166 %,

the fair value of common stock $ 1.75 ,

estimated life range 2.5

years, risk-free rate of 4.25 %

and dividend rate of nil .

expense on the Promissory Note amounted to $ 103,000

for the years ended December 31, 2024

and 2023, respectively, of which approximately $ 60,000

respectively, were capitalized as data center development cost.

4 – Convertible Debentures

CONVERTIBLE DEBENTURES

debentures transactions for the years ended December 31, are summarized as follows:

OF CONVERTIBLE DEBENTURES

Balance, beginning of period

Balance, end of period

Debt issuance cost

Balance, beginning of period

Balance, end of period

Net book value

June 2024, the Company initiated a private place offering for its convertible promissory notes (the “Debentures”).

December 31, 2024, the net proceeds were approximately $ 1,304,000 , due to approximately $ 106,000 paid as debt issuance cost in connection

with the issuance of the Debentures.

The Debentures bears interest at 10.0 % per annum with a default interest rate of 15.0 % per annum.

The principal amount and all accrued interest are payable on December 31, 2026.

The holder of the Debentures has the option to convert

the unpaid principal and interest into shares of the Company’s common stock at the conversion rate of $ 2.00 per share, subject

to adjustment for stock splits, stock dividends and the like and for issuances by the Company of common stock at a price per share that

is less than the then-current conversion price, subject to certain exceptions.

accordance with the Debenture, the Company has the right to prepay the Debentures upon providing 45 days of its intention to prepay.

outstanding principal amount of the Debentures and all accrued interest thereon shall automatically be converted into shares of common

stock at the then effective conversion price upon (i) the close of business on the sixtieth (60th) consecutive day on which the VWAP

of the Company’s common stock is at least $ 4.00 per share, subject to appropriate adjustment in the event of any stock dividend,

stock split, stock combination or other similar recapitalization with respect to the common stock, or (ii) the execution by the Company

of a long-term lease with a data center client for all or a substantial portion of the Company’s planned data center development

December 2023, the Company offered the holders of the Company’s outstanding convertible promissory notes in the aggregate principal

amount of $ 341,000 the option to convert such notes into the Company’s common stock at a price ranging from $ 0.51 to $ 0.54 per

During the three months ended March 31, 2024, the Company converted principal and interest of approximately $ 341,000 and $ 119,000 ,

respectively (a total of $ 460,000 ), for 884,942 shares of the Company’s common stock with a fair market value of approximately

$ 6,928,000 as of the dates of conversion.

As the terms of the conversion were not in accordance with the original conversion feature,

the holders of such notes did not provide any concession to the Company, and there was not an inducement to the holders to convert.

the offer did not have a time limit, the Company has accounted for the conversion in accordance with ASC 470-50-40-4.

The difference

between the fair value of the consideration paid of approximately $ 6,928,000 and the liability of $ 460,000 was approximately $ 6,468,000 ,

which was accounted for as a loss on liability settlement.

The loss on settlement was recorded as loss on extinguishment of

debt on the statement of operations for the year ended December 31, 2023.

expense on default convertible promissory notes amounted to $ 439,000 and $ 204,000 for the year ended December 31, 2023, respectively,

of which $ 214,000 and nil was capitalized as data center cost, respectively.

The loss on the settlement was recorded as a loss on extinguishment of debt

on the statement of operations for the three months ended March 31, 2024.

expense on these convertible promissory notes amounted to $ 32,000

and $ 439,000

for the years ended December 31, 2024

and 2023, respectively, of which $ 21,000

and $ 2 03 ,000 ,

respectively, was capitalized as Data Center Campus Cost.

5 – Commitments and Contingencies

4 unchanged sentences

such litigation be resolved unfavorably.

Operating Officer

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” or “COO”).

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.

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 Company’s initial data center, 2) once the initial

data center is operational and at least 25% of the planned megawatts 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.

Payment of any 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.

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.

7 – Stockholders Deficit

STOCKHOLDERS DEFICIT

2023 – Stock Options

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.

Stock Options are exercisable for a period of seven years from the date of grant, which was June 19, 2023 (“Grant Date”).

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 $ 300,000

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 year ended December 31, 2023, approximately $ 98,000

Of the amount earned of $ 98,000

approximately $ 74,000

was capitalized as date center cost and the remaining $ 24,000

was expensed as stock-based compensation.

