GEDC 10-Q
TerraVolt Holdings, Inc. (GEDC)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For
the quarterly period ended | |
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the transition period from __________ to __________ |
Commission
File No.
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
| (Address of Principal Executive Offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
| ☐ | Large accelerated filer | ☐ | Accelerated filer |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No
As of August 14, 2026, there were outstanding shares of the registrant’s common stock, par value $ per share.
TABLE OF CONTENTS
| i |
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain information set forth in this Quarterly Report on Form 10-Q, including in Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere herein, with respect to our financial condition, results of operations and business that are not historical facts are “forward-looking statements”. Forward-looking statements can be identified by the use of forward-looking terminology, such as “anticipate”, “believe”, “expect”, “plan”, “intend”, “seek”, “estimate”, “project”, “could”, “may” or the negative thereof or other variations thereon, or by discussions of strategy that involve risks and uncertainties. Management wishes to caution the reader of the forward-looking statements that any such statements that are contained in this report reflect our current beliefs with respect to future events and involve known and unknown risks, uncertainties and other factors, including, but not limited to, economic, competitive, regulatory, technological, key employees, and general business factors affecting our operations, markets, growth, services, products and other factors, some of which are described in this report and some of which are discussed in our other filings with the Securities and Exchange Commission. These forward-looking statements are only estimates or predictions. No assurances can be given regarding the achievement of future results, as actual results may differ materially as a result of risks facing our company, and actual events may differ from the assumptions underlying the statements that have been made regarding anticipated events.
Important factors to consider in evaluating any forward-looking statements include:
| ● | our ability to finance and complete the design and construction of our proposed data center operations; | |
| ● | our ability to implement our business plan; | |
| ● | our ability to attract key personnel; | |
| ● | our ability to operate profitably; | |
| ● | our ability to efficiently and effectively finance our operations; | |
| ● | inability to achieve future sales levels or other operating results; | |
| ● | inability to raise additional financing for working capital; | |
| ● | inability to efficiently manage our operations; | |
| ● | the inability of management to effectively implement our strategies and business plans; | |
| ● | the unavailability of funds for capital expenditures and/or general working capital; | |
| ● | the fact that our accounting policies and methods are fundamental to how we report our financial condition and results of operations, and they may require management to make estimates about matters that are inherently uncertain; | |
| ● | deterioration in general or regional economic conditions; | |
| ● | changes in U.S. GAAP or in the legal, regulatory and legislative environments in the markets in which we operate; | |
| ● | adverse state or federal legislation or regulation that increases the costs of compliance, or adverse findings by a regulator with respect to existing operations; |
These risk factors should be considered in connection with any subsequent written or oral forward-looking statements that we or persons acting on our behalf may issue. All written and oral forward-looking statements made in connection with this report that are attributable to our company or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. Given these uncertainties, we caution investors not to unduly rely on our forward-looking statements. We do not undertake any obligation to review or confirm analysts’ expectations or estimates or to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events, except as required by applicable law or regulation.
Notwithstanding the above, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), expressly state that the safe harbor for forward-looking statements does not apply to companies that issue penny stock. If, as now, we are considered to be an issuer of penny stock, the safe harbor for forward-looking statements may not apply to us at certain times.
Throughout this report, unless otherwise designated, the terms “we,” “us,” “our,” “the Company” and “our company” refer to TerraVolt Holdings, Inc., a Nevada corporation, and its subsidiaries. All amounts are in U.S. Dollars, unless otherwise indicated.
| ii |
PART I - FINANCIAL INFORMATION
Item 1: Financial Statements
TerraVolt Holdings, Inc.
Condensed Consolidated Balance Sheets
As of
| June 30, 2026 | December 31, 2025 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Prepaid and other current expenses | ||||||||
| Total current assets | ||||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and stockholders’ deficit | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Notes payable – related party, net of discount | ||||||||
| Convertible debentures, net | ||||||||
| Total current liabilities | ||||||||
| Notes payable – related party, net of discount | ||||||||
| Total liabilities | ||||||||
| Stockholders’ deficit | ||||||||
| Series A convertible preferred stock, par value $, shares designated; shares issued and outstanding | ||||||||
| Preferred stock, par value $, shares authorized; shares issued and outstanding | ||||||||
| Common stock par value $: shares authorized; and shares issued and outstanding | ||||||||
| Additional paid-in capital | ||||||||
| Stock subscription receivable | ( | ) | ( | ) | ||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ deficit | ( | ) | ( | ) | ||||
| Total liabilities and stockholders’ deficit | $ | $ | ||||||
See the accompanying notes to these unaudited condensed consolidated financial statements.
| 1 |
TerraVolt Holdings, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Operating Expenses | ||||||||||||||||
| Professional fees | ||||||||||||||||
| Equity-based compensation | ( | ) | ( | ) | ||||||||||||
| General and administrative | ||||||||||||||||
| Payroll and related expense | ||||||||||||||||
| Amortization of gas reservation fee | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expenses) | ||||||||||||||||
| Interest income | ||||||||||||||||
| Financing costs | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Financing costs – related party | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Abandoned project costs | ( | ) | ( | ) | ||||||||||||
| Total other expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss before provision for income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Provision for income taxes | ||||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss per share - Basic and Diluted | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Weighted Average common shares outstanding - Basic and Diluted | ||||||||||||||||
See the accompanying notes to these unaudited condensed consolidated financial statements.
| 2 |
TerraVolt Holdings, Inc.
Condensed Consolidated Statements of Stockholders’ Deficit (Unaudited)
For the Three and Six Months Ended June 30, 2026
| Common Stock | Additional Paid-in | Stock Subscription | Accumulated | Total Stockholders’ | ||||||||||||||||||||
| Shares | Amount | Capital | Receivable | Deficit | deficit | |||||||||||||||||||
| Balance December 31, 2025 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||
| Equity-based compensation - signing bonus | - | |||||||||||||||||||||||
| Equity-based compensation expense | - | |||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance March 31, 2026 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||
| Equity-based compensation expense | - | |||||||||||||||||||||||
| Warrants issued for note payable – related party | - | |||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance June 30, 2026 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||
TerraVolt Holdings, Inc.
