Quarterly report [Sections 13 or 15(d)]



STYLE="font: 10pt Times New Roman, Times, Serif">

























UNITED
STATES






SECURITIES
AND EXCHANGE COMMISSION






Washington,
D.C. 20549










FORM
10-Q









(Mark
One)






































[X]





QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934














For
the quarterly period ended March 31, 2020











[  ]





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. 000-50331










CalEthos,
Inc




.















(Exact
name of registrant as specified in its charter)




















Nevada








98-0371433




(State
or other jurisdiction


of incorporation or organization)







(I.R.S.
Employer




Identification
No.)






















11753
Willard Avenue






Tustin,
California









92782




(Address
of Principal Executive Offices)






(Zip
Code)















(714)
352-5315



(Registrant’s
telephone number, including area code)


















(Former
name, former address and former fiscal year, if changed since last report)








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. Yes [X] No

[  ]









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). Yes [X] No

[  ]









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



[  ]



Non-accelerated
filer



[X]



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.

[  ]









Securities
registered pursuant to Section 12(b) of the Act: None








Securities
registered pursuant to Section 12(g) of the Act: None








Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes [X] No

[  ]












As of May 31, 2021,
there were 12,960,621 outstanding shares of the registrant’s common stock, par value $0.001 per share.





















































CalEthos,
Inc.










Quarterly
Report on Form 10-Q










Three
Months Ended March 31, 2020










TABLE
OF CONTENTS


























































































































































































































Page















Cautionary
Note Regarding Forward-Looking Statements





-ii-













PART
1-FINANCIAL INFORMATION
















Item
1.



Financial
Statements (unaudited)




















Condensed
Balance Sheets as of March 31, 2020 (unaudited) and December 31, 2019





F-2

















Condensed
Statements of Operations for the three months ended March 31, 2020 and 2019 (Unaudited)





F-3

















Condensed
Statements of Stockholders’ deficit for the three months ended March 31, 2020 and 2019 (Unaudited)





F-4

















Condensed
Statements of Cash Flows for the three months ended March 31, 2020 and 2019 (Unaudited)





F-5

















Condensed
Notes to Financial Statements





F-6












Item
2.





Management’s
Discussion and Analysis of Financial Condition and Results of Operations





1












Item
3.





Quantitative
and Qualitative Disclosures about Market Risk





4












Item
4.





Control
and Procedures





4















PART
II-OTHER INFORMATION


















Item
1.





Legal
Proceedings





6












Item
1A.





Risk
Factors





6












Item
2.





Unregistered
Sales of Equity Securities and Use of Proceeds





6












Item
3.





Defaults
Upon Senior Securities





6












Item
4.





Mine
Safety Disclosures





6










Item
5.





Other
Information





6












Item
6.





Exhibits





6















SIGNATURES






7





































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, may address or relate to future events and expectations and
as such constitutes “forward-looking statements” within the meaning of the Private Securities Litigation Act of 1995. Statements
which are not historical reflect our current expectations and projections about our future results, performance, liquidity, financial
condition, prospects and opportunities and are based upon information currently available to us and our management and their interpretation
of what is believed to be significant factors affecting our business, including many assumptions regarding future events. Such forward-looking
statements include statements regarding, among other things:





























































our
ability to implement our current stated business plans;



















our
ability to retain key members of our management team;



















our
future financing or acquisition plans and our ability to consummate any such transactions on favorable terms if at all

;




















our
anticipated needs for working capital; and



















our
ability to establish a market for our common stock and operate as a public company.








Forward-looking
statements, which involve assumptions and describe our future plans, strategies, and expectations, are generally identifiable by use
of the words “may,” “should,” “would,” “could,” “scheduled,” “expect,”
“anticipate,” “estimate,” “believe,” “intend,” “seek,” or “project”
or the negative of these words or other variations on these words or comparable terminology. Actual results, performance, liquidity,
financial condition and results of operations, prospects and opportunities could differ materially and perhaps substantially from those
expressed in, or implied by, these forward-looking statements as a result of various risks, uncertainties and other factors.








Particularly
in light of our current status as a shell company, there can be no assurance that the forward-looking statements contained herein will
in fact occur. Readers should not place undue reliance on any forward-looking statements. Except as expressly required by the federal
securities laws, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information,
future events, changed circumstances or any other reason.













