UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
Commission File No.
(FKA Inception Mining, Inc.) |
(Exact Name of Registrant as Specified in Its Charter) |
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(State of Other Jurisdiction of Incorporation or Organization) |
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(Address of Principal Executive Offices) |
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(Registrant’s telephone number, including area code)
Copies to:
Brunson Chandler & Jones, PLLC
175 South Main Street, Suite 1410
Salt Lake City, Utah 84111
(801) 303-5721
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 and posted 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 and post such files).
Indicate by checkmark 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,” “smaller reporting company” and “emerging growth company” in Rule 12b-3 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ | Emerging growth company |
☒ | Smaller reporting company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to 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
Securities registered to Section 12(b) of the Act: None.
As of May 15, 2025 there were
BLUSKY AI INC.
FORM 10-Q
TABLE OF CONTENTS
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| Table of Contents |
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
BluSky AI, Inc.
(FKA Inception Mining, Inc.)
Condensed Balance Sheets
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| March 31, 2025 |
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| December 31, 2024 |
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ASSETS |
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Current Assets |
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Prepaid expenses and other current assets |
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Total Current Assets |
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Other assets |
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Total Assets |
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LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||
Current Liabilities |
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Accounts payable and accrued liabilities |
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Accrued interest - related parties |
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Note payable |
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Notes payable - related parties |
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Convertible notes payable - net of discount |
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Derivative liabilities |
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Total Current Liabilities |
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Total Liabilities |
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Commitments and Contingencies |
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Stockholders' Deficit |
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Preferred stock, $ |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
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Total Stockholders' Deficit |
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Total Liabilities and Stockholders' Deficit |
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See accompanying notes to the unaudited condensed financial statements.
| F-1 |
| Table of Contents |
BluSky AI, Inc.
(FKA Inception Mining, Inc.)
Condensed Statements of Operations
(Unaudited)
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| For the Three Months Ended |
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| March 31, 2025 |
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| March 31, 2024 |
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Operating Expenses |
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General and administrative |
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Depreciation and amortization |
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Total Operating Expenses |
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Income (Loss) from Operations |
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Other Income/(Expenses) |
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Other income (expense) |
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Change in derivative liability |
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Initial derivative expense |
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Gain on extinguishment of debt |
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Interest expense |
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Total Other Income/(Expenses) |
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Net Income (Loss) from Operations before Income Taxes |
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Provision for Income Taxes |
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Net Income (Loss) |
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Net income (loss) per share – Basic and Diluted |
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Weighted average number of shares outstanding during the period – Basic and Diluted |
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See accompanying notes to the unaudited condensed financial statements.
| F-2 |
| Table of Contents |
BluSky AI, Inc.
(FKA Inception Mining, Inc.)
Condensed Statements of Stockholders’ Deficit
(Unaudited)
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| ($0.00001 Par) |
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| Paid-in |
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| Accumulated |
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| Shares |
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| Amount |
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Balance, December 31, 2024 |
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Rounding shares issued with reverse split |
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Net income for the period |
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Balance, March 31, 2025 |
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| Preferred stock |
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| Total |
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| ($0.00001 Par) |
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| Amount |
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Balance, December 31, 2023 |
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Net loss for the period |
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Balance, March 31, 2024 |
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See accompanying notes to the unaudited condensed financial statements.
| F-3 |
| Table of Contents |
BluSky AI, Inc.
(FKA Inception Mining, Inc.)
Condensed Statements of Cash Flows
(Unaudited)
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| March 31, 2025 |
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Cash Flows From Operating Activities: |
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Net Income (Loss) |
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Adjustments to reconcile net income (loss) to net cash used in operations |
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Depreciation and amortization expense |
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(Gain) on extinguishment of debt |
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Change in derivative liability |
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Expenses paid in behalf of the company by related party |
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Amortization of right-of-use asset |
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Amortization of debt discount |
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Initial derivative expense |
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Changes in operating assets and liabilities: |
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Prepaid expenses and other current assets |
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Accounts payable and accrued liabilities |
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Accounts payable and accrued liabilities - related parties |
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Net Cash Used In Operating Activities |
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Cash Flows From Investing Activities: |
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Net Cash Provided By (Used In) Investing Activities |
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Cash Flows From Financing Activities: |
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Repayment of convertible notes payable |
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Proceeds from notes payable-related parties |
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Proceeds from convertible notes payable |
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Net Cash Provided by Continuing Financing Activities |
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Net Change in Cash |
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Cash at Beginning of Period |
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Cash at End of Period |
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Supplemental disclosure of cash flow information: |
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Cash paid for interest |
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Cash paid for taxes |
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Supplemental disclosure of non-cash investing and financing activities: |
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Recognition of debt discounts on convertible note payable |
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Note payable issued to related party for settlement of convertible note payable |
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See accompanying notes to the unaudited condensed financial statements.
| F-4 |
| Table of Contents |
BluSky AI, Inc.
(FKA Inception Mining, Inc.)