Condensed Consolidated Statements of Stockholders’ Equity (Deficit) (Unaudited)
For the Three and Six Months Ended June 30, 2025
| Common Stock | Additional Paid-in | Stock Subscription | Other Comprehensive | Accumulated | Total Stockholders’ equity | |||||||||||||||||||||||
| Shares | Amount | Capital | Receivable | Income | Deficit | (deficit) | ||||||||||||||||||||||
| Balance December 31, 2024 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||
| Forfeiture of stock options | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Equity-based compensation | - | |||||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance March 31, 2025 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||
| Equity-based compensation | - | |||||||||||||||||||||||||||
| Forfeiture of stock options | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Reversal of equity-based compensation | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Warrants issued for note payable – related party | - | |||||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance June 30, 2025 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||
See the accompanying notes to these unaudited condensed consolidated financial statements.
| 3 |
TerraVolt Holdings, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
For the Six Months Ended June 30,
| 2026 | 2025 | |||||||
| Cash Flows From Operating Activities | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Abandoned project cost | ||||||||
| Amortization of note payable discounts | ||||||||
| Amortization of debt issuance cost | ||||||||
| Amortization of gas reservation fee | ||||||||
| Fair value of equity-based compensation | ( | ) | ||||||
| Changes in operating assets and liabilities | ||||||||
| Prepaid expenses and other current assets | ( | ) | ( | ) | ||||
| Accounts payable and accrued expenses | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash Flows From Investing Activities | ||||||||
| Purchase of gas reservation fee | ( | ) | ||||||
| Data center campus development cost | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash Flows From Financing Activities | ||||||||
| Proceeds from the issuance of notes payable – related party | ||||||||
| Proceeds from the issuance of convertible debentures | ||||||||
| Cost for issuance of convertible debentures | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| Net increase (decrease) in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents, beginning of period | ||||||||
| Cash and cash equivalents, end of period | $ | $ | ||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income taxes | $ | $ | ||||||
| Non-cash investing and financing activities | ||||||||
| Relative fair value of warrants issued with notes payable – related party | $ | $ | ||||||
| Accrued expenses – project development cost | $ | $ | ( | ) | ||||
See the accompanying notes to these unaudited condensed consolidated financial statements.
| 4 |
TerraVolt Holdings, Inc.
Condensed Consolidated Financial Statements (Unaudited)
For the Three and Six Months Ended June 30, 2026 and 2025
Note 1 – Organization and Accounting Policies
TerraVolt Holdings, Inc., formerly CalEthos, Inc. (the “Company” or “we”), was incorporated on March 20, 2002 under the laws of the State of Nevada.
On July 10, 2026, the Company changed its corporate name from CalEthos, Inc. to TerraVolt Holdings, Inc. by filing a Certificate of Amendment to its Articles of Incorporation, as amended, with the Secretary of State of the State of Nevada. The name change was effected to reflect the Company’s strategic focus on sustainable powered land and infrastructure solutions for large-scale data center development and end users. The Company’s proposed solution is a Physical Infrastructure-as-a-Service (PIaaS) Platform that will integrate a portfolio of grid and behind-the-meter power with construction-ready data center building sites that include utilities and fiber connectivity. The Company plans to provide this turnkey solution to hyperscalers, colocation providers, and data center companies seeking to deploy new capacity faster than with traditional power generation and transmission.
The Company is currently focusing on properties in states in which onsite power production utilizing natural gas turbines and reciprocating engines are allowed and in which the Company can acquire access to natural gas pipeline and capacity for delivery within a reasonable timeframe.
Basis of Presentation
The accompanying condensed consolidated financial statements and notes thereto are unaudited. The unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and note disclosures normally included in the Company’s annual financial statements have been condensed or omitted. The December 31, 2025 condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by GAAP. These interim unaudited condensed consolidated financial statements, in the opinion of management, reflect all normal recurring adjustments necessary for a fair presentation of the financial position, results of operations and cash flows for the three and six-month periods ended June 30, 2026 and 2025. The results for the three and six months ended June 30, 2026 are not necessarily indicative of the results to be expected for the full year ending December 31, 2026 or for any future period.
| 5 |
These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2025, included in the Company’s annual report on Form 10-K filed with the SEC on March 31, 2026.
Principles of Consolidation
The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary from the formation date. All material intercompany transactions and balances have been eliminated in consolidation.
Going Concern and Liquidity
The
Company incurred a net loss of approximately $
The Company’s unaudited condensed consolidated financial statements have been presented on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.
The Company is subject to a number of risks similar to those of other similar stage companies, including dependence on key individuals; successful development, marketing and branding of services; the uncertainty of product development and generation of revenues; dependence on outside sources of financing; risks associated with research and development; dependence on third-party suppliers and collaborators; protection of intellectual property; and competition with larger, better-capitalized companies. Ultimately, the attainment of profitable operations is dependent on future events, including locating and contracting to purchase suitable real estate with access to gas pipelines or other suitable power sources, contracting for the purchase of natural gas or otherwise obtaining the necessary power for the development of a data center, obtaining adequate financing to fund the Company’s operations and generating a level of revenues adequate to support the Company’s cost structure.
The Company will need to raise debt or equity financing in the future in order to continue its operations and achieve its growth targets. However, there can be no assurance that such financing will be available in sufficient amounts and on acceptable terms, when and if needed, or at all. The precise amount and timing of the funding needs cannot be determined accurately at this time. The Company believes its cash balances and cash flow from operations will not be sufficient to fund its operations and growth for the next twelve months from the issuance date of these financial statements. If the Company is unable to raise additional funding from investors or through other avenues, it may not be able to continue as a going concern. The accompanying unaudited condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
Segment Reporting
The Company’s chief operating decision maker (“CODM”) is the Company’s Chief Executive Officer. The Company operates as one operating segment and uses net income or loss as measures of profit or loss on a consolidated basis in making decisions regarding the allocation of capital resources and performance assessment. Additionally, the Company’s CODM regularly reviews the Company’s expenses on a consolidated basis. The financial metrics used by the CODM help make key operating decisions, such as determination of the use of capital resources for data center development and general and administrative expenses.
| 6 |
Since
the Company operates as
Use of Estimates
The 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 unaudited condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods.
Fair Value Measurement
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants as of the measurement date. Applicable accounting guidance provides an established hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors that market participants would use in valuing the asset or liability. There are three levels of inputs that may be used to measure fair value:
| Level 1 - | Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. |
| Level 2 - | Other inputs that are directly or indirectly observable in the marketplace. |
| Level 3 - | Unobservable inputs which are supported by little or no market activity. |
The 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.
