BSAI 10-K
Blusky Ai Inc. (BSAI)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File No. –
(Name of registrant as specified in its Charter) |
INCEPTION MINING INC. |
(Former name of registrant) |
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(State or other Jurisdiction of Incorporation or organization) |
| (I.R.S. Employer Identification No.) |
(Address of Principal Executive Offices)
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(Registrant’s Telephone Number, including area code)
Securities Registered Pursuant to Section 12(b) of the Act: None
Securities Registered Pursuant to Section 12(g) of the Act: Common Stock, $0.00001 par value
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes ☐
Indicate by check mark if the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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.
(1) Yes ☒ No ☐ (2)
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 such files).
Indicate by check mark if disclosure of delinquent filers pursuant to item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company:
Large accelerated filer | ☐ | Accelerated filer | ☐ |
☒ | Smaller reporting company | ||
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| Emerging growth company |
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. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D(b). ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
State the aggregate market value of the voting and non-voting common stock held by non-affiliates computed by reference to the price at which the common stock was last sold, or the average bid and asked price of such common stock, as of the last business day of the Registrant’s most recently completed second quarter: $
Outstanding Shares
As of March 26, 2025, the Registrant had
Documents Incorporated by Reference
See Part IV, Item 15.
TABLE OF CONTENTS
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PART I
ITEM 1. BUSINESS
As used in this Annual Report on Form 10-K, unless otherwise indicated, the terms “we,” “us,” “our” and “the Company” refer to BluSky AI Inc., a Nevada corporation formerly known as Inception Mining Inc.
Forward-Looking Statements and Associated Risks.
This Annual Report on Form 10-K contains forward-looking statements.
Such forward-looking statements include statements regarding, among other things, (1) discussions about data centers, artificial intelligence, and high performance computing, (2) our projected sales and profitability, (3) our growth strategies, (4) anticipated trends in our industry, (5) our future financing plans, (6) our anticipated needs for working capital, (7) our lack of operational experience and (8) the benefits related to ownership of our common stock. Forward-looking statements, which involve assumptions and describe our future plans, strategies, and expectations, are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” or “project” or the negative of these words or other variations on these words or comparable terminology. These statements constitute forward-looking statements. This information may involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from the future results, performance, or achievements expressed or implied by any forward-looking statements. Factors that may cause results to vary include, 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. These statements may be found under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” as well as in this filing generally. Actual events or results may differ materially from those discussed in forward-looking statements as a result of various factors, including, without limitation, the risks outlined under Item 1A below and other risks and matters described in this filing and in our other SEC filings. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this filing will in fact occur as projected. We do not undertake any obligation to update any forward-looking statements.
The Company
Overview
We are a data center company for the artificial intelligence community BluSky AI Inc. is a modular data center provider specializing in artificial intelligence (AI) and high-performance computing (HPC). The company is dedicated to delivering state-of-the-art infrastructure and solutions tailored to meet the demands of modern AI applications and computational workloads. With a focus on innovation, scalability, and environmental sustainability, that was originally formed in Nevada on July 2, 2007.
Previously known as Inception Mining Inc., the company underwent a significant transformation and rebranding in March 2025 to align with its new strategic direction. This change reflects BluSky AI Inc.'s commitment to advancing technology and providing unparalleled services in the data center industry. The Company is headquartered in Salt Lake City, Utah, BluSky AI Inc.
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Historically, we have operated within the mining industry, serving as a consultant to mining companies and as an operator of a mine engaged in the production of precious metals. From 2013 to 2020, the Company owned certain real property and the associated exploration permits and mineral rights commonly known as the UP and Burlington Gold Mine in Idaho (“UP and Burlington”). From 2015 through January 24, 2023, the Company operated the Clavo Rico mine in Honduras through its wholly-owned subsidiary, Compañía Minera Cerros del Sur, S.A de C.V. (“CMCS”) and other mining concessions. The Clavo Rico mine’s workings include several historical underground mining operations dating back to the early Mayan and Spanish occupation, and the primary mine operated through 2022 is located on the 200-hectare Clavo Rico Concession, located in southern Honduras.
2023 Divestiture of the Clavo Rico Mine
On January 12, 2023, 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.
In addition to the amounts already delivered under the LOI, an additional amount of $2,700,0000 was agreed to be paid by MLM to the Company over a period of twenty-four (24) months (the “Monthly Payments”) to be secured by a 10% NSR on the Clavo Rico mine production until the Monthly Payments are delivered and the purchase price is paid in full. In addition to the Monthly Payments, the Company received a carried forward net profits interest royalty (“NPI”) of 5% on the Clavo Rico mine production until the total NPI paid to the Company is $1,000,000, subject to limited conditions. MLM has not made all of the payments required under the LOI and the Company has been aggressively pursuing the collection of these amounts owed. See the “Litigation” section in Item 3 for an update.