Notes to Condensed Financial Statements (Unaudited)
March 31, 2025
1. Nature of Business
BluSky AI, Inc. (formerly known as Inception Mining, Inc.) was incorporated under the name of Golf Alliance Corporation and under the laws of the State of Nevada on July 2, 2007. Inception Mining, Inc. was a precious metal mineral acquisition, exploration and development company. Inception Development, Inc., its wholly owned subsidiary, was incorporated under the laws of the State of Idaho on January 28, 2013.
Golf Alliance Corporation pursued its original business plan to provide opportunities for golfers to play on private golf courses normally closed to them due to the membership requirements of the private clubs. During the year ended July 31, 2010, the Company decided to redirect its business focus toward precious metal mineral acquisition and exploration.
On March 5, 2010, the Company amended its articles of incorporation to (1) change its name to Silver America, Inc. and (2) increase its authorized common stock from
On June 23, 2010, the Company amended its articles of incorporation to change its name to Gold American Mining Corp.
On February 25, 2013, Gold American Mining Corp. and its majority shareholder (the “Majority Shareholder”), and its wholly owned subsidiary, Inception Development Inc. (the “Subsidiary”), entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with
On May 17, 2013, the Company amended its articles of incorporation to change its name to Inception Mining, Inc. (“Inception” or the “Company”).
On October 2, 2015, the Company consummated a merger with Clavo Rico Ltd. (“Clavo Rico”). Clavo Rico is a privately held Turks and Caicos company with principal operations in Honduras, Central America. Clavo Rico operates the Clavo Rico mining concession through its subsidiaries Compañía Minera Cerros del Sur, S.A de C.V. and Compañía Minera Clavo Rico, S.A. de C.V. and holds other mining concessions. Pursuant to the agreement, the Company issued
| F-5 |
| Table of Contents |
On January 12, 2023, Inception Mining, Inc. (the “Company”) entered into a non-binding Letter of Intent (the “LOI”) with Mother Lode Mining, Inc. (“MLM”). The LOI became binding on January 24, 2023. Pursuant to the terms of the LOI, the Company agreed to sell all of the shares of its wholly-owned subsidiary, Compañía Minera Cerros Del Sur, S.A. de C.V. (“CMCS”), to MLM. CMCS is the Honduran-based company that owns the Clavo Rico mine.
Since the divestiture of the Clavo Rico Mine, the Company has been operating as a consultant and advisor to the mining industry, including to Mother Lode Mining, the new owner of the Clavo Rico mine. It also has an ongoing financial interest in the Clavo Rico Mine under the LOI, with monthly payments due through February 2025 that are secured by a net smelter royalty.
2. Summary of Significant Accounting Policies
Going Concern - The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying financial statements, the Company had a net income of $
The Company’s existence is dependent upon management’s ability to develop profitable operations and to obtain additional funding sources. There can be no assurance that the Company’s financing efforts will result in profitable operations or the resolution of the Company’s liquidity problems. The accompanying statements do not include any adjustments that might result should the Company be unable to continue as a going concern.
Management is currently working to make changes that will result in profitable operations and to obtain additional funding sources to meet the Company’s need for cash during the next twelve months and beyond.
Basis of Presentation - The Company prepares its financial statements in accordance with accounting principles generally accepted in the United States of America.
Condensed Financial Statements - The interim financial statements included herein have been prepared by BluSky AI, Inc. (“BluSky” or the “Company”) without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC” or the “Commission”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. These interim financial statements should be read in conjunction with the financial statements and notes thereto included in this filing and the Form 10-K for the year ended December 31, 2024 filed with the SEC on April 1, 2025.
In the opinion of management, all adjustments have been made consisting of normal recurring adjustments necessary to present fairly the financial position of the Company and as of March 31, 2025, the results of its statements of operations and comprehensive income (loss) for the three-month period ended March 31, 2025, its condensed statement of stockholders’ deficit and its cash flows for the three-month period ended March 31, 2025. The results of operations for the interim periods are not necessarily indicative of the results for the full year.
Use of Estimates – In preparing financial statements in conformity with generally accepted accounting principles, we are required to make 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 and revenues and expenditures during the reported periods. Actual results could differ materially from those estimates. Estimates may include those pertaining to valuation of the estimated useful lives and valuation of properties, plant and equipment, deferred tax assets, convertible preferred stock, derivative assets and liabilities, stock-based compensation and payments, and contingent liabilities.
| F-6 |
| Table of Contents |
Cash and Cash Equivalents - The Company considers all highly liquid temporary cash investments with an original maturity of three months or less to be cash equivalents. At March 31, 2025 and December 31, 2024, the Company had $
Settlement of Contracts in Company’s Equity– In accordance with ASC 815-40-25, the Company must meet certain requirements in order to report contracts as equity versus liabilities. These requirements must be met by the Company or the contracts need to be reported as liabilities. The Company has adopted the sequencing approach as guidance on contracts that permit partial net share settlement. The Company evaluates the contracts based on the earliest issuance date. Currently, the Company doesn’t have any items that are reported as equity instead of liabilities.
Fair Value Measurements - The fair value of a financial instrument is the amount that could be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial assets are marked to bid prices and financial liabilities are marked to offer prices. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the fair value of liabilities should include consideration of non-performance risk, including the party’s own credit risk.
