GEDC Calethos, Inc. - 10-K

Risk Factors

Emerging federal and state regulations aimed at protecting ratepayers could significantly increase our cost of doing business. In early 2026, several legislative proposals were introduced at both the federal and state levels to address the surge in demand for more AI data centers. We face emerging risks from:

Moratoriums and Siting Restrictions : Concerns over grid reliability, noise, and water consumption have led some counties and states to deny building permits or to enact moratoriums on large-scale data center campuses.

Sustainability Regulations : Stringent new sustainability standards and the devaluation of traditional carbon offsets may impact our ability to meet environmental targets. Sustainability regulations are evolving rapidly.

Our strategic reliance on “Bring Your Own Power” (BYOP) and onsite power generation entails nascent operational risks and greater capital intensity. While BYOP offers a faster “time-to-power,” it introduces several critical risks:

Capital Intensity : Average construction costs for onsite-powered facilities have risen significantly, contributing to a global infrastructure investment “supercycle” projected to reach $3 trillion by 2030.

Technology Risk : Deploying large-scale microgrids utilizing natural gas turbines, fuel cells, and Battery Energy Storage Systems (BESS) involves complex engineering and integration risks that may lead to operational downtime or higher-than-expected maintenance costs.

Supply Chain Volatility : The reliability of onsite power depends on a steady supply of natural gas. Any disruption to pipeline infrastructure or significant volatility in gas pricing could materially impact our operating margins.

In early 2026, the gas power generation equipment market is experiencing a robust upward cycle. It is driven by a global shift away from coal, the need to stabilize grids reliant on intermittent renewables, and a massive surge in electricity demand from AI and data centers. Because of this demand,

Natural Gas Generators (Industrial Gensets) are experiencing delivery times of 18 to 30 months. While faster than utility-scale turbines, lead times for industrial-grade natural gas engines (like those from Caterpillar) have roughly doubled since 2021. Companies are increasingly deploying “mobile gas turbines” as stopgap measures to get data centers online while awaiting permanent equipment.

Support Infrastructure (Transformers & Switchgear), like generation equipment, due to market demand, and other components, such as electrical generation and distribution systems, are also experiencing lead times of 2+ years.

Employees

We currently have three full-time employees, two of whom are our executive officers. None of our employees is represented by a collective bargaining agreement, and we have never experienced any work stoppage. We believe we have good relations with our employees.

Corporate History and Recent Developments

We were incorporated pursuant to the laws of the State of Nevada on March 20, 2002 under the name Integrated Brand Solutions Inc., and on February 6, 2006, we changed our name to Upstream Biosciences Inc. From 2006 to December 2009, our company operated as a biotechnology company, and from 2010 until May 2013, our company had no operating business. On July 11, 2013, we changed our corporate name to RealSource Residential, Inc. Our initial business strategy in 2013 was to engage in various real estate related businesses. However, in 2016 we disposed of all of our real estate and other assets and on December 20, 2018, we changed our corporate name from RealSource Residential, Inc. to CalEthos, Inc.

In early 2021, we determined there was a sizable opportunity to develop and manufacture high-performance computer systems for the cryptocurrency mining industry. During the development of our computer chip and system in Korea, we had also developed a plan to build a large-scale, clean-energy powered, containerized, immersion-cooled data center operation in Southern California to support the use of the systems we were developing for our company and for others. However, following the decline of the bitcoin market in early 2022, we decided to abandon our chip and system development efforts and we determined that we could develop a profitable business by offering wholesale data center colocation services to a larger customer base of hyperscale and enterprise IT companies, initially in Imperial County, California. After optioning parcels of land in Imperial County and working with the Imperial County planning department and other local regulatory agencies in seeking zoning changes and other required regulatory approvals required for the Company’s proposed data center campus, it became evident by May 2025 that the Company’s timelines for the receipt of such approvals would not be met.

In May 2025, we formed TerraVolt to meet the demand for sustainable, baseload, powered land and infrastructure solutions for large-scale data centers development and end users. We are currently focusing on acquiring properties in states in which onsite power production utilizing natural gas fuel cells and turbines are allowed and in which we can acquire access to natural gas pipeline and capacity for delivery within a reasonable timeframe.

Item 1A.

Risk Factors.

We are a smaller reporting company, as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operation.

The following discussion should be read in conjunction with our audited financial statements and the related notes that appear elsewhere in this Report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward looking statements. Factors that could cause or contribute to such differences include those discussed below and elsewhere in this Report.

Our audited financial statements are stated in United States dollars and are prepared in accordance with United States generally accepted accounting principles.