As of and for the six months ended June 30, 2026, the Company had no assets or liabilities that required fair value measurement.
Cash and Cash Equivalents
The
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 their fair value. The Company maintains its cash and cash equivalents
in banks insured by the Federal Deposit Insurance Corporation (“FDIC”) in accounts that at times may be in excess of the
federally insured limit of $
| 7 |
Prepaid Expenses
Prepaid expenses are assets held by the Company that are expected to be realized and consumed within twelve months after the reporting period.
Related Parties
The Company follows Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) section 850-10 for the identification of related parties and disclosure of related-party transactions.
Pursuant 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 for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option of ASC section 825–10–15, to be accounted for by the equity method by the investing entity; (c) trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; (d) principal owners of the Company; (e) management of the Company; (f) other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and (g) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.
The consolidated financial statements are required to include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures are required to include: (a) the nature of the relationship(s) involved; (b) a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; (c) the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and (d) amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.
Commitments and Contingencies
The Company follows ASC section 450-20 to report accounting for contingencies. Certain conditions may exist as of the date the unaudited condensed consolidated financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or un-asserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or un-asserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s unaudited condensed consolidated financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed.
| 8 |
Stock-Based Compensation
The 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 in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments.
The Company uses the fair value method for equity instruments granted to non-employees and uses the Black-Scholes Option Pricing model for measuring the fair value of options. The fair value of stock-based compensation is determined as of the date of the grant (measurement date) and is recognized over the vesting periods.
The Company uses ASC 260, “Earnings Per Share” for calculating the basic and diluted earnings (loss) per share. The Company computes basic earnings (loss) per share by dividing net income (loss) by the weighted average number of common shares outstanding. Diluted earnings (loss) per share is computed based on the weighted average number of shares of common stock plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method. Dilutive potential common shares include outstanding stock options and warrants and stock awards. For periods with a net loss, basic and diluted loss per share is the same, in that any potential common stock equivalents would have the effect of being anti-dilutive in the computation of net loss per share.
Securities that could potentially dilute loss per share in the future were not included in the computation of diluted loss per share for the three and six months ended June 30, 2026 and 2025 because their inclusion would be anti-dilutive. Common stock equivalents amounted to and as of June 30, 2026 and 2025, respectively.
Recent Accounting Pronouncements
The Company’s management reviewed all recently issued accounting standard updates (“ASUs”) not yet adopted by the Company and does not believe the future adoption of any such ASUs may be expected to cause a material impact on the Company’s unaudited condensed consolidated financial condition or the results of its operations.
Note 2 – Gas Reservation Fee
In
April 2026, the Company entered into a natural gas supply agreement (the “Supply Agreement”) with a natural gas marketing
company (“Fuel Supplier”) pursuant to which the Fuel Supplier made a firm commitment to provide the Company with 55,000 MMBTU
per day of natural gas for the Company’s planned behind-the-meter onsite power plant to be located on the Company’s master-planned data center campus development to be located in Southeast Idaho on the Northwest Natural Gas Pipeline.
Pursuant to the Supply Agreement, in May 2026, the Company paid to the Fuel Supplier a natural gas reservation fee in the amount of approximately
$
| 9 |
The reservation fee reserves the Company’s right to the firm natural gas allotment during the reservation window; it is not credited against the purchase price of gas purchased under the Supply Agreement and is forfeited if the Company does not commence the gas transaction. Under the Supply Agreement, the Company must deliver a notice designating the start date of gas deliveries by April 30, 2028 and must designate a start date no later than July 31, 2029, upon which a three-year delivery period commences. Both deadlines may be extended by up to eight months for delays beyond the Company’s reasonable control.
The
Company concluded that the reservation right does not meet the definition of a derivative under ASC 815, Derivatives and Hedging, as
the arrangement contemplates physical delivery of natural gas and the net settlement criterion is not met. Accordingly, the Company recorded
the reservation fee as a noncurrent deferred asset under ASC 340-10, Other Assets and Deferred Costs, and is amortizing the fee on a
straight-line basis over the approximately 38-month reservation window from the date of payment through the outside start date of July
31, 2029, or approximately $
For
the three and six months ended June 30, 2026, the Company recognized amortization of the gas reservation fee of approximately $
In
connection with the Supply Agreement, the Company is required to deliver to the Fuel Supplier a standby letter of credit in the maximum
drawable amount of $
Note 3 – Notes Payable – Related Party
On
April 20, 2026, the Company entered into a letter agreement (the “Letter Agreement”) with SFO IDF LLC (“SFO IDF”),
a company owned and controlled by a trust established for the benefit of certain family members of Sean Fontenot, a director of the Company,
the trustees of which are independent and not affiliated with Mr. Fontenot. Pursuant to the Letter Agreement, on April 23, 2026, SFO
IDF advanced $
In
consideration, the Company issued to SFO IDF (i) an
The
Warrant was determined to be equity-classified. The Company allocated the proceeds between the Note and the Warrant shares
based on their relative fair values, resulting in approximately $
| 10 |
The
cancellation of the three previously outstanding notes in exchange for a portion of the Note was accounted for as a debt
modification in accordance with ASC 470-50, Debt – Modifications and Extinguishments, as the terms of the new instruments were
not substantially different from those of the cancelled notes. Accordingly, no gain or loss was recognized on the cancellation. The
$
As
additional consideration for the $
Notes payable – related party transactions are summarized for the periods as follows:
As of June 30, 2026 | As of December 31, 2025 | |||||||
| Principal | ||||||||
| Balance, beginning of the period | $ | $ | ||||||
| Additions | ||||||||
| Cancellation | ( | ) | ||||||
| Balance, end of the period | ||||||||
| Discount | ||||||||
| Balance, beginning of the period | ||||||||
| Additions | ||||||||
| Accrued interest on cancelled notes | ( | ) | ||||||
| Amortization | ( | ) | ( | ) | ||||
| Balance, end of the period | ||||||||
| Net carrying amount | $ | $ | ||||||
Financing
cost for the notes payable – related party amounted to $
| 11 |
Note 4 – Convertible Debentures
Convertible debentures transactions are summarized as follows:
| Principal | As of June 30, 2026 | As of December 31, 2025 | ||||||
| Balance, beginning of period | $ | $ | ||||||
| Additions | ||||||||
| Balance, end of period | ||||||||
| Debt issuance cost | ||||||||
| Balance, beginning of period | ||||||||
| Additions | ||||||||
| Amortization | ( | ) | ( | ) | ||||
| Balance, end of period | ||||||||
| Net book value | $ | $ | ||||||
Financing
cost for convertible debentures amounted to $
Note 5 – Commitments and Contingencies
Litigation
From time to time, the Company may become subject to legal proceedings, claims and litigation arising in the ordinary course of business. The Company is not currently a party to any material legal proceedings, nor is the Company aware of any pending or threatened litigation that would have a material adverse effect on the Company’s business, operating results, cash flows or financial condition should such litigation be resolved unfavorably.
Note 6 – Stockholders’ Deficit
Stock Options
| Number of Shares | Weighted Average Strike Price/Share | Weighted Average Remaining Contractual Term (Years) | Weighted Average Grant Date Fair Value/Share |
Intrinsic Value | ||||||||||||||||
| Balance, December 31, 2025 | ||||||||||||||||||||
| Granted | ||||||||||||||||||||
| Forfeited | - | |||||||||||||||||||
| Exercised | - | |||||||||||||||||||
| Expired | - | |||||||||||||||||||
| Balance, June 30, 2026 | ||||||||||||||||||||
| Vested and exercisable, June 30, 2026 | ||||||||||||||||||||
| Unvested, June 30, 2026 | $ | $ | $ | |||||||||||||||||
For
the three months ended June 30, 2026 and 2025, the total equity-based compensation expense (credit) was approximately $
As of June 30, 2026, the Company had stock options outstanding - options had a time-based vesting requirement and had a performance-based vesting requirement, as follows:
| Time-based | Performance-based | |||||||
| VP - Corporate Development | ||||||||
| CEO | ||||||||
| VP - Senior Counsel | ||||||||
| VP – Engineering and Construction | ||||||||
| Terminated employees - vested | ||||||||
| Non-employees -Vested on issuance | ||||||||
| Non-employee advisor | ||||||||
| Total | ||||||||
| 12 |
The outstanding performance-based awards, excluding the option granted to the non-employee advisor described below, are as follows:
| VP – Corporate Development | CEO | VP- Senior Counsel | Total | |||||||||||||
| Milestone 1 | ||||||||||||||||
| Milestone 2 | ||||||||||||||||
| Milestone 3 | ||||||||||||||||
| Milestone 4 | ||||||||||||||||
| Milestone 5 | ||||||||||||||||
| Total | ||||||||||||||||
The
performance-based options held by the Company’s VP – Corporate Development, CEO and VP - Senior Counsel vest upon the
achievement of five specified milestones related to the development of the Company’s data center platform. In June 2026,
pursuant to provisions of the option agreements that permit the vesting milestones to be altered or changed upon the mutual
agreement of the Company and each optionee as the development plan is further defined, the Company and the optionees agreed to
update the five performance milestones to align them with the Company’s current natural gas-based development plan: (1) fuel
supply and transportation rights; (2) site control; (3) regulatory and land use approvals; (4) customer or offtake commitment; (5)
purchase order for principal power plant component; and (6) permit to operate power generator facility.
In May 2026, the first milestone (fuel supply and transportation rights) was achieved upon the execution of the Company’s natural gas supply and transportation arrangements. As a result, performance-based options vested and the Company recognized compensation expense of approximately $ for the three and six months ended June 30, 2026, equal to the grant date fair value of the vested options. Management cannot estimate whether or when the remaining four milestones will be achieved and, accordingly, no compensation expense has been recognized for the remaining unvested performance-based options, which have an aggregate grant date fair value of approximately $. The probability of achievement of the milestones is reassessed at each reporting date, and compensation cost for a milestone tranche will be recognized if and when achievement of that milestone becomes probable.
In June 2026, the Company entered into an employment agreement with its VP – Engineering and Construction, with services commencing July 1, 2026. As part of the employment agreement, the Company granted a non-qualified stock option to purchase shares of the Company’s common stock at an exercise price of $ per share under the Company’s 2021 Equity Incentive Plan. The option is exercisable for a period of seven years from the date of grant and vests in four quarterly installments of shares as earned, based on hours worked, beginning July 1, 2026. The option grant date fair value of approximately $ was calculated using the Black-Scholes fair value option-pricing model with key input variables provided by management, as of the date of grant: the fair value of common stock $, volatility of %, estimated life of seven years, and risk-free interest rate of %. Compensation expense will be recognized as the option is earned over the requisite service period beginning July 1, 2026; accordingly, no compensation expense was recognized for the three and six months ended June 30, 2026.
In
June 2026, the Company granted to a non-employee advisor a non-qualified stock option to purchase shares of the Company’s
common stock at an exercise price of $ per share under the Company’s 2021 Equity Incentive Plan. The option is exercisable
for a period of seven years from the date of grant and vests solely upon the achievement of the following performance milestones related
to the development of the Company’s data center project: (1) completion of the data center energy stack baseline and strategy definition
(%, or shares); (2) selection of the power plant architecture and execution model (%, or shares); (3) strategic partner
sourcing and engineering selection for the Company’s planned Idaho data center campus (%, or shares); (4) execution of
a letter of intent for power plant financing or with an off-taker (%, or shares); and (5) design, build and construction commissioning
of the power plant (%, or shares). The option grant date fair value of approximately $
In
March 2026, the Company entered into an employment agreement with its CEO. As a sign-on bonus, the CEO received a non-qualified stock
option (the “Bonus Options”) to purchase shares of the Company’s common stock at a price of $ per share.
The Bonus Options vested immediately with an expiration date of
In January 2025, the Company issued to the Vice President and Sr. Counsel, Real Estate, Land Use and Governmental Affairs, a non-qualified stock option agreement for the purchase of shares of the Company’s common stock for an exercise price of $ per share, which was the fair value of the Company’s common stock on the grant date. The option vests as to shares of common stock as follows:
| ● | The option became exercisable as to shares of common stock on January 16, 2026 and shall vest and become exercisable as to an additional shares of common stock on each of January 16, 2027, January 16, 2028, and January 16, 2029 provided that the optionee is a consultant, an employee or a Board member in good standing with the Company on such applicable vesting date. | |
| ● | The option vests as to the remaining shares of common stock based on the employee completing the modified milestones, as disclosed above. |
| 13 |
The
option grant date fair value of $
Warrants
The following table summarizes warrants outstanding as of June 30, 2026:
| Number of Shares | Weighted Average Strike Price/Share | Weighted Average Remaining Contractual Term (Years) | Weighted Average Grant Date Fair Value/Share | Intrinsic Value | ||||||||||||||||
| Balance, December 31, 2025 | ||||||||||||||||||||
| Granted | ||||||||||||||||||||
| Forfeited | - | |||||||||||||||||||
| Exercised | - | |||||||||||||||||||
| Expired | - | |||||||||||||||||||
| Balance, June 30, 2026 | ||||||||||||||||||||
| Vested and exercisable, June 30, 2026 | ||||||||||||||||||||
| Unvested, June 30, 2026 | $ | - | $ | $ | ||||||||||||||||
In
April 2026, the Company issued to SFO IDF the Warrant to purchase up to shares of the Company’s common stock at an exercise
price of $ per share, exercisable through April 30, 2032, in connection with the issuance of the $
Note 7 – Subsequent Events
The Company evaluated all events that occurred after the balance sheet date through the date the financial statements were issued to determine if they must be reported. Management determined there are no reportable events, except for the following:
In August 2026, the Company entered into an agreement with a financial institution (the “Financial Institution”) under which the Financial Institution issued an irrevocable standby letter of credit in the amount of $6,000,000 (the “LOC”) for the account of the Company and for the benefit of the Fuel Supplier, as required under the natural gas supply agreements described in Note 2. The LOC expires on March 31, 2029. In connection with the issuance of the LOC, the Company placed $6,000,000 into a deposit account at the Financial Institution and assigned the deposit account to the Financial Institution as collateral for the Company’s reimbursement obligations in the event of a draw under the LOC. The assignment will remain in effect until the LOC is terminated and the Company’s related obligations to the Financial Institution have been satisfied. The $6,000,000 deposit will be reported as restricted cash in the Company’s balance sheet beginning in the third quarter of 2026.
| 14 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with our financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and the financial statements and related notes thereto in our Annual Report on Form 10-K for the year ended December 31, 2025.
This discussion contains certain forward-looking statements that involve risks and uncertainties. Our actual results and the timing of certain events could differ materially from those discussed in these forward-looking statements as a result of certain factors, including, but not limited to, those set forth herein and elsewhere in this Quarterly Report and in our other filings with the Securities and Exchange Commission. See “Cautionary Note Regarding Forward Looking Statements.”
Plan of Operations
We are a developer of large-scale data center 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.
Our 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. We plan to provide a turnkey solution with power and utilities to hyperscaler, neocloud, and colocation data center companies 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.
In April 2026, we entered into a natural gas supply agreement (the “Supply Agreement”) with a natural gas marketing company (“Fuel Supplier”) pursuant to which the Fuel Supplier agreed to provide us with 55,000 MMBTU per day of natural gas for our planned onsite powered data center campus in Southeast Idaho on the Northwest Natural Gas Pipeline. Pursuant to the Supply Agreement, in May 2026, we paid to the Fuel Supplier a natural gas reservation fee in the amount of $3,832,500, and in August 2026, we delivered to the Fuel Supplier a letter of credit in the maximum drawable amount of $6,000,000 to secure our obligations under the Supply Agreement. The Supply Agreement also provides for comprehensive fuel management services provided by the Fuel Supplier, that will allow us to better manage our customer’s needs and power plant fluctuations to ensure maximum cost-effectiveness and operational reliability as data center buildings are completed and commence operation.
We are currently negotiating with a number of landowners to purchase properties in Southeast Idaho on the Northwest Natural Gas pipeline that we deem sufficient for a large-scale onsite powered data center campus. As of the date of this Report, we have commenced the initial phase of our data center campus development process, which includes working with the local county planning and development department on land-use applications, zoning amendments, and studies and reports that will be required for the county to approve our plans once we gain site control of a property, which we expect will be within the next 60 days.
Concurrently, we also 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 county and state agencies all design and environmental documentation for land use and conditional zoning amendment approvals, which include the onsite natural gas power plant and data center campus development, by year-end 2026.
However, there can be no assurance that we will be able to successfully negotiate or enter into a definitive purchase agreement for targeted properties or to gain all required approvals for land use or conditional zoning amendments.
It is anticipated that we will incur significant expenses in the implementation of our business plan as described herein. In April 2026, we borrowed $15,000,000 to fund certain expenses related to the Supply Agreement and preliminary permitting for our planned data center campus. It is anticipated that we will require substantial additional 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.
To fund our business plan going forward, we intend to raise funds from investors by issuing common stock, preferred stock and/or debt securities.
| 15 |
Results of Operations for the Three Months Ended June 30, 2026 and 2025
The following table summarizes our results of operations for the three months ended June 30, 2026 and 2025:
Three Months Ended June 30, | Change | |||||||||||||||
| 2026 | 2025 | Dollar | Percentage | |||||||||||||
| Revenues | $ | — | $ | — | $ | — | — | % | ||||||||
| Operating Expenses | ||||||||||||||||
| Professional fees | 210,000 | 81,000 | 129,000 | 159.3 | ||||||||||||
| Equity-based compensation | 315,000 | (145,000 | ) | 460,000 | 317.2 | |||||||||||
| General and administrative | 15,000 | 12,000 | 3,000 | 25.0 | ||||||||||||
| Payroll and related expense | 247,000 | 187,000 | 60,000 | 32.1 | ||||||||||||
| Amortization of gas reservation fee | 160,000 | — | 160,000 | 100.0 | ||||||||||||
| Total operating expenses | $ | 947,000 | $ | 135,000 | $ | 812,000 | 601.5 | % | ||||||||
| Other (expenses) income | ||||||||||||||||
| Interest income | $ | 54,000 | $ | 1,000 | $ | 53,000 | 5,300.0 | % | ||||||||
| Financing costs | (54,000 | ) | (55,000 | ) | (1,000 | ) | (1.8 | ) | ||||||||
| Financing costs – related party | (488,000 | ) | (75,000 | ) | 413,000 | 550.7 | ||||||||||
| Abandoned project costs | — | (4,581,000 | ) | (4,581,000 | ) | (100.0 | ) | |||||||||
| Total other expense | $ | (488,000 | ) | $ | (4,710,000 | ) | $ | (4,222,000 | ) | (89.6 | )% | |||||
Revenues
For the three months ended June 30, 2026 and 2025, we had no revenues.
Operating Expenses
Professional fees
Professional fees increased to $210,000 for the three months ended June 30, 2026 from $81,000 for the three months ended June 30, 2025, an increase of approximately $129,000, or 159.3%. The increase was primarily attributable to (i) an increase in legal fees of approximately $94,000, (ii) an increase in consulting fees of approximately $31,000, and (iii) political contributions of $30,000, partially offset by (iv) decreases in accounting, filing and transfer agent fees aggregating approximately $1,000 and (v) geologist costs of approximately $25,000 incurred during 2025 that did not recur in 2026.
Equity-based compensation
Equity-based compensation increased to $315,000 for the three months ended June 30, 2026 from a credit of $(145,000) for the three months ended June 30, 2025, an increase of approximately $460,000. The equity-based compensation expense for the three months ended June 30, 2026 included approximately $285,000 recognized upon the achievement of the first performance milestone of our performance-based stock options in May 2026, with the remaining $30,000 related to time-based equity awards issued in prior years. The credit for the three months ended June 30, 2025 resulted from the reversal of previously recognized compensation expense in connection with the forfeiture of stock options held by terminated employees and consultants.
General and administrative
General and administrative expenses increased to $15,000 for the three months ended June 30, 2026 from $12,000 for the three months ended June 30, 2025, an increase of approximately $3,000, or 25.0%, with no individually material changes.
Payroll and related cost
Payroll and related cost increased to $247,000 for the three months ended June 30, 2026 from $187,000 for the three months ended June 30, 2025, an increase of approximately $60,000, or 32.1%. The increase was primarily attributable to the employment agreement entered into with our Chief Executive Officer in March 2026 and increased staffing to support our expanded development activities.
| 16 |
Amortization of gas reservation fee
For the three months ended June 30, 2026, we recognized amortization of the gas reservation fee of $160,000 related to the reservation fee paid under the Supply Agreement we entered into in April 2026. There was no comparable cost during the three months ended June 30, 2025.
Other (expenses) income
Interest income
Interest income increased to $54,000 for the three months ended June 30, 2026 from $1,000 for the three months ended June 30, 2025, an increase of approximately $53,000. The increase was attributable to interest earned on higher average cash balances following our receipt of $15,000,000 of proceeds from the issuance of a promissory note to a related party in April 2026.
Financing costs
Financing costs decreased to $54,000 for the three months ended June 30, 2026 from $55,000 for the three months ended June 30, 2025, a decrease of approximately $1,000, or 1.8%, with no material change between periods.
Financing costs – related party
Financing costs – related party increased to $488,000 for the three months ended June 30, 2026 from $75,000 for the three months ended June 30, 2025, an increase of approximately $413,000, or 550.7%. The increase was attributable to interest on, and amortization of the debt discount associated with, the $16,000,000 promissory note issued to a related party in April 2026, as compared to lower average related party borrowings outstanding during the three months ended June 30, 2025.
Abandoned project costs
During the three months ended June 30, 2025, we recorded abandoned project costs of approximately $4,581,000 in connection with our decision to abandon our planned data center project in Imperial County, California. There were no comparable costs during the three months ended June 30, 2026.
Results of Operations for the Six Months Ended June 30, 2026 and 2025
The following table summarizes our results of operations for the six months ended June 30, 2026 and 2025:
| Six Months Ended June 30, | Change | |||||||||||||||
| 2026 | 2025 | Dollar | Percentage | |||||||||||||
| Revenues | $ | — | $ | — | $ | — | — | % | ||||||||
| Operating Expenses | ||||||||||||||||
| Professional fees | 316,000 | 177,000 | 139,000 | 78.5 | ||||||||||||
| Equity-based compensation | 637,000 | (103,000 | ) | 740,000 | 718.4 | |||||||||||
| General and administrative | 16,000 | 13,000 | 3,000 | 23.1 | ||||||||||||
| Payroll and related expenses | 414,000 | 268,000 | 146,000 | 54.5 | ||||||||||||
| Amortization of gas reservation fee | 160,000 | — | 160,000 | 100.0 | ||||||||||||
| Total operating expenses | $ | 1,543,000 | $ | 355,000 | $ | 1,188,000 | 334.6 | % | ||||||||
| Other (expenses) income | ||||||||||||||||
| Interest income | $ | 55,000 | $ | 2,000 | $ | 53,000 | 2,650.0 | % | ||||||||
| Financing costs | (108,000 | ) | (77,000 | ) | 31,000 | 40.3 | ||||||||||
| Financing costs – related party | (649,000 | ) | (75,000 | ) | 574,000 | 765.3 | ||||||||||
| Abandoned project costs | — | (4,581,000 | ) | (4,581,000 | ) | (100.0 | ) | |||||||||
| Total other expense | $ | (702,000 | ) | $ | (4,731,000 | ) | $ | (4,029,000 | ) | (85.2 | )% | |||||
| 17 |
Revenues
For the six months ended June 30, 2026 and 2025, we had no revenues.
Operating Expenses
Professional fees
Professional fees increased to $316,000 for the six months ended June 30, 2026 from $177,000 for the six months ended June 30, 2025, an increase of approximately $139,000, or 78.5%. The increase was primarily attributable to (i) an increase in legal fees of approximately $81,000, (ii) an increase in consulting fees of approximately $49,000, (iii) an increase in filing fees of approximately $9,000, and (iv) political contributions of $30,000, partially offset by (v) a decrease in accounting fees of approximately $8,000 and (vi) geologist costs of approximately $25,000 incurred in 2025 that did not recur in 2026.
Equity-based compensation
Equity-based compensation increased to $637,000 for the six months ended June 30, 2026 from a credit of $(103,000) for the six months ended June 30, 2025, an increase of approximately $740,000. The equity-based compensation expense for the six months ended June 30, 2026 included $260,000 related to the stock option issued to our Chief Executive Officer as a signing bonus pursuant to his employment agreement executed in March 2026, approximately $285,000 recognized upon the achievement of the first performance milestone of our performance-based stock options in May 2026, and the remaining $92,000 related to time-based equity awards issued in prior years. The credit for the six months ended June 30, 2025 resulted from the reversal of previously recognized compensation expense in connection with the forfeiture of stock options held by terminated employees and consultants.
General and administrative
General and administrative expenses increased to $16,000 for the six months ended June 30, 2026 from $13,000 for the six months ended June 30, 2025, an increase of approximately $3,000, or 23.1%, with no individually material changes.
Payroll and related cost
Payroll and related cost increased to $414,000 for the six months ended June 30, 2026 from $268,000 for the six months ended June 30, 2025, an increase of approximately $146,000, or 54.5%. During the six months ended June 30, 2025, we incurred total payroll costs of approximately $497,000, of which approximately $229,000 was capitalized as project development cost and the remaining $268,000 was expensed. On a gross basis, the 2026 payroll cost decreased by approximately $83,000 compared to the 2025 payroll cost, primarily due to a decrease in headcount; following the abandonment of the Imperial County project in 2025, no payroll costs were capitalized during 2026.
Amortization of gas reservation fee
For the six months ended June 30, 2026, we recognized amortization of the gas reservation fee of $160,000 related to the reservation fee paid under the Supply Agreement we entered into in April 2026. There was no comparable cost during the six months ended June 30, 2025.
Other (expenses) income
Interest income
Interest income increased to $55,000 for the six months ended June 30, 2026 from $2,000 for the six months ended June 30, 2025, an increase of approximately $53,000. The increase was attributable to interest earned on higher average cash balances following our receipt of $15,000,000 of proceeds from the issuance of a promissory note to a related party in April 2026.
| 18 |
Financing costs
Financing costs increased to $108,000 for the six months ended June 30, 2026 from $77,000 for the six months ended June 30, 2025, an increase of approximately $31,000, or 40.3%. The increase was attributable to a higher average balance of convertible debentures outstanding during the six months ended June 30, 2026 as compared to the six months ended June 30, 2025.
Financing costs – related party
Financing costs – related party increased to $649,000 for the six months ended June 30, 2026 from $75,000 for the six months ended June 30, 2025, an increase of approximately $574,000. The increase was attributable to interest on, and amortization of the debt discounts associated with, the related party notes payable outstanding during 2026, including the $16,000,000 promissory note issued to a related party in April 2026, as compared to minimal related party borrowings during the six months ended June 30, 2025.
Abandoned project costs
During the six months ended June 30, 2025, we recorded abandoned project costs of approximately $4,581,000 in connection with our decision to abandon our planned data center project in Imperial County, California. There were no comparable costs during the six months ended June 30, 2026.
Liquidity and Capital Resources
Our working capital (deficit) as of June 30, 2026 and December 31, 2025 was as follows:
| As of | ||||||||
| June 30, 2026 | December 31, 2025 | |||||||
| Current assets | $ | 10,708,000 | $ | 295,000 | ||||
| Current liabilities | 2,598,000 | 3,095,000 | ||||||
| Working capital (deficit) | $ | 8,110,000 | $ | (2,800,000 | ) | |||
Our working capital improved from a working capital deficit of $2,800,000 as of December 31, 2025 to working capital of $8,110,000 as of June 30, 2026, an improvement of approximately $10,910,000. The improvement was primarily attributable to (i) an increase of $10,402,000 in our cash and cash equivalents, primarily resulting from the $15,000,000 of proceeds received from the issuance of a promissory note to a related party in April 2026, and (ii) the cancellation of $739,000 of related party notes payable, net of discounts, that were previously classified as current liabilities, in exchange for the $16,000,000 promissory note, which is classified as a non-current liability, partially offset by (iii) an increase of $215,000 in our accounts payable and accrued expenses and an increase of $27,000 in the carrying value of our convertible debentures due to the amortization of debt discounts.
Cash Flows for the six months ended June 30, 2026 and 2025
| Six Months Ended June 30, | ||||||||
| 2026 | 2025 | |||||||
| Net cash used in operating activities | $ | (765,000 | ) | $ | (227,000 | ) | ||
| Net cash used in investing activities | (3,833,000 | ) | (464,000 | ) | ||||
| Net cash provided by financing activities | 15,000,000 | 465,000 | ||||||
| Change in cash and cash equivalents during the period | 10,402,000 | (226,000 | ) | |||||
| Cash and cash equivalents, beginning of period | 287,000 | 286,000 | ||||||
| Cash and cash equivalents, end of period | $ | 10,689,000 | $ | 60,000 | ||||
| 19 |
Cash Flows from Operating Activities
Cash used in operating activities increased to approximately $765,000 for the six months ended June 30, 2026 from approximately $227,000 for the six months ended June 30, 2025, an increase of approximately $538,000. The increase was predominantly related to the increases in our professional fees, payroll and related cost and other operating expenses during the six months ended June 30, 2026 to support our expanded development activities.
Cash Flows from Investing Activities
Cash used in investing activities increased to approximately $3,833,000 for the six months ended June 30, 2026 from approximately $464,000 for the six months ended June 30, 2025, an increase of approximately $3,369,000. The increase was attributable to the payment of the $3,833,000 reservation fee under the natural gas supply agreement entered into in April 2026, whereas the prior year period included approximately $464,000 of development costs related to the abandoned Imperial County project.
Cash Flows from Financing Activities
Cash provided by financing activities increased to $15,000,000 for the six months ended June 30, 2026 from approximately $465,000 for the six months ended June 30, 2025, an increase of approximately $14,535,000. The 2026 amount reflects the $15,000,000 advanced by an entity related to a significant shareholder and board member in connection with the issuance of the $16,000,000 promissory note in April 2026, whereas the 2025 amount consisted of $250,000 of proceeds from notes payable – related party and $225,000 of proceeds from the issuance of convertible debentures, net of $10,000 of issuance costs.
Liquidity and Material Cash Requirements
For the six months ended June 30, 2026, we funded our operations with our existing cash reserves and the proceeds from the issuance of a promissory note to an entity that is related to a significant shareholder and board member. As of June 30, 2026, we had cash and cash equivalents of approximately $10,689,000, with convertible debentures in the aggregate principal amount of $1,635,000 that mature in December 2026 and a related party promissory note in the amount of $16,000,000 that matures in April 2028.
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. While we received net proceeds in the amount of $15,000,000 from the issuance of our debt securities in April 2026 to fund our business plan going forward, as of date of the filing of this Report, we have expended approximately $3,833,000 for the payment of the reservation fee to our natural gas supplier and have deposited $6,000,000 as security for a letter of credit that we have delivered under our natural gas supply agreement. Once we secure suitable land for our master-planned data center campus, we expect to expend the remaining net proceeds of approximately $5,100,000 over the next 12 months to complete the zoning and permitting process for the land we acquire, and the required design, engineering and regulatory studies for our planned gas power plant and campus layout, as well as for working capital for salaries, regulatory reporting and other miscellaneous expenses. In order to start the construction phase of our planned campus, we intend to raise additional 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 that 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.
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Going Concern
The unaudited condensed consolidated financial statements included in this filing have been prepared on a going concern basis, which implies that our company will continue to realize its assets and discharge its liabilities and commitments in the normal course of business. We are presently in the development stage and, apart from our cash balances, have only limited assets. We have not generated revenues in the last two fiscal years, have never paid any dividends and we are unlikely to pay dividends or generate earnings in the immediate or foreseeable future. The continuation of our company as a going concern is dependent upon: (i) continued financial support from our shareholders; (ii) our ability to continue raising necessary debt or equity financing to achieve our operating objectives; and (iii) our ability to acquire assets and establish a business or merge or otherwise acquire business opportunities.
Our independent auditors included an explanatory paragraph in their report on our financial statements for the year ended December 31, 2025 regarding concerns about our ability to continue as a going concern. In addition, our financial statements contain further note disclosures in this regard. The implementation of our business plan is dependent upon our ability to continue raising sufficient new capital from equity or debt markets in order to fund our on-going operating losses and real estate acquisition activities. The issuance of additional equity securities could result in a significant dilution in the equity interests of our current stockholders.
Application of Critical Accounting Policies
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying disclosures of our company. Although these estimates are based on management’s knowledge of current events and actions that our company may undertake in the future, actual results may differ from such estimates.
Principles of Consolidation
The unaudited condensed consolidated financial statements include the accounts of our company and our wholly-owned subsidiary from the formation date. All material intercompany transactions and balances have been eliminated in consolidation.
Debt and Debt Discounts
In accordance with ASC 470-20, Debt with Conversion and Other Options, we first allocate the cash proceeds of any notes we sell with warrants between the notes and any warrants on a relative fair value basis. Proceeds are then allocated to the conversion feature.
We account for debt discounts originating in connection with conversion features that remain embedded in the related notes in accordance with ASC 470-20. These costs are classified on the balance sheet as a direct deduction from the debt liability. We amortize these costs over the term of our debt agreements as financing cost in the unaudited condensed consolidated statement of operations.
Stock-Based Compensation
We account for our stock-based compensation under ASC 718, “Compensation – Stock Compensation” using the fair value based method. Under this method, compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. This guidance establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments.
We use the fair value method for equity instruments granted to non-employees and use the BSM model for measuring the fair value of options. The stock-based fair value compensation is determined as of the date of the grant (measurement date) and is recognized over the vesting periods.
Recent Accounting Pronouncements
Our management reviewed all recently-issued accounting standard updates (“ASUs”) not yet adopted by our company and does not believe the future adoption of any such ASUs may be expected to cause a material impact on our unaudited condensed consolidated financial condition or the results of our operations.
Off-Balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial position, revenues and expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.
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Item 3. Quantitative and Qualitative Disclosures about Market Risk
Not required under Regulation S-K for smaller reporting companies.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this Quarterly Report, our Chief Executive Officer and Chief Financial Officer (our “Certifying Officers”), conducted evaluations of our disclosure controls and procedures. As defined under Sections 13a - 15(e) and 15d - 15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the term “disclosure controls and procedures” means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission (“SEC”). Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including the Certifying Officers, to allow timely decisions regarding required disclosures.
Based on their evaluation, the Certifying Officers concluded that, as of June 30, 2026, our disclosure controls and procedures were not effective.
The material weakness related to internal control over financial reporting that was identified at June 30, 2026 was that we did not have sufficient personnel staffing in our accounting and financial reporting department. As a result, we were not able to achieve adequate segregation of duties and were not able to provide for adequate review of the financial statements.
This control deficiency could result in a reasonable possibility that material misstatements of the financial statements will not be prevented or detected on a timely basis. However, our management believes that the material weakness identified does not result in the restatement of any previously reported financial statements or any other related financial disclosure, and management does not believe that the material weakness had any effect on the accuracy of our financial statements included as part of this Quarterly Report.
We will continue to monitor and evaluate the effectiveness of our disclosure controls and procedures and our internal controls over financial reporting on an ongoing basis and are committed to taking action and implementing additional enhancements or improvements, as necessary and as funds allow.
Changes in internal control over financial reporting.
There were no changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on the Effectiveness of Internal Controls
Readers are cautioned that our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material error. An internal control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our control have been detected. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any control design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
We know of no material active or pending legal proceeding against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation.
Item 1A. Risk Factors
We are a small reporting company, as defined by Rule 12b-2 of the Exchange Act, and are not required to provide the information under this item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Sales of Unregistered Securities
There have been no sales of unregistered securities within the reporting period covered by this report that would be required to be disclosed pursuant to Item 701 of Regulation S-K, except as follows:
On April 23, 2026, SFO IDF LLC, a company owned and controlled by a trust established for the benefit of certain family members of Sean Fontenot, a director of our company, the trustees of which are independent and not affiliated with Mr. Fontenot (“SFO IDF”), entered into a letter agreement for a loan to the Company in the amount of $15,000,000, agreed to refinance the outstanding notes payable held by SFO IDF in the aggregate principal amount of $1,000,000 that bore interest at the rate of 10% per annum and were to mature on June 30, 2026 by cancelling such notes in their entirety, in exchange for a promissory note in the principal amount of $16,000,000 that bears interest at the rate of 8% per annum that matures on April 30, 2028 and a six-year warrant to purchase up to 6,000,000 shares of the Company’s common stock with an exercise price of $0.50 per share. The promissory note and warrant were issued in reliance upon exemptions from registration provided by Section 4(a)(2) of the Securities Act, and Rule 506 of Regulation D promulgated thereunder, as the transactions did not involve any public offering. No placement agent was engaged in connection with these sales, and no fees or commissions were paid.
Repurchases of Shares or of Company Equity Securities
None.
Item 3. Default Upon Senior Securities
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information
None
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Item 6. Exhibits
The following documents are filed as a part of this report or incorporated herein by reference:
| ** | Furnished. Not filed. Not incorporated by reference. Not subject to liability. | |
| *** | A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. |
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SIGNATURES
Pursuant to the requirements of Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Date: August 14, 2026 | TerraVolt Holdings, Inc. | |
| By: | /s/ Joel D. Stone | |
| Name: | Joel D. Stone | |
| Title: | Chief Executive Officer | |
| By: | /s/ Dean S Skupen | |
| Name: | Dean S Skupen | |
| Title: | Chief Financial Officer | |
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