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

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.

remaining 1,250,000 shares based on the Company completing the following milestones:

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.

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).

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.

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.

Company’s management has accounted for the Non-Qual Option in accordance with ASC 718 – Stock Compensation (“ASC 718”).

common stock.

Employment Agreement also provides for certain severance benefits upon termination of the Executive 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.

President of Data Center Development

March 1, 2024, the Company hired an individual as vice president of data center development with an annual salary of $ 225,000 .

The salary increases to $ 240,000

and $ 250,000

on the first and second anniversary dates, respectively.

the individual is eligible for an annual bonus of up to 25%, 35% and 40% of the annual salary for the first, second and third

calendar years, respectively.

Strategy and Development Officer

April 1, 2024, the Company hired an individual as chief strategy and development officer vice president with an annual salary of $ 250,000 .

The salary increases to $ 275,000 and $ 300,000 on the first and second anniversary dates, respectively.

Also, the individual is eligible

for an annual bonus of up to 25%, 35% and 40% of the annual salary for the first, second and third calendar year end, respectively.

6 – Stockholders Equity

STOCKHOLDERS EQUITY

November 15, 2024, the Company issued, to a consultant, a non-qualified stock option to purchase 350,000 shares of the Company’s

common stock at an exercise price of $ 5.00 per share, the fair market value of the Company’s common stock as of November 15, 2024

(the “Grant Date’).

350,000 options vests as follows:

shares on each of the following dates July 16, 2025, July 17, 2026, July 16, 2027 and July 16,2028;

(a) 17,500 shares upon the award of a GMP contract to a construction manager/company;

(b) 35,000 shares upon completion of the initial site development plan and data center design and 100% construction documents;

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, buildings, perimeter walls and security systems);

(d) 35,000 upon the completion of all Network Ready meet me rooms in the first data center;

(e) 70,000 shares upon the completion of construction of a customer-ready data center facility and receipt of a conditional occupancy

permit for a Data Center facility.

Company’s management has accounted for the options 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.

Non-Qual Option Grant Date fair value of $ 875,000

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 %

that the first development phase (a) will be completed by June 30, 2026, the second development phase (b) by December 31, 2025, the third

development phase (c) by March 31, 2026, and the fourth and fifth development phases (d) and (e) by June 30, 2029.

The estimated service

period will be adjusted for actual and expected completion date changes.

Any such change will be recognized prospectively, and the remaining

deferred compensation will be recognized over the remaining service period.

option grant date fair value of $ 1,727,000

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 217.4 %

the fair value of common stock $ 5.00 ,

estimated life range of 3.9

years, risk-free rate range of 3.99 %

and dividend rate of $ 0 .

The calculated compensation for the year ended December 31, 2023 was approximately $ 279,000

of which $ 209,000

was capitalized as data center development cost

and the remaining $ 70,000 was expensed as stock-based compensation.

2023 Stock Options

December 2023, the Board of Directors approved the issuance of stock options to the directors for the purchase of 500,000 , 750,000

of the Company’s common stock, for a total of 1,654,000

shares, to the three directors (“Directors Options”) for an exercise price of $ 0.54 ,

estimated life range 4.5

years, risk-free rate of range 4.3 %

and dividend rate of nil .

For the years ended December 31, 2024 and 2023, the Company recorded compensation expenses of approximately $ 124,000

and nil , respectively, which was capitalized as data center cost.

On April 1, 2024 for the Chief Strategy

and Development officer, the Company awarded a non-qualified stock option to purchase 1,000,000

shares of the Company’s common stock at a purchase price of $ 2.62 ,

which was the fair market value of the Company’s common stock on the date of issuance.

The Director Options vested on December

31, 2023 and expire on December 29, 2030.

1,000,000 options vests as follows:

shares on the date of issuance;

shares on each the 1 st , 2 nd and 3 rd anniversary dates of the issuance date;

(a) 32,500 shares upon the Award of a GMP contract to a construction manager/company;

shares upon completion of the initial site development

plan and data center design and 100% construction documents;

(c) 32,500 shares upon the Company receiving permits necessary to start construction of the data center site and facilities;

(d) 65,000 shares upon the completion of an all-network ready meeting rooms in the first data center;

(e) 130,000 shares upon the completion of construction of a customer-ready data center facility

and receipt of a conditional

permit for a data center facility.