-

ii

-



















CalEthos,
Inc.








Three
Months Ended March 31, 2020








Index
to the Financial Statements
































































Contents






Page
(s)














Condensed
Balance Sheets at March 31, 2020 (Unaudited) and December 31, 2019








F-2














Condensed
Statements of Operations for the three months ended March 31, 2020 and 2019 (Unaudited)








F-3














Condensed
Statements of Stockholders’ deficit for the three months ended March 31, 2020 and 2019 (Unaudited)








F-4














Condensed
Statements of Cash Flows for the three months ended March 31, 2020 and 2019 (Unaudited)








F-5














Condensed
Notes to the Financial Statements (Unaudited)








F-6













F-

1




















CalEthos,
Inc.







Condensed
Balance Sheets

































































































































































































































































































































































March
31, 2020









December
31, 2019













(Unaudited)
















ASSETS



























CURRENT
ASSETS:



























Cash
and cash equivalents






$



6,000









$



123,000






Prepaid
expenses









2,000












2,000

































Total
Current Assets









8,000












125,000

































Total
Assets






$



8,000









$



125,000

































LIABILITIES
AND STOCKHOLDERS’ DEFICIT



























CURRENT
LIABILITIES:



























Accounts
payable and accrued expenses






$



423,000









$



363,000






Convertible
promissory notes, net









631,000












323,000

































Total
Current Liabilities









1,054,000












686,000

































Total
Liabilities









1,054,000












686,000

































STOCKHOLDERS’
DEFICIT



























Series
A convertible preferred stock, par value $0.001, 3,600,000 shares authorized, 85,975 issued and outstanding as of December 31, 2019
(liquidation value of $119,000)





























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





























Common
stock par value $0.001: 100,000,000 shares authorized; 16,634,951 shares issued and outstanding









17,000












17,000






Additional
paid-in capital









8,741,000












8,750,000






Stock
subscription receivable









(2,000



)









(2,000



)



Accumulated
deficit









(9,802,000



)









(9,326,000



)






























Total
Stockholders’ Deficit









(1,046,000



)









(561,000



)






























Total
Liabilities and Stockholders’ Deficit






$



8,000









$



125,000












See
accompanying notes to the unaudited condensed financial statements.














F-

2




















CalEthos,
Inc.







Condensed
Statements of Operations





(Unaudited)




For
the Three Months Ended March 31,


















































































































































































































































2020









2019



























Revenues






$











$










Operating Expenses



























Professional fees









132,000












155,000






General and administrative
expenses









42,000












5,000






Operating expenses









174,000












160,000






Loss from operations









(174,000



)









(160,000



)






























Other expenses



























Financing cost









(164,000



)









(21,000



)



Loss on extinguishment
of series A convertible preferred stock









(138,000



)























(302,000



)









(21,000



)






























Loss before provision for income taxes









(476,000



)









(181,000



)



Provision for income
taxes

























Net loss









(476,000



)









(181,000



)



Other comprehensive
income (loss)

























Comprehensive loss






$



(476,000



)






$



(181,000



)



Net loss per share






$



(0.03



)






$



(0.01



)



Weighted average number of shares outstanding
- basic and diluted









16,634,951












16,634,951












See
accompanying notes to the unaudited condensed financial statements.














F-

3


















CalEthos,
Inc.






Condensed
Statements of Stockholders’ Deficit




For
the Three Months Ended March 31, 2020 and 2019




(Unaudited)








For
the Three Months Ended March 31, 2020





















































































































































































































































































































































































Series
A Convertible Preferred









Preferred
Stock









Common
Stock









Additional
Paid-In









Stock


Subscription









Accumulated









Total
Stockholders’












Shares









Amount









Shares









Amount









Shares









Amount









Capital









receivable









Deficit









Deficit






Balance January 1, 2020









85,975









$


























$
















16,634,951









$



17,000









$



8,750,000









$



(2,000



)






$



(9,326,000



)






$



(561,000



)






























































































































Conversion of series A convertible preferred
Stock to convertible promissory notes









(85,975



)
































































(119,000



)































(119,000



)



Fair value of warrants issued with the conversion
of series A convertible preferred stock











































































52,000


































52,000






Debt premium on issuance of convertible promissory
notes for conversion of series A convertible preferred stock













































































58,000


































58,000






Net loss















































































































(476,000



)