Following the Closing of the LOI on January 24, 2023, the Company divested its ownership interest in CMCS and its interests in the Clavo Rico mine, resulting in the transfer of operations to Mother Lode Mining and full control of the Clavo Rico mine asset.
Current Operations
Legacy Mining Matters
Since the Divestiture of the Clavo Rico Mine up through March 2025, 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.
According to the LOI, the Company is obligated to receive $2,700,000 in cash payments through January 2025, with such payments secured by a ten percent net smelter royalty on the Clavo Rico Mine’s production. The Company has created an allowance for this total amount and is also in litigation over non-payment of this receivable.
The Company also received a carried forward net profits interest royalty of five percent of the Clavo Rico mine production until payment to the Company reaches $1,000,000, subject to reduction for certain limited Clavo Rico mine expenses.
During the year ended December 31, 2024, the Company did not receive any payments from Mother Lode Mining and Mother Lode Mining is in default under this note. Management has been addressing this issue with Mother Lode Mining through litigation and the Company has established an allowance for the entire remaining balance.
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BluSky AI Operations
Since March 1, 2025, the Company has focused its operations on artificial intelligence compute infrastructure and participating in the dynamic and expanding AI industry. The Company has plans to grow its AI operations organically within the Company. BluSky AI was established by drawing on extensive industry expertise, insights from outside experts, and a careful evaluation of current conditions in the data center markets. The innovative concept is built around a modular design that leverages existing power infrastructure. BluSky AI plans to develop multiple data center sites across various U.S. jurisdictions, with artificial intelligence (AI) focus, specifically targeting facilities with the ability to develop power capacity or utilize existing power capacities. This strategy enables a faster time to market, scalable deployment, and a cost-effective approach that meets the evolving needs of the data center market.
BluSky AI is revolutionizing the artificial intelligence compute landscape by addressing the immediate global supply shortage with a cutting-edge, turnkey solution. Our strategy centers on rapidly deployable, plug-and-play, modular compute centers on powered land assets—sites that already possess permitted energy infrastructure. This approach not only accelerates time to market but also itends to positions BluSky AI as a premier AI compute infrastructure provider dedicated to meeting the surging demand for advanced AI services.
A Next-Generation Compute Infrastructure
At BluSky AI, we are committed to be a leader in the evolution of AI compute by emphasizing two core pillars: green power and modular scalability. Our Green Power plans are designed to harness renewable energy sources such as solar, wind, geothermal, and battery storage. This commitment to sustainability ensures that our operations are both environmentally responsible and cost-effective. Our modular container centers are engineered for rapid deployment—installable in months rather than years. With plans to scale across multiple sites and deliver megawatts of capacity (ranging from 1 MW to 60 MW per site), BluSky AI provides client-tailored scalability to meet diverse and growing compute demands.
Meeting the AI Compute Shortfall
BluSky AI’s plan is to design leading AI compute provisioning. By placing our modular units on strategically locations, with existing power where available, we will provide the essential backbone for AI inferences—enabling trained AI models to recognize patterns and draw conclusions on demand. Our unique offering will minimize technical deployment risks while maximizing opportunities for immediate incremental revenue generation and rapid market capture.
Our portfolio of modular compute centers will serve as a core infrastructure asset for AI companies, providing the essential compute power needed to drive strategic growth and innovation in the era of IoT and big data.
We are targeting initial sites ranging from 5 MW to 60 MW across various states, intending to insure robust geographic diversification to capture regional and global demand.
We are committed to delivering cutting-edge, environmentally conscious, and modular compute solutions that will empower AI companies to realize their full potential, driving the next generation of AI applications and safeguarding data with quantum-level security.
We believe BluSky AI’s unique approach to its future operations—combining turnkey-powered land assets, rapid deployment, and scalable modular compute centers—delivers the critical infrastructure needed to bridge the AI compute gap that exists in the marketplace today. Our solutions not only address today’s pressing needs but also lay a solid foundation for sustained growth and technological advancement in the future of AI.
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BluSky AI’s plans are built around a revenue model focused on delivering modular data center solutions that leverage existing power infrastructure for rapid, scalable, and cost-effective deployments. The company will generate revenue primarily through:
| · | Leasing and Subscription Services: BluSky AI will provide modular, turnkey data center solutions to customers on a subscription or leasing basis. These services include the design, deployment, and ongoing management of facilities tailored to support power capacities of less than 100MW, which accelerates time to market and reduces capital expenditure compared to traditional builds. |
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| · | Integrated Infrastructure Services: Beyond physical infrastructure, BluSky AI will offer advanced operational monitoring, predictive maintenance, and energy management analytics. These value-added services will help clients optimize performance and minimize downtime, creating additional revenue streams. |
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| · | Strategic Partnerships and Government Contracts: With a growing demand for secure, sustainable, and energy-efficient data center operations, BluSky AI is positioning itself to serve a diverse customer base—including private enterprises and governmental agencies. This dependency on revenue-generating activities from both commercial and public sectors is key to its expansion strategy. |
Key products and service families revolve around modular data center designs, scalable power and cooling solutions, and integrated management systems—all aimed at delivering predictable quality and cost efficiency. This operational focus not only drives current revenue but also underpins the company’s broader strategy to expand its footprint across multiple U.S. jurisdictions while meeting the evolving needs of high-value clients, including government, education, and others.