Company’s management has accounted for the options in accordance with ASC 718, which requires the Company to estimate the service

period over which the compensation cost will be recognized.

Management has estimated that the first development phase (a) will be completed

by June 30, 2026, the second development phase (b) by December 31, 2025, the third development phase (c) by March 31 , 2026, and the fourth

and fifth development phases (d) and (e) by June 30, 2029 .

The estimated service period will be adjusted for actual and expected

completion date changes.

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

over the remaining service period.

option grant date fair value of $ 2,437,000

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 166.28 %

the fair value of common stock $ 2.62 ,

estimated life range 2.38

years, risk-free rate of range 4.34 %

and dividend rate of nil .

For the years ended December 31, 2024 and 2023, the Company recorded compensation expenses of approximately $ 1 , 317 ,000

and nil , respectively, which was capitalized as data center cost.

2023 Stock Options

December 2023, the Board of Directors approved the issuance of stock options to the directors for the purchase of 500,000 , 750,000 and

404,000 of the Company’s common stock, for a total of 1,654,000 shares, to the three directors (“Directors Options”)

for an exercise price of $ 0.54 , which was the fair market value of the Company’s common stock on the date of issuance.

Options vested on December 31, 2023 and expire on December 29, 2030.

Director Options grant date fair value of approximately $ 860,000 was calculated using the Black Scholes fair value option-pricing model

9 unchanged sentences

both the CEO and COO 1,000,000 options vest and become exercisable as follows:

shares on each of December 6, 2024, 2025 and 2026 for a total of 500,000 shares, upon vesting the options have life of seven years.

shares on each of December 6, 2024, 2025 and 2026 for a total of 500,000 shares, upon vesting the options have a life of seven years.

remaining 500,000 shares based on the Company completing the following milestones (upon vesting the options have a life of seven

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

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).

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.

shares) upon the signing of 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.

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.

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).

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.

shares) upon the signing of 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.

Company’s management has accounted for the 2023 Executive Options in accordance with ASC 718 – Stock Compensation (“ASC

ASC 718 requires the Company to estimate the service period over which the compensation cost will be recognized.

has estimated that the first development phase (a) will be completed by October 30, 2024, the second development phase (b) by February

2025, the third development phase (c) by April 1, 2025 and the fourth development phase (d) by September 1, 2026.

has estimated that the first development phase (a) will be completed by December 31, 2025, the second development phase (b) by June 30, 2029, the third development phase (c) by April 1, 2025 and the fourth development phase (d) by June 30, 2027.

The estimated service

3 unchanged sentences

2023 Executive Options grant date fair value of $ 1,060,000

was calculated using the Black Scholes fair value

option-pricing model with key input variables provided by management, as of the date of issuance:

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 232.67 %

4 unchanged sentences

and dividend rate of $ 0 .

For the year ended December 31, 2023, the Company recorded compensation expenses of approximately $ 59,000 ,

of which approximately $ 21,000

was expensed as compensation expense and approximately

For the years ended December 31, 2024 and 2023, the Company recorded compensation expenses of approximately $ 645,000 and $ 59,000 ,

respectively, of which approximately $ 253,000 and $ 21,000

was expensed as compensation expense and approximately $ 392,000 and $ 38,000

was capitalized as data center cost.

December 2023, the Board of Directors approved the issuance of stock options to two consultants, an executive advisor and data

center development advisor, for the purchase of 350,000

and 350,000 ,

for each consultant (collectively “2023 Consultant Options”) for an exercise price of $ 0.54 ,

which was the fair market value of the Company’s common stock on the date of issuance.

The 350,000 options for data center development consultant vest, as

shares on each of December 6, 2024, 2025 2026 and 2027 for a total of 175,000

shares, upon vesting the options have life of seven years.

December 2023, the Board of Directors approved the issuance of stock options to two consultants, an executive advisor and data center

development advisor, for the purchase of 350,000 and 350,000 , for each consultant (collectively “2023 Consultant Options”)

for an exercise price of $ 0.54 , which was the fair market value of the Company’s common stock on the date of issuance.