(476,000



)



Balance March 31, 2020

















$
























$











$



16,634,951









$



17,000









$



8,741,000









$



(2,000



)






$



(9,802,000



)






$



(1,046,000



)








For
the Three Months Ended March 31, 2019





















































































































































































































































































































































































Series
A Convertible Preferred









Preferred
Stock









Common
Stock









Additional
Paid-In









Stock


Subscription









Accumulated









Total
Stockholders’












Shares









Amount









Shares









Amount









Shares









Amount









Capital









receivable









Deficit









Deficit






Balance January 1, 2019









35,975









$






















$














16,634,951









$



17,000









$



7,660,000









$











$



(7,827,000



)






$



(150,000



)






























































































































Proceeds for the sale of Series A Convertible
Preferred Stock









50,000





































































69,000


































69,000






Relative fair value of warrants issued with
convertible promissory notes











































































102,000


































102,000






Beneficial conversion feature associated with
convertible promissory notes

















































































118,000




































118,000






Net loss



































































































(181,000



)









(181,000



)



Balance March 31, 2019









85,975









$






















$











$



16,634,951









$



17,000









$



7,949,000









$











$



(8,008,000



)






$



(42,000



)









See
accompanying notes to the financial statements.














F-

4


















CalEthos,
Inc.







Condensed
Statements of Cash Flows





For
the Three Months Ended March 31,




(Unaudited)












































































































































































































































































































































































































2020









2019



























Cash
flows from operating activities



























Net
loss






$



(476,000



)






$



(181,000



)



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



























Amortization
of convertible promissory note discounts









161,000












21,000






Loss
on extinguishment of convertible preferred stock









86,000

















Fair
value of warrants issued for extinguishment of preferred stock









52,000



















Changes
in operating assets and liabilities:



























Accounts
payable and accrued expenses









60,000












39,000






Net
cash used in operating activities









(117,000



)









(121,000



)






























Cash
flows from investing activities



























Cash
held by officer




















12,000






Net
cash provided by investing activities






















12,000

































Cash
flows from financing activities



























Proceeds
from the issuance of convertible promissory notes




















220,000






Proceeds
from the issuance of series A convertible preferred stock






















69,000






Net
cash provided by financing activities






















289,000

































Net
increase (decrease) in cash









(117,000



)









180,000






Cash,
beginning of period









123,000

















Cash,
end of period






$



6,000









$



180,000

































Supplemental
disclosure of cash flow information:



























Cash
paid for interest






$











$








Cash
paid for income taxes






$













$



































Non-Cash
investing and financing activities



























Conversion
of series A preferred stock to convertible promissory notes






$



147,000









$








Fair
value of warrants issued with the conversion of series A convertible preferred stock






$



52,000









$










Debt
premium on issuance of convertible promissory notes for conversion of series A convertible preferred stock






$



58,000









$








Relative
fair value of warrants issued with convertible promissory notes






$











$



102,000






Beneficial
conversion feature associated with convertible promissory notes






$













$



118,000












See
accompanying notes to the unaudited condensed financial statements.














F-

5




















CalEthos,
Inc.




March
31, 2020







Condensed
Notes to the Financial Statements






(Unaudited)









Note
1 – Organization and Accounting Policies








CalEthos,
Inc. (the “Company”) (fka RealSource Residential, Inc.) was incorporated on March 20, 2002 under the laws of the State of
Nevada. Since the second quarter of 2016, the Company has been a “shell” company, as defined in Rule 12b-2 under the Exchange
Act.









Change
in Control









On
May 16, 2018, certain majority stockholders of the Company, including certain former directors and officers of the Company, entered into
a stock purchase agreement dated May 16, 2018 (the “Control Purchase Agreement”) with RealSource Acquisition Group, LLC,
a Utah limited liability company (“RealSource Acquisition”), whereby RealSource Acquisition agreed to purchase an aggregate
of 11,006,356 shares (440,256 shares after giving effect to the Reverse Stock Split (see Note 3) (the “Control Shares”) of
the Company’s issued and outstanding shares of common stock for an aggregate purchase price of $180,000. Immediately prior to the
closing under the Control Purchase Agreement on September 12, 2018 (the “Closing Date”), RealSource Acquisition assigned
its rights under the Control Purchase Agreement to M1 Advisors, LLC, a Delaware limited liability company (“M1 Advisors”),
pursuant to a purchase agreement and assignment and assumption of contract rights dated as of August 28, 2018 between RealSource Acquisition
and M1 Advisors. M1 Advisors paid RealSource Acquisition $80,000 as consideration for such assignment.








Effective
on the Closing Date, and in accordance with the amended and restated bylaws of the Company and the requirements of the Control Purchase
Agreement, (a) each of Michael S. Anderson, Nathan W. Hanks and V. Kelly Randall resigned as directors of the Company, (b) Michael Campbell,
the sole member of M1 Advisors, and Piers Cooper were elected to the Company’s board of directors, and (c) Mr. Hanks also resigned
as president and chief executive officer of the Company, Mr. Randall also resigned as chief operating office and chief financial officer
of the Company, Mr. Campbell was appointed the chief executive officer of the Company and Piers Cooper was appointed president of the
Company.








On
the Closing Date, the Company entered into a series A preferred stock purchase agreement dated as of the Closing Date (the “Preferred
Purchase Agreement”) with M1 Advisors, which is an entity controlled by Michael Campbell, the Company’s chief executive officer
and a director of the Company at such time, Piers Cooper, the Company’s president and a director of the Company at such time, the
members of RealSource Acquisition, and the other investors who were signatories thereto (collectively, the Purchasers”). Pursuant
to the Preferred Purchase Agreement, the Company sold to the Purchasers an aggregate of 15,600,544 shares of the Company’s series
A preferred stock, which has since been re-designated as Founder preferred stock (“Founder Preferred Stock”), for an aggregate
purchase price of $16,000, or $0.001 per share. Of the Founder Preferred Stock purchased, 9,320,414 shares were purchased by M1 Advisors,
4,674,330 shares were purchased by Mr. Cooper and an aggregate of 1,195,000 shares were purchased by the members of RealSource Acquisition
or their assigns.








Immediately
following the above transactions, an aggregate of 15,600,544 shares of Founder Preferred Stock and 630,207 shares of common stock was
issued and outstanding. At such time, the shares of Founder Preferred Stock and common stock owned by M1 Advisors represented approximately
60.14% of the issued and outstanding shares of capital stock of the Company on a fully-diluted basis and the shares of Founder Preferred
Stock owned by Mr. Cooper represented approximately 28.80% of the issued and outstanding shares of capital stock of the Company on a
fully-diluted basis. The shares of Founder Preferred Stock acquired by M1 Advisors were purchased with funds that M1 Advisors borrowed
from another entity controlled by Mr. Campbell.








On
December 20, 2018, all outstanding shares of Founder Preferred Stock was converted in to shares of the Company’s common stock on
a one-for-one basis pursuant to the terms of the Founder Preferred Stock.













F-

6























Business
Activity









Following
the change in control, as described above, the board of directors determined to establish the Company in the rapidly-growing cannabis
industry, initially in the State of California. The primary activity of the Company’s management is to seek and investigate various
opportunities in the California cannabis industry, and if such investigation warrants, acquire assets and create a business around them,
acquire part or all of an operating cannabis business or invest in a joint venture with other more established companies already in the
cannabis industry. The Company will not restrict its search to any specific business, segment of the cannabis industry or geographical
location and the Company may participate in a business venture of virtually any kind or nature that the board of directors believe is
beneficial to the Company and its shareholders.









Financial
Statement Presentation









The
accompanying unaudited condensed financial statements have been prepared in conformity with generally accepted accounting principles
in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 8-01 of Regulation
S-X. Pursuant to these rules and regulations, certain information and note disclosures, normally included in financial statements prepared
in accordance with GAAP, have been condensed or omitted. GAAP requires management to make estimates and assumptions that affect reported
amounts and related disclosures. In the opinion of management, all adjustments (consisting of normal recurring items) considered necessary
for a fair presentation have been included. Operating results for the three months ended March 31, 2020 are not necessarily indicative
of the results that may be expected for the fiscal year ending December 31, 2020. The balance sheet as of December 31, 2019 has been
derived from the audited financial statements at that date, but does not include all the information and footnotes required by GAAP for
complete financial statements. For further information, refer to the financial statements and notes thereto contained in the Annual Report
on Form 10-K for the year ended December 31, 2019. The notes to the unaudited condensed financial statements are presented on a going
concern basis unless otherwise noted.









Basis
of Presentation









The
accompanying condensed financial statements have been prepared assuming that the Company will continue as a going concern. The Company
has no established operations. The Company incurred a net loss of approximately $476,000 for the three months ended March 31, 2020 and
had an accumulated deficit of approximately $9,802,000 as of March 31, 2020. The Company has financed its activities principally through
debt and equity financing and shareholder contributions. Management expects to incur additional losses and cash outflows in the foreseeable
future in connection with its operating activities.








The
Company’s condensed 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 products; 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 obtaining adequate financing to fund its 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, and will depend on a number
of factors, including market demand for the Company’s products and services, the success of product development efforts, the timing
of receipts for customer deposits, the management of working capital, and the continuation of normal payment terms and conditions for
purchase of goods and services. 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 substantially
increase revenues, reduce expenditures, or otherwise generate cash flows from operations, then the Company will likely need to raise
additional funding from investors or through other avenues to continue as a going concern.













F-

7



















Debt
Discounts









The
Company accounts for debt discounts originating in connection with conversion features that remain embedded in the related notes in accordance
with ASC 470-20,

Debt with Conversion and Other Options

. These costs are classified on the consolidated balance sheet as a direct
deduction from the debt liability. The Company amortizes these costs over the term of its debt agreements as interest expense-debt discount
in the consolidated statement of operations.






Earnings Per Share





We use ASC 260, “

Earnings
Per Share

” for calculating the basic and diluted earnings (loss) per share. We compute 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 are 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.





There were 1,690,214 common share equivalents
at March 31, 2020 and 484,000 common share equivalents at March 31, 2019. For the three months ended March 31, 2020 and 2019,
these potential shares were excluded from the shares used to calculate diluted. These securities were not included in the computation
of diluted net earnings per share as their effect would have been antidilutive.






Recent Accounting Pronouncements





Changes to accounting principles
are established by the Financial Accounting Standards Board’s (“FASB”) in the form of Accounting Standards Update (“ASU”)
to the FASB’s Codification. We consider the applicability and impact of all ASUs on our financial position, results of operations,
cash flows, or presentation thereof. The Company reviewed all recently issued pronouncement in 2021, but not yet effective, and does
not believe the future adoption of any such pronouncements may be expected to cause a material impact on the Company’s financial
condition or the results of its operations.








Note
2 – Accounts Payable and Accrued Liabilities








The
following table summarizes the Company’s accounts payable and accrued expense balances as of the date indicated:




































































March
31, 2020









December
31, 2019






Trade payables






$



224,000









$



187,000






Accrued liabilities









196,000












176,000






Accrued interest









3,000



















Accounts payable and
accrued expenses






$



423,000









$



363,000











Note
3 – Convertible Promissory Notes








During
the period ended March 31, 2020, the Company issued convertible promissory notes in the amount of $146,000 (the “Notes”).
The Notes were issued in exchange for the 85,975 shares of series A convertible preferred stock. The Notes are non-interest bearing with
the principal due and payable starting on February 28, 2021. Any amount of unpaid principal on the date of maturity will accrue interest
at rate of 10% per annum (default interest). The principal amount and all accrued interest are convertible into shares of the Company’s
common stock, as of the date of issuance, at a rate of $1.00 per share (“Conversion Rate”). The conversion rate is adjustable
if, at any time when any principal amount of the Notes remains unpaid or unconverted, the Company issues or sells any shares of the Company’s
common stock for no consideration or for a consideration per share (before deduction of reasonable expenses or commissions or underwriting
discounts or allowances in connection therewith), which is less than the Conversion Rate in effect on the date of such issuance (or deemed
issuance) of such shares of common stock (a “Dilutive Issuance”). Immediately upon a Dilutive Issuance, the Conversion Rate
will be reduced to the amount of the consideration per share received by the Company in such Dilutive Issuance. Events of default include
failure to issue conversion shares, the occurrence of a breach or default under any other agreement, any money judgment, writ or similar
process entered or filed against the Company or any of its property or other assets for more than $100,000, bankruptcy filing, application
for the appointment of a custodian, trustee or receiver, insolvency, the Company’s common stock delisted, or dissolution, winding
up, or termination of the business of the Company.








In
connection with the issuance of the Notes, the Company issued to the purchasers of the Notes stock purchase warrants (the “Warrants”)
to purchase an aggregate of 73,000 shares of the Company’s common stock for a purchase price of $1.50 per share, subject to adjustments.








In
accordance with ASC 470 - Debt, the Company has accounted for the issuance of the Notes as an extinguishment of the series A preferred
stock. Under extinguishment accounting, the difference between the fair value of the Notes and book basis of the series A preferred stock
of $86,000 was accounted for as a loss on extinguishment. Also, the fair value of the Warrants of $52,000 was recorded as a loss on extinguishment.
The difference between the fair value of the Notes and the face value of the notes of $58,000 was recorded as additional paid on capital.
As of March 31, 2020, the amortization expense was approximately $161,000.








The
Company determined that the conversion feature of the Notes would not be an embedded feature to be bifurcated and accounted for as a
derivative in accordance with ASC 818-15,

Derivatives and Hedging

.








As
of March 31, 2020 and 2019, convertible promissory notes consisted of the following















































































2020









2019






Principal amount






$



653,000









$



506,000






Original issue discount









(2,000



)









(19,000



)



Warrant discount









(10,000



)









(79,000



)



Conversion feature discount









(10,000



)









(85,000



)



Net balance






$



631,000









$



323,000








Interest expense on default
convertible notes amounting to $3,000 and $0 for the three months ended March 31, 2020 and 2019, respectively.








Note
4 – Subsequent Events








The
Company has evaluated all events that occurred after the balance sheet date through the date when the financial statements were issued
to determine if they must be reported. The management of the Company determined the following reportable non-adjusting events:








Subsequent
to March 31, 2020, the Company issued six (6) additional Notes for total cash proceeds of $60,000.









On January 5, 2021, Piers
Cooper (“Mr. Cooper”), our President and a member of our Board of Directors, resigned as an officer and director of our company
(“Termination Agreement”). As part of the Termination Agreement, Mr. Cooper’s agreed to return 3,674,330 shares of
the Company’s common stock (“Cancelled Shares”). The Cancelled shares were to be returned within thirty days of Mr. Cooper’s
execution of the Termination Agreement, which was January 5, 2021. The Cancelled Shares were returned and cancelled on April 19, 2021.












In
January 2021, the Company issued a promissory note for cash amounting to $15,000 with 8% annual interest per year and a maturity date
of March 31, 2022. Interest will be computed starting January 11, 2021 and payable at maturity date together with the principal amount.
In the event of default, the interest rate of the note shall increase to 10% per annum and computed on the basis of the actual number
of days elapsed and a 365-day year.








In
February 2021, the Company issued a promissory note for cash amounting to $25,000 with 10% annual interest per year and a maturity date
of February 19, 2022. The principal and accrued interest is payable in a single instalment on or before the maturity date. In
the event of default, the interest rate of the note shall increase to 15% per annum and computed on the basis of the actual number of
days elapsed and a 365-day or 366-day year.








In
February 2021, the Company signed a new consulting agreement that granted one of its shareholders an option to purchase 750,000 shares
of the Company’s common stock at $0.001 per share for the consultancy work provided from August 2020 to February 2021. The options
were fully vested on the date of issuance.








In
March 2021, the Company issued a convertible promissory note in the amount of $55,000 (the “Note”). The total proceeds
were approximately $50,000, due to approximately $5,000 for an original issue discount. The Note is non-interest bearing with the principal
due and payable starting in March 2022. Any amount of unpaid principal on the date of maturity will accrue interest at rate of
10% per annum (default interest). The principal amount and all accrued interest are convertible into shares of the Company’s common
stock, as of the date of issuance, at a rate of $1.00 per share (“Conversion Rate”). The conversion rate is adjustable if,
at any time when any principal amount of the Notes remains unpaid or unconverted, the Company issues or sells any shares of the Company’s
common stock for no consideration or for a consideration per share (before deduction of reasonable expenses or commissions or underwriting
discounts or allowances in connection therewith), which is less than the Conversion Rate in effect on the date of such issuance (or deemed
issuance) of such shares of common stock (a “Dilutive Issuance”). Immediately upon a Dilutive Issuance, the Conversion Rate
will be reduced to the amount of the consideration per share received by the Company in such Dilutive Issuance. Events of default include
failure to issue conversion shares, the occurrence of a breach or default under any other agreement, any money judgment, writ or similar
process entered or filed against the Company or any of its property or other assets for more than $100,000, bankruptcy filing, application
for the appointment of a custodian, trustee or receiver, insolvency, the Company’s common stock delisted, or dissolution, winding
up, or termination of the business of the Company. In connection with the issuance of the Notes, the Company issued to the purchasers
of the Notes stock purchase warrants (the “Warrants”) to purchase an aggregate of 27,500 shares of the Company’s common
stock for a purchase price of $1.50 per share, subject to adjustments.