BluSky AI is accelerating its development efforts to enhance its suite of modular data center solutions. The company’s R&D team is finalizing new modules that integrate advanced power management, enhanced cooling, and remote monitoring capabilities, which are designed to improve deployment speed and scalability. These enhancements target facilities with existing power infrastructure under 60MW, a segment that is seeing robust market demand due to the growing need for sustainable, cost-effective, and rapidly deployable data centers.
Market trends indicate a steady increase in demand for modular data centers driven by rising energy efficiency requirements and the need for quicker, scalable solutions. Competitive conditions are intensifying as traditional hyperscale data center operators and emerging off-grid, sustainable providers vie for market share. In response, BluSky AI is strategically refining its business plans and product offerings and operational efficiencies while building relationships to forge key partnerships with both commercial enterprises and governmental customers. This dual focus not only supports its revenue generation strategy but also positions the company to remain competitive in a dynamic and rapidly evolving market landscape.
Pricing Program for Modular AI Data Center
Our pricing program is structured to provide flexibility and transparency for AI workloads. It balances resource utilization with modular scalability, catering to training, inference, and mixed AI workflows.
Base Structure
Each block of power supports a defined compute capacity, which is billed based on:
-Resource Usage (Compute Time, Memory, and Storage)
-Workload Type (Training vs. Inference)
-Service Plan (On-Demand vs. Reserved)
Key Benefits
Key benefits include:
1. Scalability: Modular increments allow gradual scaling up to meet demand.
2. Cost Efficiency: Discounts for reserved plans and spot pricing reduce long-term costs.
3. Flexibility: Tailored configurations for training, inference, or mixed workloads.
4. Sustainability: Carbon-neutral options available, appealing to ESG-conscious clients.
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Usage Metrics
BluSky AI data centers will offer usage metrics calculated by the amount of compute time utilized, measured in CPU and GPU hours. Customers will be billed according to the number of hours their CPUs or GPUs are in use, with GPU pricing typically being higher than CPU pricing due to the greater processing power offered by GPUs.
- Compute Time (CPU/GPU Hours):
- Customers are billed based on the number of hours the CPUs or GPUs are used.
- GPU pricing is typically higher than CPU pricing due to greater processing power.
- Resource Allocation:
Resource allocation charges are determined by the number of cores, GPUs, or accelerators allocated, as well as their respective performance levels. High-performance GPUs incur higher costs compared to entry-level models due to their enhanced capabilities.
- Memory Usage:
Memory usage charges may be based on the amount of RAM used per hour or the specific memory tier utilized for training or inference workloads.
- Storage Costs:
Storage costs include charges for high-speed storage used during compute processes, such as NVMe SSDs, as well as fees for long-term data storage.
Type of Workload:
The type of workload affects pricing, with training and inference being the primary factors. Training large models, such as deep learning networks, requires significantly more resources and is priced higher. In contrast, inference, which involves deploying models for predictions, is less resource-intensive and generally incurs lower costs.
Reserved vs. On-Demand Pricing
With On-Demand pricing, customers pay a premium for immediate access to resources without any long-term commitment. In contrast, Reserved or Subscription pricing provides discounts for reserving resources for a longer period or for bulk usage.
Pricing tiers for specific hardware configurations:
The Standard tier offers low-cost, general-purpose resources suitable for small-scale tasks. The High-Performance tier, on the other hand, comes with premium pricing for advanced GPUs or clusters, designed to handle complex AI workloads.
Location and Energy Costs:
Location and energy costs play a significant role in pricing. Regions with lower energy costs or tax incentives for renewable energy typically offer lower pricing. However, carbon-neutral or sustainable data centers may charge a premium for green computing initiatives.
Additional Costs
Additional costs may include networking fees for data transfer in and out of the data center or between regions, as well as charges for software licenses related to proprietary AI frameworks, tools, or libraries. Additionally, support services such as technical assistance, managed services, or custom optimization may incur extra fees.
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- Colocation Data Centers:
Colocation data centers typically charge flat fees for rack space, power, and cooling, with additional charges applied for compute usage.