We are a developer of large-scale infrastructure designed to power the digital economy. Our primary focus is the development of a “master-planned” data center campus in a business-friendly Northwestern U.S. location. Unlike traditional developments, our campus will be designed to be onsite-powered, meaning we intend to provide our tenants with dedicated, reliable energy generated on the property.

In May 2025, we formed TerraVolt Infrastructure Inc. (“TerraVolt”), a wholly-owned subsidiary established to meet the demand for sustainable, baseload, powered land and infrastructure solutions for large-scale data center development. TerraVolt’s proposed solution is a Physical Infrastructure-as-a-Service (PIaaS) platform that will integrate onsite behind-the-meter (BTM) power with construction-ready data center building sites that include utilities and fiber connectivity. TerraVolt plans to provide a turnkey solution with power and utilities to hyperscalers, colocation providers, and data center developers seeking to deploy new capacity faster than with traditional power and transmission from a local electric utility company. We are currently focused on a location where onsite power production using natural gas turbines and reciprocating engines is allowed under local and state building codes and where there is direct access to a natural gas pipeline with capacity for delivery within a reasonable timeframe.

As of the date of this Report, we have commenced the initial phase of our planned onsite-powered data center campus development, which is focused on completing land-use applications, zone change requests, and supplemental site reports required by the local County Planning and Development Department. We anticipate securing land-use and conditional zone change approvals by year-end 2026.

Concurrently, we are finalizing timelines and budgets for all necessary county and state environmental assessments. These studies cover the data center campus, the onsite power plant, electrical distribution systems, and critical utility infrastructure (water, sewer, fiber, and gas). We expect to file these reports before the end of 2026, with the aim of securing all necessary construction approvals by the second quarter of 2027. Additionally, we expect to submit to applicable state agencies all design and environmental documentation for the onsite natural gas power plant by mid-2026.

It is anticipated that we will incur significant expenses in the implementation of our business plan as described herein, and that we will require substantial financing to complete the development and construction of the planned data center campus. A failure to obtain this necessary capital when required on acceptable terms, or at all, could force us to delay, limit, reduce or terminate our development plans, any commercialization efforts and any other operations. We may not be able to secure financing on favorable terms, or at all, to meet our future capital needs. In addition, even if we are able to obtain sufficient funding to commence our business operations, we may need to pursue additional financing in the future to make expenditures and/or investments to support the growth of our business. In addition, we may require additional capital to pursue our business objectives and respond to new competitive pressures, pay extraordinary expenses or fund our growth, including through acquisitions. Additional funding, however, may not be available when required on terms that are acceptable to us, or at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us when it is required, our ability to commence and grow our proposed business operations, to support our business and to respond to business challenges could be significantly limited.

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

Results of Operations for the years ended December 31, 2025 and 2024

The following table summarizes our results of operations for the years ended December 31, 2025.

Change

Dollar

Percentage

Revenues

Operating Expenses

Professional fees

Equity-based compensation

General and administrative

Payroll and related cost

Total operating expenses (income)

Other (expenses) income

Interest income

Financing costs

Financing costs - related party

Abandoned development project cost

Loss on extinguishment of notes payable – related party

Loss on extinguishment of convertible promissory notes

Gain from closure of foreign subsidiary

Total other expense

Revenues

For the years ended December 31, 2025 and 2024, we had no revenues.

Operating Expenses

Professional fees

Our professional fees decreased to $340,000 for the year ended December 31, 2025 from $386,000 for the year ended December 31, 2024. The decrease of approximately $46,000 was attributable to increases in (i) audit fees of $17,000 and geological services of $37,000, offset by decreases in (ii) consulting services $34,000, legal services $61,000 and other professional expenses of $5,000.

Equi ty -based compensation

Our equity-based compensation for the year ended December 31, 2025 decreased to $80,000 from $369,000 for the year ended December 31, 2024. During the year ended December 31, 2025, we recorded a recapture of approximately $236,000 of equity-based compensation related to the non-performance of outstanding performance-based awards. The time-based equity-based compensation for the year ended December 31, 2025 was $316,000, for a net expense of $80,000.

Payroll and related expenses

Payroll and related expenses increased to $583,000 for the year ended December 31, 2025 from $259,000 for the year ended December 31, 2024. The increase of $324,000 related to our abandonment of our data center campus project in Imperial County, California in July 2025. As a result of the abandonment, we did not capitalize payroll and related expenses during the second, third and fourth quarters of 2025, we did not capitalize payroll and related expenses.