Fair value measurements do not include transaction costs. A fair value hierarchy is used to prioritize the quality and reliability of the information used to determine fair values. Categorization within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is defined into the following three categories:
| Level 1: Quoted market prices in active markets for identical assets or liabilities. |
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| Level 2: Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities. |
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| Level 3: Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities. |
To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed and is determined based on the lowest level input that is significant to the fair value measurement.
The carrying value of the Company’s cash, accounts payable, short-term borrowings (including convertible notes payable), and other current assets and liabilities approximate fair value because of their short-term maturity.
Notes Receivable - Notes receivable include amounts due to the Company pursuant to financial agreements stipulating interest rates, payment terms and maturity dates. As of March 31, 2025 and December 31, 2024, notes receivable balance includes one note due from Mother Load Mining, Inc. in the amounts of $
Long-Lived Assets - We review the carrying amount of our long-lived assets for impairment whenever there are negative indicators of impairment. An asset is considered impaired when estimated future cash flows are less than the carrying amount of the asset. In the event the carrying amount of such asset is not considered recoverable, the asset is adjusted to its fair value. Fair value is generally determined based on discounted future cash flows.
| F-7 |
| Table of Contents |
Properties, Plant and Equipment - We record properties, plant and equipment at historical cost. We provide depreciation and amortization in amounts sufficient to match the cost of depreciable assets to operations over their estimated service lives or productive value. We capitalize expenditures for improvements that significantly extend the useful life of an asset. We charge expenditures for maintenance and repairs to operations when incurred. Depreciation is computed using the straight-line method over estimated useful lives as follows:
Building |
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Vehicles and equipment |
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Processing and laboratory |
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Stock Issued for Goods and Services - Common and preferred shares issued for goods and services are valued based upon the fair market value of our common stock or the goods and services received.
Stock-Based Compensation - For stock-based transactions, compensation expense is recognized over the requisite service period, which is generally the vesting period, based on the estimated fair value on the grant date of the award.
Income (Loss) per Common Share - Basic net income (loss) per common share is computed by dividing net income (loss), less the preferred stock dividends, by the weighted average number of common shares outstanding. Dilutive income (loss) per share includes any additional dilution from common stock equivalents, such as stock options and warrants, and convertible instruments, if the impact is not antidilutive.
The following tables summaries the changes in the net earnings per common share for the three-month periods ended March 31, 2025 and 2024:
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| For the Three Months Ended |
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Numerator |
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Net Income (Loss) |
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Adjusted Net Income (Loss) |
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Denominator |
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Basic Weighted Average Number of Shares Outstanding during Period |
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Dilutive Shares |
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Diluted Weighted Average Number of Shares Outstanding during Period |
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Diluted Net Income (Loss) per Share |
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Derivative Liabilities - Derivative liabilities are recorded at fair value when issued and the subsequent change in fair value each period is recorded in other income (expense) in the statements of operations. We do not hold or issue any derivative financial instruments for speculative trading purposes.
Income Taxes - The Company’s income tax expense and deferred tax assets and liabilities reflect management’s best assessment of estimated future taxes to be paid. Significant judgments and estimates are required in determining the income tax expense.
Deferred income taxes arise from temporary differences between the tax and financial statement recognition of revenue and expense. In evaluating the Company’s ability to recover its deferred tax assets, management considers all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial operations. In projecting future taxable income, the Company develops assumptions including the amount of future state and federal pretax operating income, the reversal of temporary differences, and the implementation of feasible and prudent tax planning strategies. These assumptions require significant judgment about the forecasts of future taxable income and are consistent with the plans and estimates that the Company is using to manage the underlying businesses. The Company provides a valuation allowance for deferred tax assets for which the Company does not consider realization of such deferred tax assets to be more likely than not.
| F-8 |
| Table of Contents |
Changes in tax laws and rates could also affect recorded deferred tax assets and liabilities in the future. Management is not aware of any such changes that would have a material effect on the Company’s results of operations, cash flows or financial position.
Business Segments – The Company operates in one segment and therefore segment information is not presented.
Operating Lease – The Company leases its corporate headquarters and administrative offices in Salt Lake City, Utah. This lease expired in August 2024 and is now a month-to-month lease.
The Company made cash payments of $
Recently Issued Accounting Pronouncements – From time to time, new accounting pronouncements are issued by FASB that are adopted by the Company as of the specified effective date. If not discussed, management believes that the impact of recently issued standards, which are not yet effective, will not have a material impact on the Company’s financial statements upon adoption.
3. Derivative Financial Instruments
The Company adopted the provisions of ASC subtopic 825-10, Financial Instruments (“ASC 825-10”) on January 1, 2008. ASC 825-10 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of non-performance. ASC 825-10 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
The following table provides a summary of changes in fair value of the Company’s Level 3 financial liabilities as of March 31, 2025:
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| Debt Derivative Liabilities |
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Balance, December 31, 2024 |
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Settlement of derivative liabilities |
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Balance, March 31, 2025 |
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Derivative Liabilities – The Company issued convertible promissory notes which are convertible into common stock, at holders’ option, at a discount to the market price of the Company’s common stock. The Company has identified the embedded derivatives related to these notes relating to certain anti-dilutive (reset) provisions. These embedded derivatives included certain conversion features. The accounting treatment of derivative financial instruments requires that the Company record fair value of the derivatives as of the inception date of debenture and to fair value as of each subsequent reporting date.