Emerging Trends
Emerging trends in data center pricing and operations include several innovative approaches. Pay-As-You-Go pricing is ideal for startups or workloads with unpredictable demands, allowing customers to pay only for the resources they use. Spot Pricing offers discounts for utilizing idle resources during non-peak times, which can help reduce costs. Custom AI Accelerators, like Google's TPU, are increasingly being used in data centers, offering competitive pricing tailored for specific AI tasks.
BluSky AI’s approach to building its modular data centers will rely on a complex, carefully managed supply chain and sourcing strategy. The company will leverage existing on-site power infrastructures and renewable energy options, such as solar, hydrogen, or even alternative on-site grid systems. This helps to accelerate deployments and reduce the need for extensive new power installations, although securing reliable, sustainable power often involves long lead times for specialized components like hydrogen fuel cells or advanced renewable integration systems, and can be impacted by regional regulatory constraints.
BluSky AI plans to focus on sites in various U.S. jurisdictions, specifically targeting facilities with power capacities under 50MW. However, acquiring suitable land with the necessary zoning, infrastructure, and environmental clearances can be time-consuming and competitive, as prime locations are in high demand.
For equipment sourcing, BluSky AI will need to procure critical items such as transformers, switch gear, servers, CPUs, GPUs, racks, and cooling solutions. These components are essential for ensuring efficient power distribution and supporting high-performance computing workloads. However, these items often come with long lead times due to their customizability, regulatory compliance requirements, and the current global supply chain constraints, such as semiconductor shortages. Specialized racks and advanced cooling systems, like rear-door heat exchangers and liquid cooling modules, are also vital for handling the substantial heat loads generated by modern AI deployments. These systems require extensive engineering and have lengthy procurement cycles.
By balancing these sourcing strategies and navigating industry constraints, BluSky AI aims to deliver scalable, efficient, and cost-effective data center solutions that meet the evolving needs of its diverse customer base, including revenue-generating activities from commercial and governmental clients.
BluSky AI’s operational model is built on leveraging open standards and modular, scalable solutions that do not hinge on proprietary intellectual property rights. In fact, the company does not currently hold patents, trademarks, licenses, franchises, or concessions that affect its core operations. This approach provides several advantages:
| · | Flexibility and Agility: By not being tied to a proprietary IP portfolio, BluSky AI can rapidly adapt to technological advances and market shifts without concerns about the expiration or enforcement of specific patents or licenses. |
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| · | Open Standards & Collaboration: The company embraces open-source frameworks and industry best practices—such as those embodied in the AT Protocol—allowing for interoperability and a more transparent development environment. This strategy reduces reliance on exclusive technologies and minimizes risks associated with the duration or changes in IP rights. |
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| · | Cost Efficiency: Avoiding significant investments in proprietary IP frees up resources that can be redirected toward R&D, scaling operations, and forming strategic partnerships. The operational model thus remains cost-effective and resilient in a competitive, fast-evolving market. |
Overall, BluSky AI does not see any negative impact on its operations related to the duration or effect of patents, trademarks, licenses, franchises, or concessions, allowing it to focus on innovation and scalable deployment without being encumbered by restrictive intellectual property concerns.
BluSky AI faces several risks associated with its modular data center model, reliance on GPUs, and constraints in the U.S. energy grid, as well as potential exposure to government contract renegotiation or termination.
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In summary, BluSky AI’s planned operations are designed to meet constant, year-round needs. This non-seasonal nature is a significant strength, allowing the company to focus on scalable, long-term growth while mitigating risks associated with fluctuating market cycles.
BluSky AI plans to operate in a highly competitive data center market that is rapidly evolving alongside the surge in demand for AI computing, particularly GPU on demand services. Here are some key points regarding the competitive landscape and growth prospects:
| · | Competitive Environment in Data Centers: |
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| BluSky AI faces competition from traditional hyperscale data center providers (like AWS, Google, and Microsoft) as well as specialized modular data center firms. Its focus on deploying modular solutions that integrate with existing power infrastructure gives it a competitive edge by offering faster deployment, lower capital costs, and scalability. However, the market is crowded, and large players benefit from economies of scale and long-established supply chains. |
| · | GPU on Demand and AI Workloads: |
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| The demand for GPUs has skyrocketed as AI workloads intensify. BluSky AI targets this growing segment by offering flexible, high-density computing solutions. Despite robust market growth, global semiconductor supply constraints and fierce competition from major GPU vendors such as NVIDIA and AMD present challenges. BluSky AI is investing in supply chain resilience and strategic partnerships to secure a steady supply of GPUs to meet customer needs. |
| · | Growth Dynamics: |
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| With the increasing importance of AI across industries, the overall market for data centers and GPU-powered infrastructure is expected to continue growing. BluSky AI’s modular approach allows it to capture a portion of this growth by meeting the rising demand for energy-efficient, rapidly deployable data centers that can scale as client requirements evolve. This growth is fueled by the need for continuous, non-seasonal computing capacity, particularly in sectors like government, finance, and healthcare. |
| · | Risks and Strategic Considerations: |
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| While BluSky AI is well-positioned, it must navigate industry challenges such as long lead times for critical components, energy grid constraints in certain regions, and potential disruptions in the semiconductor supply chain. Additionally, competitive pressures may force frequent innovations or strategic adjustments, particularly as larger players ramp up their AI and GPU offerings. |
Compliance with Government Regulation
Since the Divestiture of CMCS and the Clavo Rico mine in January 2023, we are no longer subject to the mining regulations of Honduras.