In
March 2021, the CEO agreed to forgive approximately $68,000 due to him.








In
March 2021, the CFO agree to reduce amount due to him from approximately $127,000 to $30,000. For the reduction of $97,000, the Company
will issue 75,000 shares of common stock. The remaining liability of $30,000 will be paid in cash.








In
April 2021, the Company issued a promissory note for cash amounting to $8,550 with 0% annual interest per year if paid at a maturity
date of July 5, 2021. In the event of default, the interest rate of the note shall increase to 8% per annum and computed on the basis
of the actual number of days elapsed and a 365-day or 366-day year.








In
April 2021, an option holder exercised two options for 385,000 and 750,000 shares of the Company's common stock at an exercise price
of $0.001 for both options. The shares for the options have yet to be issued.








In
April 2021, the Company issued a promissory note for cash amounting to $50,000 with 10% annual interest per year and a maturity date
of April 22, 2022. The principal and accrued interest is payable in a single instalment on or before the maturity date. In the
event of default, the interest rate of the note shall increase to 15% per annum and computed on the basis of the actual number of days
elapsed and a 365-day or 366-day year.













F-

8





















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, 2019.










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









As
of the filing of this Report, our management has not yet determined our corporate structure and the initial business in which we plan
to engage, and we are still in the process of refining and finalizing the course of action needed to implement our proposed new business
operations. As a result, management has not determined our actual short-term or long-term cash requirements, which management expects
to be substantial.








We
will require substantial financing to commence meaningful business operations and to achieve our goals, and a failure to obtain this
necessary capital when needed on acceptable terms, or at all, could force us to delay, limit, reduce or terminate our product 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.








Until
we finalize our plans and raise capital to execute our business plan, our operations will be minimal, so our operating expenses will
be similarly limited. Our pre-operational expenses have been and will continue to be funded by private placements of our debt and equity
securities and loans from our majority shareholder.

















1




















Critical
Accounting Policies









Our
financial statements are prepared using the accrual basis of accounting in accordance with accounting principles generally accepted in
the United States (US GAAP). Our fiscal year ends December 31.








This
Management’s Discussion and Analysis of Financial Condition and Results of Operations discuss our financial statements, which have
been prepared in accordance with US GAAP. The preparation of these financial statements requires making estimates and assumptions that
affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial
statements, as well as the reported revenues and expenses for the reporting periods. On an ongoing basis, we evaluate such estimates
and judgments. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances,
the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent
from other sources. Actual results may differ (perhaps significantly) from these estimates under different assumptions or conditions.








While
all the accounting policies impact the financial statements, certain policies may be viewed to be critical. Our management believes that
we do not have any significant accounting policies, given we had no meaningful operations as of March 31, 2020.

















2




















Results
of Operations










Revenues









We
had no revenues for the three months ended March 31, 2020 and 2019.









Expenses









Operating
costs for the three months ended March 31, 2020 were $174,000, compared to $160,000 for the three months ended March 31, 2019. The expenses
in 2020 primarily included audit, filing, legal and transfer agent fees and consulting fees paid to outside third parties.









Net
loss









Net
loss for the three months ended March 31, 2020 and 2019 was $476,000 and $181,000, respectively, consisting primarily of filing fees,
transfer agent costs, legal and accounting expenses, financing costs and loss on extinguishment of series A preferred stock.









Liquidity
and Capital Resources









Our
financial position as of March 31, 2020 and December 31, 2019 were as follows:









Working
Capital





































































As
of






March
31, 2020













As
of






December
31,2019





























Current Assets






$



8,000









$



125,000






Current Liabilities









1,054,000












686,000






Working Capital Deficit






$



(1,046,000



)






$



(561,000



)








At
March 31, 2020, we had cash of approximately $6,000 and prepaid expenses of approximately $2,000. Working capital deficit increased by
approximately $485,000 from December 31, 2019 to March 31, 2020. The increase was primarily due to decrease in cash and cash equivalent
used in operations approximately $117,000, increase in our accounts payable and accrued expenses of approximately $60,000 and increase
in convertible promissory notes from conversion of series A convertible preferred stock approximately $147,000. No new monies came in during this period.

