Based upon ASC 840-15-25 (EITF Issue 00-19, paragraph 11) the Company has adopted a sequencing approach regarding the application of ASC 815-40 to its outstanding convertible notes. Pursuant to the sequencing approach, the Company evaluates its contracts based upon earliest issuance date.
| F-9 |
| Table of Contents |
4. Note Receivable
On January 12, 2023, Inception Mining, Inc. (the “Company”) entered into a non-binding Letter of Intent (the “LOI”) with Mother Lode Mining, Inc. (“MLM”). The LOI became binding on January 24, 2023 when the final installment of initial payment set forth under the LOI was received by the Company. Pursuant to the terms of the LOI, the Company agreed to sell all of the shares of its wholly-owned subsidiary, Compañía Minera Cerros Del Sur, S.A. de C.V. (“CMCS”), to MLM. CMCS is the Honduran-based company that owns the Clavo Rico mine.
The purchase price for the sale of CMCS by the Company to MLM consisted of the following cash consideration (a) $
In addition to the amounts already delivered under the LOI, an additional amount of $
The following table summarizes the note receivable of the Company as of March 31, 2025 and December 31, 2024:
|
| March 31, 2025 |
|
| December 31, 2024 |
| ||
Note Receivable from Mother Load Mining, Inc. pursuant to a Letter of Intent dated effective January 12, 2023, in the original principal amount of $5,700,000, accruing no interest, with monthly payments beginning on March 31, 2023, maturing February 1, 2025. |
| $ |
|
| $ |
| ||
Less: Payments received |
|
|
|
|
|
| ||
Total Note Receivable outstanding |
|
|
|
|
|
| ||
Less: Allowance for Doubtful Note Receivable |
|
| ( | ) |
|
| ( | ) |
Total Note Receivable |
| $ |
|
| $ |
| ||
5. Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities at March 31, 2025 and December 31, 2024 consisted of the following:
|
| March 31, 2025 |
|
| December 31, 2024 |
| ||
Accounts Payable |
| $ |
|
| $ |
| ||
Accrued Liabilities |
|
|
|
|
|
| ||
Accrued Salaries and Benefits |
|
|
|
|
|
| ||
Negative Cash in Bank |
|
|
|
|
|
| ||
Total Accrued Liabilities |
| $ |
|
| $ |
| ||
| F-10 |
| Table of Contents |
6. Notes Payable
Notes payable were comprised of the following as of March 31, 2025 and December 31, 2024:
Notes Payable |
| March 31, 2025 |
|
| December 31, 2024 |
| ||
Phil Zobrist |
| $ |
|
| $ |
| ||
Antczak Polich Law LLC |
|
|
|
|
|
| ||
Total Notes Payable |
|
|
|
|
|
| ||
Less Short-Term Notes Payable |
|
| ( | ) |
|
| ( | ) |
Total Long-Term Notes Payable |
| $ |
|
| $ |
| ||
Phil Zobrist – On January 11, 2013, the Company issued an unsecured Promissory Note to Phil Zobrist in the principal amount of $
Antczak Polich Law, LLC – On March 21, 2023, the Company issued an unsecured Promissory Note (“Note”) to Antczak Polich Law, LLC (“Antczak”), in the principal amount of $
7. Notes Payable – Related Parties
Notes payable – related parties were comprised of the following as of March 31, 2025 and December 31, 2024:
Notes Payable - Related Parties |
| Relationship |
| March 31, 2025 |
|
| December 31, 2024 |
| ||
Cluff-Rich PC 401K |
|
| $ |
|
| $ |
| |||
Whit Cluff |
|
|
|
|
|
|
| |||
Digital Asset Medium, LLC |
|
|
|
|
|
|
| |||
D. D'ambrosio |
|
|
|
|
|
|
| |||
Francis E. Rich |
|
|
|
|
|
|
| |||
Pine Valley Investments |
|
|
|
|
|
|
| |||
Total Notes Payable - Related Parties |
|
|
|
|
|
|
|
| ||
Less Short-Term Notes Payable - Related Parties |
|
|
|
| ( | ) |
|
| ( | ) |
Total Long-Term Notes Payable - Related Parties |
|
|
| $ |
|
| $ |
| ||
Cluff-Rich PC 401K – On June 29, 2022, the Company issued an unsecured Short-Term Promissory Note to Cluff-Rich PC 401K in the principal amount of
| F-11 |
| Table of Contents |
Digital Asset Medium, LLC (Affiliate – Director) – On January 9, 2025, the Company formalized an unsecured Short-Term Promissory Notes to Digital Asset Medium, LLC in principal amounts totaling $
D. D’Ambrosio (Immediate Family Member of Director) – On January 1, 2023, there were six notes outstanding with outstanding balance of the Notes of $
D. D’Ambrosio (Immediate Family Member of Director) – During June through September, 2024, the Company received funds in the amount of $
D. D’Ambrosio (Immediate Family Member of Director) – During October through December, 2024, the Company received funds in the amount of $
D. D’Ambrosio (Immediate Family Member of Director) – On January 1, 2025, the Company formalized an unsecured Short-Term Promissory Notes to D. D’Ambrosio in principal amounts totaling $
Francis E. Rich – On January 1, 2023, there were two notes outstanding with outstanding balance of the Notes of $
Pine Valley Investments, LLC – On January 1, 2023, there were three Notes outstanding with outstanding balance of the Notes of $
Whit Cluff (Affiliate – Director) – On March 28, 2024, the Company issued an unsecured Short-Term Promissory Note to Cluff-Rich PC 401K in the principal amount of $
Typically, any gains or losses on the extinguishment of debts are reported on the statement of operations. However, since all of the debts in this section are related parties, the gains or losses on the extinguishment of debts have been recorded as additional paid-in capital instead of gains or losses.
| F-12 |
| Table of Contents |
8. Convertible Notes Payable
Convertible notes payable were comprised of the following as of March 31, 2025 and December 31, 2024:
Convertible Notes Payable |
| March 31, 2025 |
|
| December 31, 2024 |
| ||
1800 Diagonal Lending |
| $ |
|
| $ |
| ||
Total Convertible Notes Payable |
|
|
|
|
|
| ||
Less Unamortized Discount |
|
|
|
|
|
| ||
Total Convertible Notes Payable, Net of Unamortized Debt Discount |
|
|
|
|
|
| ||
Less Short-Term Convertible Notes Payable |
|
|
|
|
| ( | ) | |
Total Long-Term Convertible Notes Payable, Net of Unamortized Debt Discount |
| $ |
|
| $ |
| ||
1800 Diagonal Lending LLC – On January 23, 2024, the Company issued an unsecured Convertible Promissory Note (“Note”) to 1800 Diagonal Lending, LLC (“1800”), in the principal amount of $
1800 Diagonal Lending LLC – On May 3, 2024, the Company issued an unsecured Convertible Promissory Note (“Note”) to 1800 Diagonal Lending, LLC (“1800”), in the principal amount of $
On January 9, 2025, the Company negotiated the settlement of both notes with the lender and agreed to pay $
9. Stockholders’ Deficit
Common Stock
The Company is authorized to issue
The Company enacted a reverse stock split of the
On August 2, 2024 the Company issued
| F-13 |
| Table of Contents |
10. Related Party Transactions
Consulting Agreement – In February 2014, the Company entered into a consulting agreement with stockholder/director Trent D’Ambrosio. The Company agreed to pay $
Mr. Cluff currently serves as a director of the Company and has a separate agreement as a consultant of the Company effective as of October 2, 2015.
Employment Agreements – The Company has an employment agreement with its chief executive officer, Trent D’Ambrosio. The employment agreement was effective as of April 1, 2019 and provides for compensation of $
Notes Payable – The Company took one short-term note payable from Debra D’ambrosio, an immediate family member related party and one short-term note payable from Digital Asset Medium, LLC, an affiliate of a direct during the three months ended March 31, 2025. The Company received $
Accounts Payable – Two officers/directors of the Company have been paying expenses for the Company on their personal credit cards. The Company has recorded these expenses and accrued the amounts in accounts payable to the individuals. As of March 31, 2025, there is $
11. Commitments and Contingencies
Litigation
The Company at times is subject to other legal proceedings that arise in the ordinary course of business. The following is a summary of pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of operations of the Company.
March 4, 2024, the Company filed a complaint against Mother Lode Mining, Inc., a Canadian company, and Robert Salna (the “Defendants"), alleging an amount of not less than $
In the opinion of management, as of March 31, 2025, the amount of ultimate liability with respect to such matters, if any, may be likely to have a material impact on the Company’s business, financial position, results of operations or liquidity. However, as the outcome of litigation and other claims is difficult to predict significant changes in the estimated exposures could exist.
On September 22, 2023, the Company entered into a consulting agreement with William McCluskey. This agreement requires the Company to pay $
12. Subsequent Events
Management has evaluated subsequent events, in accordance with FASB ASC Topic 855, “Subsequent Events,” through the date which the financial statements were available to be issued and there are no material subsequent events.
| F-14 |
| Table of Contents |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward Looking Statements
The statements contained in the following MD&A and elsewhere throughout this Quarterly Report on Form 10-Q, including any documents incorporated by reference, that are not historical facts, including statements about our beliefs and expectations, are “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements preceded by, followed by or that include the words “may,” “could,” “would,” “should,” “believe,” “expect,” “anticipate,” “plan,” “estimate,” “target,” “project,” “intend” and similar words or expressions. In addition, any statements that refer to expectations, projections, or other characterizations of future events or circumstances are forward-looking statements.
These forward-looking statements, which reflect our management’s beliefs, objectives, and expectations as of the date hereof, are based on the best judgement of our management. All forward-looking statements speak only as of the date on which they are made. Such forward-looking statements are subject to certain risks, uncertainties and assumptions relating to factors that could cause actual results to differ materially from those anticipated in such statements, including, without limitation, the following: economic, social and political conditions, global economic downturns resulting from extraordinary events such as the COVID-19 pandemic and other securities industry risks; interest rate risks; liquidity risks; credit risk with clients and counterparties; risk of liability for errors in clearing functions; systemic risk; systems failures, delays and capacity constraints; network security risks; competition; reliance on external service providers; new laws and regulations affecting our business; net capital requirements; extensive regulation, regulatory uncertainties and legal matters; failure to maintain relationships with employees, customers, business partners or governmental entities; the inability to achieve synergies or to implement integration plans and other consequences associated with risks and uncertainties detailed in our filings with the SEC, including our most recent filings on Forms 10-K and 10-Q.
We caution that the foregoing list of factors is not exclusive, and new factors may emerge, or changes to the foregoing factors may occur, that could impact our business. We undertake no obligation to publicly update or revise these statements, whether as a result of new information, future events or otherwise, except to the extent required by the federal securities laws.
This discussion should be read in conjunction with our financial statements on our 2020 Form 10-K, and our financial statements and the notes thereto contained elsewhere in this Quarterly Report on Form 10-Q.
Introduction to Interim Financial Statements.
The interim financial statements included herein have been prepared by BluSky AI Inc. (“BluSky AI” or the “Company”) without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC” or the “Commission”). Certain information and footnote disclosure normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. These interim financial statements should be read in conjunction with the financial statements and notes thereto included in this filing.
In the opinion of management, all adjustments have been made consisting of normal recurring adjustments necessary to present fairly the financial position of the Company as of March 31, 2025, the results of its statements of operations for the three-month periods ended March 31, 2025 and 2024, and its cash flows for the three-month periods ended March 31, 2025 and 2024. The results of operations for the interim periods are not necessarily indicative of the results for the full year.
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
| 3 |
| Table of Contents |
Overview and Plan of Operation
Overview
BluSky AI Inc., is a pioneering company in AI-driven data center solutions, combining innovation with regulatory compliance and sustainability. The company is focused on high-performance computing infrastructure, strategic site selection, and operational risk management.
Financial Condition
BluSky AI Inc., as a startup entering the highly competitive AI-driven data center industry, faces significant financial constraints, primarily due to limited capital resources and liquidity. In an industry characterized by high upfront infrastructure costs, regulatory compliance expenses, and ongoing operational investments, BluSky AI must carefully manage its financial position to sustain growth and innovation. The company’s liquidity challenges, reflected in a low current ratio and negative cash flow, highlight the need for strategic capital allocation and alternative financing options. With restricted access to immediate cash reserves and a growing need for funding, BluSky AI is actively structuring equity financing mechanisms, including convertible notes and stock issuance, to strengthen its financial foundation. Successfully navigating these early-stage financial pressures will be critical for positioning BluSky AI as a sustainable and competitive player in the AI-powered data center space.
Startups in the AI-driven data center industry face several key financial risks that can impact their ability to scale and compete effectively:
| 1. | High Capital Requirements – Building and maintaining data centers requires substantial upfront investment in infrastructure, equipment, and regulatory compliance. Limited access to capital can constrain a startup’s ability to establish competitive operations. |
|
|
|
| 2. | Liquidity Challenges – Cash flow management is critical. AI and data center startups often experience extended periods of negative cash flow due to long revenue cycles and high operational expenses, making liquidity a pressing concern. |
|
|
|
| 3. | Market Competition & Pricing Pressure – The industry is dominated by large incumbents with significant financial resources. Competing against established players like Google, Microsoft, and Amazon requires startups to strategically differentiate while managing thin profit margins. |
|
|
|
| 4. | Regulatory & Compliance Costs – Strict regulations around cybersecurity, environmental impact, and operational standards add financial burdens. Failing to meet compliance requirements can lead to penalties and reputational damage. |
|
|
|
| 5. | Operational Scalability Risks – As demand grows, the ability to scale efficiently without excessive capital burn is a major challenge. Missteps in scaling can lead to costly inefficiencies or underutilized capacity. |
|
|
|
| 6. | Funding Uncertainty – Many startups in this space rely on venture capital, private equity, or convertible debt financing. Economic downturns or investor sentiment shifts can create funding uncertainty, making it difficult to secure the necessary growth capital. |
|
|
|
| 7. | Technological Obsolescence – Rapid advancements in AI and hardware mean that startups must continually invest in innovation. Falling behind technologically can diminish competitiveness and lead to sunk costs in outdated infrastructure. |
Strategic Initiatives
BluSky AI Inc. is actively working on:
| · | Branding and Market Positioning: Strengthening its identity as a leader in AI-driven data centers. |
| · | Regulatory Compliance: Addressing cybersecurity threats and operational risks. |
| · | Equity Financing: Structuring convertible notes and stock issuance to support growth. |
| 4 |
| Table of Contents |
Outlook
The company is focused on improving financial stability through strategic investments, operational efficiencies, and enhanced revenue streams. Future initiatives include expanding AI-driven infrastructure and optimizing financial performance.