The Company’s policy is to conduct our business in a manner that safeguards public health and mitigates the environmental effects of our business activities. To comply with these laws and regulations, we have made, and in the future may be required to make, capital and operating expenditures.
- In the U.S., federal guidelines like the Federal Data Center Enhancement Act focus on cybersecurity, resiliency, and energy efficiency. https://www.congress.gov/bill/118th-congress/senate-bill/933/text
In 2023, the European Union introduced the revised Energy Efficiency Directive (EED, EU/2023/1791) that requires data centers to report energy efficiency data to the European Commission. https://energy.ec.europa.eu/topics/energy-efficiency/energy-efficiency-targets-directive-and-rules/energy-efficiency-directive_en
Data centers have a significant environmental footprint, and compliance with environmental regulations is critical:
- Air Quality: Backup generators require air permits and adherence to emission standards.
- Water Management: Cooling systems often need permits for water usage and discharge.
- Hazardous Materials: Proper storage and disposal of materials like batteries and used oil are essential.
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Capital Equipment and Research & Development Expenditures
During the year ended December 31, 2024, we did not incur any expense related to research and development. Additionally, we are not currently conducting any research and development activities other than those relating to the Company’s new artificial intelligence-related operations.
Employees
As of the date of this filing, we currently employ 0 full-time employees and 0 temporary employees in the United States. We have contracts with various independent contractors and consultants to fulfill additional needs, including investor relations and other administrative functions, and may staff further with employees as we expand activities and bring new projects online.
Patents, Trademarks, Licenses, Franchises, Concessions, Royalty Agreements or Labor Contracts
We do not currently own any patents or trademarks. Also, we are not a party to any license or franchise agreements, concessions, or labor contracts arising from any patents. trademarks, or royalty agreements.
Company Information
The public may read and copy any materials that we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address of that site is www.sec.gov. Further information about the Company may be found at its website: www.inceptionmining.com. The Company makes available its filings to investors, free of charge, on this website.
Reports to Security Holders
You may read and copy any materials that we file with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may also find all the reports that we have filed electronically with the SEC at their Internet site www.sec.gov.
ITEM 1A. RISK FACTORS
An investment in our securities involves a high degree of risk. You should consider carefully the following risks, along with all of the other information included in this report, before deciding to buy our common stock. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also impair our business operations. If we are unable to prevent events that have a negative effect from occurring, then our business may suffer.
RISKS RELATED TO OUR COMPANY
We rely on third parties and disruptions in the supply chain could cause significant delays.
One of the primary risks comes from its reliance on modular data center providers. Any disruptions in the supply chain, such as delays in manufacturing, installation, or shipping, could affect deployment schedules. Furthermore, standardization challenges across different jurisdictions may require design adjustments, increasing both costs and deployment times. The need for specialized equipment, such as liquid cooling systems for high-performance AI workloads, also introduces compatibility risks with various modular providers. Another significant risk revolves around the GPU supply chain and performance. GPUs are essential for BluSky AI's high-performance computing infrastructure, particularly for AI and machine learning workloads. However, the global semiconductor supply chain remains volatile, with shortages, geopolitical restrictions, and high demand from cloud and AI companies impacting availability and pricing. BluSky AI’s dependence on a few major GPU manufacturers, such as NVIDIA and AMD, increases procurement risks, as delays or price hikes from these suppliers can directly affect operational costs and scalability.
We rely on the existing U.S. energy grid
Additionally, there are risks related to the U.S. energy grid. The growing demand for data centers, combined with aging energy infrastructure in some regions, poses a risk to BluSky AI's ability to secure reliable power for its facilities. Regulatory restrictions on energy consumption and sustainability requirements may also affect site selection and operational costs. Power-intensive AI workloads require stable energy supplies, and any potential grid instabilities could necessitate costly backup solutions, such as on-site renewables or energy storage systems. For BluSky AI's government contracts, any portion of its business tied to these agreements may be subject to renegotiation of profits or termination at the government’s discretion. Changes in federal or state regulations, budget reallocations, or shifts in policy could impact existing agreements, and government contracts often include termination clauses, meaning the government can end agreements without cause, potentially leading to financial losses. Additionally, the company must comply with evolving security and data protection requirements in government contracts, which may require additional investment in infrastructure and regulatory compliance measures.