Financing costs

Our financing cost for the year ended December 31, 2025 increased to $186,000 compared to $12,000 for the year ended December 31, 2024. Our convertible debentures were outstanding for the twelve months of the year ended December 31, 2025 compared to four months of the year ended December 31, 2024.

Financing costs – related party

Our financing cost – related party for the year ended December 31, 2025 decreased to $676,000 from $2,398,000 for the year ended December 31, 2024. The decrease of $1,722,000 was due to a decrease in interest and loan discount expense for notes payable to the related party.

Loss on extinguishment of notes payable - related par ty

During the year ended December 31, 2025, we did not have an extinguishment for our notes payable to related party.

Loss on extinguishment of convertible promissory notes

During the year ended December 31, 2025, we did not have a loss on extinguished of convertible promissory notes.

Gain from closure of foreign subsidiary

During the year ended December 31, 2025, we finalized the closure of our Korean subsidiary.

Abandonment of development project cost

We elected not to renew our purchase option on the existing property in Imperial County, California when it expired in July 2025. Consequently, previously capitalized data center development costs were expensed, and we will cease capitalizing additional data center development expenses until we can secure parcels with appropriate zoning for data center use and greater certainty around the execution of our development plans. At the termination of the data center development, we had approximately $4,581,000 of capitalized development cost, which has been recorded as abandoned project costs.

Liquidity and Capital Resources

Our working capital deficit as of December 31, 2025 and 2024 was as follows.

Current assets

Current liabilities

Working capital deficit

Our working capital deficit increased from a $219,000 deficit as of December 31, 2024 to a deficit of $2,800,000 as of December 31, 2025 for an increase of $2,582,000. The increase in our working capital deficit was due to increases in (i) $1,581,000 of convertible debentures, (ii) $728,000 of notes payable related parties and (iii) $271,000 of accounts payable.

Cash Flows, for the years ended December 31,

Net cash used in operating activities

Net cash used in investing activities

Net cash provided by financing activity

Effect of exchange rate changes

Change in cash and cash equivalents during the period

Cash and cash equivalents, beginning of period

Cash and cash equivalents, end of period

Cash Flows from Operations

Cash used in operating activities decreased to approximately $750,000 for the year ended December 31, 2025 from approximately $859,000 for the year ended December 31, 2024, which was predominantly related to the increase in our payroll and related expenses that was offset in part by a decrease in professional fees.

Cash Flows from Investing

Our cash used in investing activities decreased to approximately $464,000 for the year ended December 31, 2025 from approximately $1,467,000 for the year ended December 31, 2024. The primary use of cash was for expenditures for the development of our data center campus, which was suspended during the quarter ended June 30, 2025.

Cash Flows from Financing

Our cash provided by financing activities decreased to $1,215,000 for the year ended December 31, 2025 from approximately $2,305,000 for the year ended December 31, 2024. The cash provided of $1,215,000 was funded by one of our shareholders, who is also a member of our board.

Liquidity and Material Cash Requirements

Even though we experienced negative cash flows from operations of approximately $750,000 for the year ended December 31, 2025, as a result of the funding from one of our shareholders, we had cash and cash equivalents of approximately $287,000 at December 31, 2025. As of December 31, 2025, we had approximately $1,635,000 of convertible debentures with maturity dates of December 31, 2026 and $1,000,000 of notes payable related party with maturity dates of June 30, 2026.

It is anticipated that we will incur expenses in the implementation of our business plan described above, and such expenses will require substantial financing to complete the development of the property for a data center operation and to achieve our goals. We currently have only limited capital with which to pay these anticipated expenses. To repay our short-term indebtedness and to fund our business plan going forward, we intend to raise funds from investors by issuing common stock, preferred stock and/or debt securities. We are currently in discussions with several potential funding sources. However, there can be no assurance we will be able to successfully raise additional funds when required, if at all.

The failure to obtain this necessary capital when needed on acceptable terms, or at all, could force us to delay, limit, reduce or terminate our development plans, any commercialization efforts or other operations. We may not be able to secure financing on favorable terms, or at all, to meet our future capital needs. In addition, even if we are able to obtain sufficient funding to commence our business operations, we may need to pursue additional financing in the future to make expenditures and/or investments to support the growth of our business and may require additional capital to pursue our business objectives and respond to new competitive pressures, pay extraordinary expenses or fund our growth, including through acquisitions. Additional funds, however, may not be available when we need them on terms that are acceptable to us, or at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to commence our proposed business operations, to continue to grow and support our business and to respond to business challenges could be significantly limited.