350,000 options for data center development consultant vest, as follows:

shares on each of December 6, 2024, 2025 2026 and 2027 for a total of 175,000 shares, upon vesting the options have life of seven

remaining 175,000 shares based on the Company completing the following milestones (upon vesting the options have a life of seven

1 unchanged sentence

upon the Award of a GMP contract to a construction manager/company

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 onsite distribution

systems, fiber conduit lines and communications systems, and on-site roads, water, power and communications grid, buildings, perimeter

walls and security systems).

35,000 upon the completion of all Network Ready meet me rooms in the first data

shares upon the completion of construction of a customer-ready data center

facility and receipt of an conditional occupancy permit for a Data Center facility.

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 onsite distribution systems, fiber conduit lines and communications

systems, and on-site roads, water, power and communications grid, buildings, perimeter walls and security systems).

upon the completion of all Network Ready meet me rooms in the first data center

shares upon the completion of construction of a customer-ready data center facility and receipt of a conditional occupancy permit

for a Data Center facility.

Company’s management has accounted for the data center development consultant options 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 October 1, 2024, the second development

phase (b) by December 31, 2024, the third development phase (c) by April 1, 2025, and the fourth and fifth development phases (d) and

(e) by September 1, 2026.

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.

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 June 30, 2026, the second development phase (b) by December 31, 2025, the third development phase (c) by March 31,

2026, and the fourth and fifth development phases (d) and (e) by June 30, 2029.

The estimated service period will be adjusted

for actual and expected completion date changes.

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

compensation will be recognized over the remaining service period.

data center development consultant options grant date fair value of $ 189,000

was calculated using the Black Scholes fair value

option-pricing model with key input variables provided by management, as of the date of issuance:

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 322.83 %,

3 unchanged sentences

and dividend rate of $ 0 .

For the year ended December 31, 2023, the Company recorded compensation expenses of approximately $ 7,000 ,

For the years ended December 31, 2024 and 2023, the Company recorded compensation expenses of approximately $ 104,000 and $ 7,000 ,

which was capitalized as data center cost.

The 350,000 options for executive advisor,

70,000 upon completion of the initial site development plan and data center design

and 100% construction documents.

options for the executive advisor will vest based on the following performance milestones:

upon completion of the initial site development plan and data center design and 100% construction documents.

upon the award of a GMP contract to a construction manager/company.

options upon the Company receiving the permits necessary to start construction

of the data center site and facilities.

options upon the completion of a network-ready meeting room in the first

140,000 options upon the completion of construction of a customer-ready data center

facility and receipt of a conditional occupancy permit for a data center facility.

Company’s management has accounted for the executive advisors options in accordance with ASC 718 – Stock Compensation (“ASC

options upon the Company receiving the permits necessary to start construction of the data center site and facilities.

options upon the completion of a network-ready meeting room in the first data center.

options upon the completion of construction of a customer-ready data center facility and receipt of a conditional occupancy permit

for a data center facility.

Company’s management has accounted for the executive advisors’ options in accordance with ASC 718 – Stock Compensation

ASC 718 requires the Company to estimate the service period over which the compensation cost will be recognized.

has estimated that the first development phase (a) will be completed by October 1, 2024, the second development phase (b) by December

31, 2024, the third development phase (c) by April 1, 2025, and the fourth and fifth development phases (d) and (e) by September 1, 2026.

Management has estimated that the first development phase (a) will be completed by June 30, 2026,

the second development phase (b) by December 31, 2025, the third development phase (c) by March 31, 2026, and the fourth and fifth development

phases (d) and (e) by June 30, 2029.

The estimated service period will be adjusted for actual and expected completion date changes.

Any such change will be recognized prospectively,

and the remaining deferred compensation will be recognized over the remaining service period.

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

data center development consultant options grant date fair value of $ 182,000

was calculated using the Black Scholes fair value

option-pricing model with key input variables provided by management, as of the date of issuance:

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 224.03 %,

3 unchanged sentences

and dividend rate of $ 0 .

For the year ended December 31, 2023, the Company recorded compensation expenses of approximately $ 8,000 ,

For the years ended December 31, 2024 and 2023, the Company recorded compensation expenses of approximately $ 94,000 and $ 8,000 ,

which was capitalized as data center cost.

2023 – Stock Options

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.

Stock Options are exercisable for a period of seven years from the date of grant, which was June 19, 2023 (“Grant Date”).

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 $ 300,000

was calculated using the Black Scholes fair value option-pricing

model with key input variables provided by management, as of the date of issuance: