10-K: CalEthos Pivots to Onsite-Powered Data Centers Amid Losses

CalEthos, Inc. reported a net loss of $6.5 million for 2025 and a significant working capital deficit, while strategically shifting its focus to developing onsite-powered data center campuses.

Summary

• CalEthos, Inc. is a developer of large-scale infrastructure focused on master-planned, onsite-powered data center campuses in the Northwestern U.S.
• The company formed TerraVolt Infrastructure Inc. in May 2025, a wholly-owned subsidiary, to provide Physical Infrastructure-as-a-Service (PIaaS) integrating onsite power with construction-ready data center sites.
• The previous data center development project in Imperial County, California, was abandoned in July 2025 due to unmet timelines, additional environmental studies, community concerns, and regulatory delays, resulting in $4,581,000 of capitalized development costs being expensed.
• The company reported no revenues for the years ended December 31, 2025, and 2024.
• Net loss for 2025 was $6,498,000, an improvement from $12,590,000 in 2024, primarily due to lower financing costs and no loss on extinguishment of notes payable in 2025.
• Working capital deficit increased significantly to $2,800,000 in 2025 from $219,000 in 2024, driven by increases in convertible debentures, notes payable to related parties, and accounts payable.
• Cash and cash equivalents remained low at $287,000 at year-end 2025.
• Joel D. Stone was appointed Chairman and Chief Executive Officer on March 27, 2026, replacing Michael Campbell, who became Senior Vice President, Corporate Development due to health issues.
• The company faces substantial doubt about its ability to continue as a going concern due to recurring losses, negative operating cash flows, and an accumulated deficit of $38,368,000.
• Performance-based stock option milestones were modified in May 2025 to align with the new business model, specifically land acquisition for geothermal development, but their achievement is not yet probable.

Sentiment

Score: 2

Explanation: StockSavvy.ai views this filing with a highly negative sentiment due to severe liquidity issues, a significant working capital deficit, no revenue, and explicit 'going concern' doubt, despite a strategic pivot to a high-growth industry.

Positives

• The strategic pivot to onsite-powered data centers addresses a critical industry need for reliable power and faster deployment, especially with the surge in AI demand.
• The company's focus on a Northwestern U.S. location offers climate advantages for free-air cooling, potentially reducing energy needs by up to 80% compared to warmer regions.
• Secured FIRM Gas Supply Contract for 55k MMBTU/day, sufficient for 300MW-350MW of power, with additional capacity planned for 2030.
• Onsite BTM (behind-the-meter) gas-fired power plant is allowed in the Electric Co-Op service territory, eliminating utility oversight, studies, or interconnection queuing, which can expedite market entry.
• Management changes include Joel D. Stone, with 25 years of experience in data center infrastructure and operations, taking over as CEO, potentially bringing valuable expertise to the new strategy.
• Net loss decreased from $12,590,000 in 2024 to $6,498,000 in 2025, primarily due to reduced financing costs and the absence of large extinguishment losses seen in the prior year.

Negatives

• The company reported no revenues for both 2025 and 2024, indicating it is still in the development phase with no operational income.
• A significant working capital deficit of $2,800,000 as of December 31, 2025, up from $219,000 in 2024, highlights severe liquidity issues.
• The abandonment of the Imperial County data center project resulted in expensing $4,581,000 of previously capitalized development costs, representing a substantial loss.
• The company has an accumulated deficit of $38,368,000 as of December 31, 2025, raising substantial doubt about its ability to continue as a going concern.
• The stock price has seen a dramatic decline, from a high of $13.50 in Q1 2024 to $0.14 as of March 16, 2026.
• Payroll and related expenses increased by $324,000 in 2025 due to the cessation of capitalizing these costs after the Imperial County project abandonment.
• The company relies heavily on related-party financing, with notes payable to related parties increasing significantly to $739,000 in 2025 from $11,000 in 2024.

Risks

• Inability to finance and complete the acquisition of real estate and necessary power for proposed data center operations.
• Inability to obtain all necessary regulatory approvals for data center operations and energy supply.
• Challenges in implementing the new business plan and attracting key personnel.
• Inability to operate profitably or efficiently manage operations.
• Difficulty in raising additional financing for working capital and capital expenditures.
• Emerging federal and state regulations (moratoriums, siting restrictions, sustainability standards) could increase costs or hinder development.
• Strategic reliance on Bring Your Own Power (BYOP) and onsite power generation entails nascent operational risks and greater capital intensity, with average construction costs rising significantly.
• Technology risks associated with deploying large-scale microgrids (natural gas turbines, fuel cells, BESS) may lead to operational downtime or higher maintenance costs.
• Supply chain volatility for natural gas and disruptions to pipeline infrastructure or significant gas pricing volatility could materially impact operating margins.
• Long lead times for natural gas generators (18-30 months) and support infrastructure (2+ years) due to high market demand.
• Competition from larger, more established, and better-capitalized companies, as well as new entrants focused on BTM solutions.
• Potential loss of customers or pressure to reduce rental rates if competitors offer lower prices.
• Intense competition for specialized third-party service providers (engineers, contractors) for onsite power production and data center development, increasing costs and risk of delays.
• Competition for suitable properties for power production and data center developments, potentially reducing availability and increasing prices.
• Material weaknesses in internal control over financial reporting, including inadequate segregation of duties, insufficient written policies, inadequate security for computer systems, and no whistle-blower policy, which may not be remediated without additional financing.

Future Outlook

The company anticipates securing land-use and conditional zone change approvals for its new Northwestern U.S. data center campus by year-end 2026. Environmental assessments are expected to be filed before the end of 2026, with construction approvals aimed for Q2 2027. Design and environmental documentation for the onsite natural gas power plant are expected to be submitted by mid-2026. The company expects to incur significant expenses and will require substantial financing to complete development and construction, intending to raise funds through common stock, preferred stock, and/or debt securities.

Management Comments

• "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."
• "We anticipate securing land-use and conditional zone change approvals by year-end 2026."
• "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."
• "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 believe our strategic pivot to onsite natural gas power generation addresses the immediate, critical need for baseload power for hyperscale customers."
• "We believe our plan for onsite power offers us the following competitive advantages: Reduced Time-to-Power and Baseload Reliability."

Industry Context

StockSavvy.ai notes that CalEthos's strategic pivot aligns with a significant industry trend: the data center infrastructure supercycle, projected to reach $3 trillion by 2030, driven by AI scaling. The market is characterized by tight occupancy (97% globally) and severe power availability bottlenecks, with grid connection delays averaging four or more years in major hubs. The company's focus on 'Power-First' strategies and onsite natural gas generation directly addresses the industry's shift towards independent, off-grid operations, where approximately one-third of data center leaders expect their facilities to be 100% onsite-powered by 2030. This positions CalEthos to potentially capitalize on the demand for predictable time-to-power, a key differentiator against traditional, grid-dependent competitors like Equinix and Digital Realty. However, the capital intensity and supply chain risks associated with this approach are significant, as highlighted by the filing.

Comparison to Industry Standards

• CalEthos's business model of providing construction-ready sites with onsite power generation (Physical Infrastructure-as-a-Service) directly competes with specialized developers like Tract and Quantum Loophole, who focus on large-scale land and power master development for hyperscale tenants.
• The company's use of natural gas for baseload power aligns with the industry's current preference for dispatchable power sources, contrasting with the intermittency of purely renewable sources, a strategy also seen in hybrid systems combining natural gas with BESS and solar.
• The projected 12-18 month timeline for onsite gas pipeline tap/meter station build is significantly faster than the 4+ year average wait times for grid connections reported by CBRE and JLL for major hubs, offering a competitive advantage in 'speed to market'.
• CalEthos's target of reducing data center cooling energy needs by up to 80% through free-air cooling in a cool, semi-arid Northwestern U.S. climate compares favorably to warmer regions like the Southwest or Southeast, where cooling costs are substantially higher.
• Unlike established data center REITs such as Equinix, Digital Realty, and CyrusOne, CalEthos is a new entrant with no current operational revenue, placing it at a significant disadvantage in terms of financial resources, operating history, and existing customer relationships.

Management Changes

Corporate Governance

Legal Proceedings

• No material active or pending legal proceedings against the company are known.

Related Party Transactions

• Nanosha Investments LLC (controlled by director Sean Fontenot) exchanged $4,287,193 of promissory notes and a warrant for 8,574,386 common shares in February 2024.
• Nanosha provided a $1,000,000 loan in February 2024, which was extended multiple times with additional warrants issued, and eventually exchanged for 500,000 common shares and warrants for 2,258,877 shares in December 2024.
• SFO IDF LLC (owned by a trust for Mr. Fontenot's family) provided a $250,000 loan on April 22, 2025, receiving a promissory note and a warrant for 500,000 shares at $0.49/share. This transaction also reduced the exercise price of Nanosha's December 2024 warrant from $2.00 to $0.49.
• SFO IDF LLC provided a $500,000 loan on July 22, 2025, receiving a promissory note and a warrant for 2,000,000 shares at $0.50/share, and extended the maturity of the April 2025 note.
• SFO IDF LLC provided a $250,000 loan on December 15, 2025, receiving a promissory note and a warrant for 1,000,000 shares at $0.50/share, and extended the maturity of the April and July 2025 notes.
• DSS Consulting Corporation (controlled by CFO Dean Skupen) receives a monthly consulting fee of $5,000 and was issued 250,000 shares of common stock in March 2019.

Stakeholder Impact

• **Shareholders**: Significant dilution risk from potential future capital raises (common stock, preferred stock, debt securities) and existing warrants/options. Current shareholders have experienced substantial value erosion with the stock price decline. The 'going concern' doubt poses a fundamental risk to investment.
• **Employees**: The company has a small staff (3 full-time employees). The strategic pivot and abandonment of previous projects could create uncertainty. Performance-based equity awards were modified due to the strategic shift, impacting employee incentives.
• **Creditors**: The company's increased working capital deficit and reliance on related-party financing indicate elevated credit risk. Convertible debentures and notes payable to related parties have upcoming maturity dates (June 2026, December 2026) that require refinancing or conversion.
• **Customers (Prospective)**: The new PIaaS platform aims to attract hyperscalers and colocation providers by offering faster deployment and reliable onsite power, addressing a critical industry need. However, the company's early stage and financial instability could be a concern for potential large-scale clients.

Next Steps

• Complete land-use applications, zone change requests, and supplemental site reports for the new Northwestern U.S. data center campus.
• Secure land-use and conditional zone change approvals by year-end 2026.
• Finalize timelines and budgets for necessary county and state environmental assessments.
• File environmental reports before the end of 2026.
• Secure all necessary construction approvals by the second quarter of 2027.
• Submit design and environmental documentation for the onsite natural gas power plant to applicable state agencies by mid-2026.
• Raise additional debt or equity financing to fund operations and growth targets.
• Obtain stockholder approval for the increase in the 2021 Equity Incentive Plan to 10,000,000 shares by written consent in Q2 2026.
• Remediate material weaknesses in internal controls over financial reporting, contingent on securing additional financing for staffing.

Key Dates

Recommendation

The company faces severe financial distress, evidenced by zero revenue, a rapidly increasing working capital deficit, and an accumulated deficit of over $38 million. The explicit 'going concern' warning from management and auditors is a critical red flag. While the strategic pivot to onsite-powered data centers addresses a high-demand market, the company's current financial state, reliance on related-party financing, and significant stock price depreciation (from $13.50 to $0.14) indicate extreme risk. The abandonment of a previous major project and material weaknesses in internal controls further compound these concerns. Without substantial, non-dilutive financing and a clear path to revenue generation, the company's viability is highly questionable, making it a strong sell for investors.

Keywords

Data Center Development, Onsite Power, Natural Gas Turbines, Infrastructure-as-a-Service, Hyperscale, Colocation, AI Infrastructure, SEC Filing, 10-K, TerraVolt, Nevada Corporation, Corporate Governance, Financial Reporting, Liquidity, Going Concern