We operate in a highly competitive and growing market
BluSky AI operates in a highly competitive data center market that is rapidly evolving in response to the growing demand for AI computing, particularly GPU on-demand services. The company faces competition from traditional hyperscale data center providers like AWS, Google, and Microsoft, as well as specialized modular data center firms.
The demand for GPUs has skyrocketed with the intensifying AI workloads, and BluSky AI targets this expanding segment by offering flexible, high-density computing solutions. However, global semiconductor supply constraints and fierce competition from major GPU vendors such as NVIDIA and AMD present challenges. BluSky AI must navigate industry challenges such as long lead times for critical components, energy grid constraints, and potential disruptions in the semiconductor supply chain. Moreover, competitive pressures may force frequent innovations or strategic adjustments, especially as larger players ramp up their AI and GPU offerings.
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An occurrence of an uncontrollable event such as the COVID-19 pandemic may negatively affect our operations.
The occurrence of an uncontrollable event such as the COVID-19 pandemic may negatively affect our operations. A pandemic typically results in social distancing, travel bans and quarantine, and this may limit access to our facilities, customers, management, support staff and professional advisors. These factors, in turn, may not only impact our operations, financial condition and demand for our goods and services but our overall ability to react timely to mitigate the impact of this event. Also, it may hamper our efforts to comply with our filing obligations with the Securities and Exchange Commission.
We have incurred losses since our inception in 2007 and may never be profitable, which raises doubt about our ability to continue as a going concern.
Since our inception in 2007 and until the Merger in 2015, we had nominal operations and incurred operating losses. As of December 31, 2024, our accumulated deficit since inception was $29,863,364. We have substantial current obligations and at December 31, 2024, we had $3,346,850 of current liabilities compared to $0 of current assets. Since inception, we have been able to raise only minimal additional capital, and we have minimal cash on hand. Accordingly, the Company does not have sufficient cash resources or current assets to pay its current obligations, and we have been meeting many of our obligations through the issuance of our common stock to our employees, consultants, and advisors as payment for the goods and services.
Our management continues to search for additional financing; however, considering the difficult U.S. and global economic conditions along with the substantial turmoil in the capital and credit markets, there is a significant possibility that we will be unable to obtain financing to continue our operations.
These circumstances raise substantial doubt about our ability to continue as a going concern as described in an explanatory paragraph to our independent registered public accounting firm’s report on our audited financial statements as of and for the year ended December 31, 2024. If we are unable to continue as a going concern, investors will likely lose all of their investment in our company.
We are Subject to Legal Proceedings.
We are subject to legal proceedings and litigation, which can be expensive and unpredictable.
We do not currently carry any property or casualty insurance.
Our business is subject to a number of risks and hazards generally, including but not limited to potential disruptions from natural disasters, such as earthquakes or floods, which could impact data center operations. Cybersecurity threats pose another significant risk, as data centers are prime targets for malicious attacks. Additionally, the company must navigate regulatory compliance challenges, particularly in meeting environmental standards and data protection laws. Market volatility and competition in the rapidly evolving AI and HPC sectors also present operational risks.
Such occurrences could result in damage to our properties, equipment, and infrastructure, personal injury or death, environmental damage, delays, monetary losses, and possible legal liability. You could lose all or part of your investment if any such catastrophic event occurs. We do not carry any property or casualty insurance at this time (but we will carry all insurances that we are required to by law, such as motor vehicle and workers’ compensation, plus other coverage that may be in the best interest of the Company). Even if we do obtain insurance, it may not cover all of the risks associated with our operations. Insurance against risks such as environmental pollution or other hazards as a result of exploration and operations are often not available to us or to other companies in our business on acceptable terms. Should any events against which we are not insured occur, we may become subject to substantial losses, costs, and liabilities, which will adversely affect our financial condition.
We face high competition in the AI compute data center industry.
The data center industry is characterized by intense competition. BluSky AI Inc. faces rivals ranging from large, established players to nimble emerging companies. These competitors generally have more extensive financial resources, advanced technology, and larger technical staffs, placing BluSky AI at a relative disadvantage.
We face resource acquisition challenges due to our size and recent expansion into these operations.
Competing companies often have the greater financial muscle to secure highly desirable properties, equipment, and technical expertise. This imbalance may hinder BluSky AI’s ability to compete for necessary capital and strategic partnerships, ultimately affecting growth prospects.
The existing scarcity of Powered Lands makes our potential acquisitions more expensive and we face increased competition in making acquisitions.
"Powered land" in the context of data centers refers to land that is pre-equipped with a committed power infrastructure, often including a signed agreement with a utility provider. This ensures that the site has a guaranteed power load available, typically ranging from 50 to 1000 MW, before construction begins. Such arrangements significantly reduce delays and risks associated with securing power during the development phase.
There is a limited availability of quality properties that would be potential business targets for our business.
BluSky AI’s business model depends on securing powered lands and valuable mineral properties for data center exploration. However, there is a limited supply of such lands, especially in high-demand regions like the United States. Larger competitors, with established networks and deeper pockets, are often better positioned to claim or lease these sites.
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We face acquisition disadvantages due to our size and lack of funding.
The competitive market for mineral lands means BluSky AI may face higher acquisition costs or be unable to secure properties that meet its operational requirements. This scarcity can delay project timelines and limit geographic expansion, thereby reducing the company’s competitive edge.
We face ongoing challenges in retaining talent and recruiting contractors with expertise in our industry.
In addition to competing for physical assets, BluSky AI faces stiff competition in recruiting and retaining skilled professionals. Larger companies can offer more attractive compensation packages and benefits, which may impede BluSky AI’s efforts to build and maintain a high-caliber technical and operational team. The inability to secure or retain top talent not only affects day-to-day operations but also limits the company’s ability to innovate and execute its long-term strategy. This talent gap can lead to delays in property development and operation, further disadvantaging the company relative to its competitors.
Our operations require high infrastructure costs.
Developing and operating data centers is capital-intensive. BluSky AI must invest heavily in infrastructure to compete effectively. Limited financial resources, compared to competitors, can constrain the company’s ability to fund rapid expansion and state-of-the-art technology deployment.
We may experience difficulty raising capital to fund our operations
The need for continuous investment in property acquisition, infrastructure development, and talent recruitment increases the company’s dependency on raising capital. Difficulty in securing adequate funding could lead to reduced operational capacity, stalled expansion plans, and, ultimately, material adverse effects on business performance.
We depend on our Chief Executive Officer and Chief Financial Officer and the loss of this individual could adversely affect our business.
Our company is completely dependent on Trent D’Ambrosio, our Chief Executive Officer and Chief Financial Officer. Mr. D’Ambrosio is also a member of our Board of Directors. The loss of Mr. D’Ambrosio could significantly and adversely affect our business and could even result in a complete failure of the Company. We do not carry any life insurance on the life of Mr. D’Ambrosio.
Rapid technological change may result in our technology becoming obsolete or in our competitors having an advantage.
BluSky AI’s reliance on cutting‐edge AI compute technology, including quantum encryption and advanced GPU chip technology, exposes the company to the risk of rapid technological obsolescence. New developments by competitors or unforeseen technical challenges may render current solutions less competitive or require significant reinvestment.
The timelines for integration and deployment may cause uncertainty and unpredictability in our results of operations.
While the modular container centers are designed for rapid deployment, any delays in installation, integration of renewable energy sources, or unforeseen engineering challenges may extend timelines and impair revenue recognition.
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Our Component and infrastructure dependency may result in supply chain delays and disruption.
The company’s model depends heavily on securing critical components—from renewable energy infrastructure (solar, wind, geothermal) to GPU chips. Disruptions in these supply chains or changes in supplier terms could lead to increased costs or reduced capacity expansion.
We rely on strategic partnerships with third parties to advance our business strategy.
Partnerships with key technology suppliers and energy infrastructure providers are central to BluSky AI’s strategy. Any breakdown or change in these relationships could impact deployment capabilities and market competitiveness.
There is uncertainty that the markets will adopt AI compute infrastructure as it is a relatively new industry.
While demand for AI compute infrastructure is surging, there remains uncertainty about the pace of market adoption, customer retention, and the ability to scale operations profitably amid evolving client needs.
We face a changing regulatory landscape and increasing compliance costs that must be paid to continue our operations.
Operating on powered land assets and harnessing renewable energy exposes the company to diverse regulatory and permitting environments. Changes in local, state, or federal regulations—especially those related to energy use and environmental standards—could delay project timelines or increase costs.
Ensuring compliance with evolving industry, environmental, and cybersecurity standards may necessitate additional investments in technology and personnel, impacting overall margins.
We face advanced security requirements and risks due to cybersecurity and data protection regulations.:
Although BluSky AI leverages quantum encryption to enhance data protection, the integration of such advanced security measures is not without risk. Potential vulnerabilities in the evolving technology or sophisticated cyberattacks could compromise client data and damage the company’s reputation.
We require additional, significant capital to fund our expansion; none of which is committed at this time.
Rapid deployment across multiple sites and the significant capital expenditure required for modular scalability might strain financial resources. Inadequate funding or unfavorable capital market conditions could hamper growth and increase dilution risks for current shareholders. Difficulties in coordinating large-scale, geographically diverse projects may result in inefficiencies and increased operational costs.