Results of Operations
Three months ended March 31, 2025 compared to the three months ended March 31, 2024
We had net income of $175,389 for the three-month period ended March 31, 2025, and a net loss of $256,980 for the three-month period ended March 31, 2024. This change in our results over the two periods is primarily the result of the gain on forgiveness of debt during the current period. The following table summarizes key items of comparison and their related increase (decrease) for the three-month periods ended March 31, 2025 and 2024:
|
| Three Months Ended |
|
| Increase/ |
| ||||||
|
| March 31, 2025 |
|
| March 31, 2024 |
|
| (Decrease) |
| |||
General and Administrative |
| $ | 146,105 |
|
| $ | 123,757 |
|
| $ | 22,348 |
|
Depreciation and Amortization Expenses |
|
| - |
|
|
| 181 |
|
|
| (181 | ) |
Total Operating Expenses |
|
| 146,105 |
|
|
| 123,938 |
|
|
| 22,167 |
|
Income (Loss) from Operations |
|
| (146,105 | ) |
|
| (123,938 | ) |
|
| (22,167 | ) |
Other Income (expense) |
|
| 96 |
|
|
| - |
|
|
| 96 |
|
Change in Derivative Liabilities |
|
| - |
|
|
| (16,258 | ) |
|
| 16,258 |
|
Initial Derivative Expense |
|
| - |
|
|
| (57,116 | ) |
|
| 57,116 |
|
Gain on Extinguishment of Debt |
|
| 338,673 |
|
|
| - |
|
|
| 338,673 |
|
Interest Expense |
|
| (17,275 | ) |
|
| (59,668 | ) |
|
| 42,393 |
|
Income (Loss) from Operations Before Taxes |
|
| 175,389 |
|
|
| (256,980 | ) |
|
| 432,369 |
|
Provision for Income Taxes |
|
| - |
|
|
| - |
|
|
| - |
|
Net Income (Loss) |
| $ | 175,389 |
|
| $ | (256,980 | ) |
| $ | 432,369 |
|
General and administrative expenses have increased for the three-month period ended March 31, 2025 because of increased legal and travel, compared to the three-month period ended March 31, 2024.
Gain on forgiveness of debt increase by $338,673 in the current period
Interest expense decreased in 2025 because of the 1800 Diagonal Lending, LLC convertible notes payable being settled in early 2025.
Liquidity and Capital Resources
Our balance sheet as of March 31, 2025 reflects assets of $3,531. We had cash in the amount of $0 and working capital deficit in the amount of $3,171,461 as of March 31, 2025. Thus, we do not have sufficient working capital to enable us to carry out our stated plan of operation for the next twelve months.
Working Capital
|
| March 31, 2025 |
|
| December 31, 2024 |
| ||
Current assets |
| $ | 3,000 |
|
| $ | - |
|
Current liabilities |
|
| 3,174,461 |
|
|
| 3,346,850 |
|
Working capital deficit |
| $ | (3,171,461 | ) |
| $ | (3,346,850 | ) |
| 5 |
| Table of Contents |
We anticipate generating losses and, therefore, may be unable to continue operations in the future, if we don’t acquire additional capital and issue debt or equity or enter into a strategic arrangement with a third party.
Going Concern Consideration
As reflected in the accompanying unaudited condensed financial statements, the Company and has an accumulated deficit of $29,687,975. In addition, there is a working capital deficit of $3,171,461 as of March 31, 2025. This raises substantial doubt about its ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital and implement its business plan. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
|
| Three Months Ended |
| |||||
|
| March 31, 2025 |
|
| March 31, 2024 |
| ||
Net Cash Provided by (Used in) Operating Activities |
| $ | (37,271 | ) |
| $ | (32,808 | ) |
Net Cash Provided by (Used in) Investing Activities |
|
| - |
|
|
| - |
|
Net Cash Provided by (Used in) Financing Activities |
|
| 37,271 |
|
|
| 32,818 |
|
Net Increase (Decrease) in Cash |
| $ | - |
|
| $ | 10 |
|
Operating Activities
Net cash flow used in operating activities during the three months ended March 31, 2025 was $37,271, an increase of $4,463 from the $32,808 net cash used during the three months ended March 31, 2024. This increase in the cash used in operating activities was primarily due to the gain on forgiveness of debt offset with a increase in accounts payable and accrued liabilities for the current period.
Investing Activities
Investing activities during the three months ended March 31, 2025 provided $0, a decrease of $0 from the $0 provided by investing activities during the three months ended March 31, 2024.
Financing Activities
Financing activities during the three months ended March 31, 2025 provided cash of $37,271, an increase of $4,453 from the $32,818 used in financing activities during the three months ended March 31, 2024. During the three months ended March 31, 2025, the Company received $37,271 in proceeds from notes payable - related parties.
Critical Accounting Policies
Our financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles used in the United States. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management’s application of accounting policies. We believe that understanding the basis and nature of the estimates and assumptions involved with the following aspects of our financial statements is critical to an understanding of our financials.
| 6 |
| Table of Contents |
Recent Accounting Pronouncements
For recent accounting pronouncements, please refer to the notes to financial statements in Part I, Item 1 of this Quarterly Report.
Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company, we are not required to include disclosures under this item.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that material information required to be disclosed in our periodic reports filed under the Securities Exchange Act of 1934, as amended, or 1934 Act, is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and to ensure that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer as appropriate, to allow timely decisions regarding required disclosure. We carried out an evaluation, under the supervision and with the participation of our management, including the principal executive officer and the principal financial officer (principal financial officer), of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13(a)-15(e) under the 1934 Act, as of the end of the period covered by this report. Based on this evaluation, because of the Company’s limited resources and limited number of employees, management concluded that our disclosure controls and procedures were not effective as of March 31, 2025.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting that occurred during the period covered by this Quarterly Report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
| 7 |
| Table of Contents |
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties and an adverse result in these or other matters may arise from time to time that may harm our business. Except as set forth below, we are currently not aware of any such pending or threatened legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results.
March 4, 2024, the Company filed a complaint against Mother Lode Mining, Inc., a Canadian company, and Robert Salna (the “Defendants"), alleging an amount of not less than $2,237,800 (plus interest, additional costs and attorneys’ fees) due from Defendants as a result of their breach of their obligations and duties arising from the sale of Compañía Minera Cerros Del Sur, S.A. de C.V. in 2023 (the “Sale”). In the complaint, filed in the United States District Court for the District of Utah, Central Division, the Company asserts claims related to alleged breach of contract and unjust enrichment against the Defendants, and seeks a monetary judgment and an award of attorneys’ fees and other expenses. The complaint arises from the Defendants’ failure to convey agreed-upon consideration to the Company as contracted for the sale of CMCS. The Company was able to effect service of process on Mother Lode Mining, Inc. through Alternative Service and litigation has proceeded since that time. On May 2, 2025, Mother Lode Mining filed a Motion to Dismiss for Failure to State a Claim against the Company, and the Company disputes the premise of their argument. The Company intends to continue to pursue the lawsuit aggressively.
ITEM 1A. RISK FACTORS
As a smaller reporting company, we are not required to include disclosure under this item. We refer readers to our Form 10-K for additional risk factor disclosures.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable as the Company conducts no mining operations in the U.S. or its territories.
ITEM 5. OTHER INFORMATION
On March 5, 2025, the Company received notice from FINRA as to the Effective Date of the name change to be March 7, 2025. The name change to “BLUSKY AI, INC.” is already effective and, twenty days following the Effective Date, the trading symbol for the Common Stock will change to "BSAI."
The Company enacted a reverse stock split of the Company's issued and outstanding shares of common stock, par value $0.00001 per share (the "Common Stock"), at a ratio of 1-for-1,000 (the "Reverse Stock Split"). The Reverse Stock Split became effective on March 10, 2025 (the "Effective Date").
| 8 |
| Table of Contents |
ITEM 6. EXHIBITS
Exhibit Number |
| Exhibit Description |
|
|
|
3.1 |
| Articles of Incorporation (1) |
|
|
|
3.2 |
| Certificate of Amendment, effective March 5, 2010(2) |
|
|
|
3.3 |
| Certificate of Amendment, effective June 23, 2010(3) |
|
|
|
3.4 |
| Articles of Merger, effective May 17, 2013 (4) |
|
|
|
3.5 |
| Bylaws (1) |
|
|
|
10.1+ |
| Employment Agreement with Trent D’Ambrosio (16) |
|
|
|
10.18 |
| Settlement Agreement with Antilles Family Office, LLC dated January 18, 2023 (17) |
|
|
|
10.19 |
| Letter of Intent with Mother Lode Mining, Inc. effective as of January 24, 2023 (18) |
|
|
|
| Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
|
|
|
| Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
|
|
|
| Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
|
|
|
| Certification of Chief Financial Officers pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
|
| |
101.INS |
| Inline XBRL Instance Document |
|
|
|
101.SCH |
| Inline XBRL Schema Document |
|
|
|
101.CAL |
| Inline XBRL Calculation Linkbase Document |
|
|
|
101.DEF |
| Inline XBRL Definition Linkbase Document |
|
|
|
101.LAB |
| Inline XBRL Label Linkbase Document |
|
|
|
101.PRE |
| Inline XBRL Presentation Linkbase Document |
|
|
|
104 |
| Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* | Filed herewith. | |||||||||||
|
| |||||||||||
+ | Employment Agreement | |||||||||||
|
| |||||||||||
(1) | Incorporated by reference from Form SB-2 filed with the SEC on October 31, 2007. | |||||||||||
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| |||||||||||
(2) | Incorporated by reference from Form 8-K filed with the SEC on March 10, 2010. | |||||||||||
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| |||||||||||
(3) | Incorporated by reference from Form 8-K filed with the SEC on June 28, 2010. | |||||||||||
|
| |||||||||||
(4) | Incorporated by reference from Form 10-Q filed with the SEC on May 20, 2013. | |||||||||||
|
| |||||||||||
(5) | Incorporated by reference from the Form S-1 filed with the SEC on June 2, 2019. | |||||||||||
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(6) | Incorporated by reference from the Form 8-K filed with the SEC on January 25, 2023. | |||||||||||
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(7) | Incorporated by reference from the Form 8-K filed with the SEC on February 8, 2023. | |||||||||||
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| Table of Contents |
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 thereunto duly authorized.
| BLUSKY AI INC. |
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Date: May 15, 2025 | By: | /s/ Trent D’Ambrosio |
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| Name: | Trent D’Ambrosio |
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| Title: | Chief Executive Officer (Principal Executive Officer) |
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| Chief Financial Officer (Principal Financial and Accounting Officer) |
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