Company: GEDC
Filing Date: 2025-08-14
Form Type: 10-Q
Source: 0001641172-25-023834
Chunk: 37

Company: CalEthos, Inc.
Filing Date: 2025-08-14
Form: 10-Q
Item: Item 1
Chunk 37
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 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
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.

Foreign
Currency Translation

The
financial statements of our former foreign subsidiary, for which the functional currency is the local currency, was translated into
U.S. dollars using the exchange rate at the consolidated balance sheet date for assets and liabilities and a weighted-average
exchange rate during the year for revenue, expenses, gains and losses. Translation adjustments were recorded as other comprehensive
income (loss) within shareholders’ equity (deficit). Gains or losses from foreign currency transactions are recognized in the
consolidated statements of operations.

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 consolidated statement of operations and comprehensive loss.

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