3




















Cash
Flows












































































































For
the Three Months Ended






March
31,














2020









2019



























Net cash from Operating Activities






$



(117,000



)






$



(121,000



)



Net cash from Investing Activities




















12,000






Net cash from Financing
Activities






















289,000






Increase (decrease) in Cash during the Period









(117,000



)









180,000






Cash, Beginning of Period









123,000

















Cash, End of Period






$



6,000









$



180,000











Our
net cash used in operating activities was $117,000 and $121,000 for three-month period ended March 31, 2020 and 2019, respectively, resulting
from operating expenses.








Plan
of Operations and Cash Requirements








Following
the Change of Control Transactions, as described above, our board of directors determined to establish our company in the rapidly-growing
legal cannabis industry. As of the filing of this Report, our new management has not yet determined our corporate structure and the initial
business in which we plan to engage, and we are still in the process of refining and finalizing the course of action needed to implement
our proposed new business operations. As a result, management has not determined our actual short-term or long-term cash requirements,
which management expects to be substantial.








We
will require substantial financing to commence meaningful business operations and to achieve our goals, and a failure to obtain this
necessary capital when needed on acceptable terms, or at all, could force us to delay, limit, reduce or terminate our product 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.








Until
we finalize our plans and raise capital to execute our business plan, our operations will be minimal, so our operating expenses will
be similarly limited. Our pre-operational expenses have been and will continue to be funded by private placements of our debt and equity
securities or by loans from our majority shareholder.









Off-Balance
Sheet Arrangements









As
of March 31, 2020, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K.











Item
3. Quantitative and Qualitative Disclosures About Market Risk.









We
are a smaller reporting company and therefore are not required to provide the information for this item.












Item
4. Controls and Procedures.











Evaluation
of Disclosure Controls and Procedures









As
of the end of the period covered by this 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.

















4



















Based
on their evaluation, the Certifying Officer concluded that, as of March 31, 2020, our disclosure controls and procedures were not effective.








The
material weakness related to internal control over financial reporting that was identified at March 31, 2020 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 March 31, 2020 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.

















5

























PART
II- OTHER INFORMATION













Item
1. Legal Proceedings.









None.











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.









None.











Item
3. Defaults Upon Senior Securities.









None.











Item
4. Mine Safety Disclosures.









None.











Item
5. Other Information.









None.











Item
6. Exhibits.


































































No.








Description
of Exhibit




31.1








Certification
of Principal Executive Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002





31.2








Certification
of Principal Financial Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002





32.1







Certification
of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act 0f
2002




32.2







Certification
of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act 0f
2002




101.INS
*






XBRL
Instance Document



101.CAL
*






XBRL
Taxonomy Extension Calculation Linkbase Document



101.SCH
*






XBRL
Taxonomy Extension Schema Document



101.DEF
*






XBRL
Taxonomy Extension Definition Linkbase Document



101.LAB
*






XBRL
Taxonomy Extension Labels Linkbase Document



101.PRE
*






XBRL
Taxonomy Extension Presentation Linkbase Document













*



XBRL
(eXtensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus
for purposes of sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of section 18 of the Securities
Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

















6






















SIGNATURES









Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.





















































Date:
June 29, 2021




CalEthos,
Inc.
















By:




/s/
Michael Campbell







Name:



Michael
Campbell






Title:



Chief
Executive Officer















By:




/s/
Dean S Skupen







Name:



Dean
S Skupen






Title:



Chief
Financial Officer

















7









The above information was disclosed in a filing to the SEC. To see the filing, click here.

To receive a free e-mail notification whenever RealSource Residential, Inc. makes a similar move, sign up!

Other recent filings from the company include the following:

Departure of Directors or Certain - Oct. 8, 2021
Other preliminary information statements - Oct. 5, 2021
Notice of Exempt Offering of Securities, item 06b - Sept. 23, 2021
Entry into a Material Definitive - Sept. 21, 2021

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