Our commitment to sustainability adds additional costs and obligations to our business.
The focus on green power and renewable energy, while a competitive differentiator, also exposes the company to risks if renewable energy prices fluctuate or if new environmental regulations are enacted that affect operational costs.
We face reputational risks if we experience bad publicity or adverse results in our operations.
As a public company, BluSky AI’s commitment to sustainability and security must be consistently upheld. Any lapses in ESG performance or publicized operational failures could lead to reputational damage and reduced investor confidence.
We face regional operational challenges that may result in additional administrative expense and complexity in our operations.
While geographic diversification offers resilience, it also introduces complexity. Variations in local regulatory environments, infrastructure readiness, and market demand across different states or regions may result in inconsistent performance and increased management challenges.
These risk factors, while not exhaustive, highlight key areas where BluSky AI Inc. may face uncertainties that could impact its business model, operational performance, and financial outcomes. Investors and stakeholders should consider these factors alongside the company’s strategic initiatives and market opportunities when evaluating its long-term prospects.
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Our independent auditors have expressed substantial doubt about our ability to continue as a going concern.
In their audit opinion issued in connection with our consolidated balance sheets as of December 31, 2024 and our related consolidated statements of operations and comprehensive loss, stockholders’ deficit, and cash flows for the year ended December 31, 2024, our auditors have expressed substantial doubt about our ability to continue as a going concern given our recurring net losses, negative cash flows from operations and the limited amount of funds on our balance sheet. We have prepared our financial statements on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The consolidated financial statements do not include any adjustments that might be necessary should we be unable to continue in existence. This could make it more difficult to raise capital in the future.
Risks Associated with Our Common Stock
Trading on the Over-the-Counter markets may be volatile and sporadic, which could depress the market price of our common stock and make it difficult for our stockholders to resell their shares.
Our common stock is quoted on the OTC Pink tier of the over-the-counter markets administered by OTC Markets Group, Inc. under the symbol “BSAI”. Trading in stock quoted on over-the-counter markets is often thin, volatile, and characterized by wide fluctuations in trading prices due to many factors that may have little to do with our operations or business prospects. This volatility could depress the market price of our common stock for reasons unrelated to operating performance. Moreover, the Over-the-Counter markets are not a stock exchange, and trading of securities on the over the counter markets is often more sporadic than the trading of securities listed on other stock exchanges such as the NASDAQ Stock Market, New York Stock Exchange or American Stock Exchange. Accordingly, our shareholders may have difficulty reselling any of their shares.
Our stock is a penny stock. Trading of our stock may be restricted by the SEC’s penny stock regulations and the FINRA’s sales practice requirements, which may limit a stockholders’ ability to buy and sell our stock.
Our stock is a penny stock. The SEC has adopted Rule 15g-9 which generally defines penny stock to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and accredited investors. The term accredited investor refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customers’ account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability or willingness of broker-dealers to trade our securities. We believe that the penny stock rules discourage broker-dealer and investor interest in, and limit the marketability of, our common stock.
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Our common stock may be affected by limited trading volume and price fluctuation which could adversely impact the value of our common stock.
There has been limited trading in our common stock and there can be no assurance that an active trading market in our common stock will either develop or be maintained. Our common stock has experienced, and is likely to experience in the future, significant price and volume fluctuations which could adversely affect the market price of our common stock without regard to our operating performance. In addition, we believe that factors such as quarterly fluctuations in our financial results and changes in the overall economy or the condition of the financial markets could cause the price of our common stock to fluctuate substantially. These fluctuations may also cause short sellers to periodically enter the market in the belief that we will have poor results in the future. We cannot predict the actions of market participants and, therefore, can offer no assurances that the market for our common stock will be stable or appreciated over time.
FINRA sales practice requirements may also limit a stockholders’ ability to buy and sell our stock.
In addition to the penny stock rules promulgated by the SEC, which are discussed in the immediately preceding risk factor, FINRA rules require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit the ability to buy and sell our stock and have an adverse effect on the market value for our shares.
Because the SEC imposes additional sales practice requirements on brokers who deal in shares of penny stocks, some brokers may be unwilling to trade our securities. This means that you may have difficulty reselling your shares, which may cause the value of your investment to decline.
Our shares are classified as penny stocks and are covered by Section 15(g) of the Securities Exchange Act of 1934 (the “Exchange Act”) which imposes additional sales practice requirements on broker-dealers who sell our securities in this offering or in the aftermarket. For sales of our securities, broker-dealers must make a special suitability determination and receive a written agreement prior from you to making a sale on your behalf. Because of the imposition of the foregoing additional sales practices, it is possible that broker-dealers will not want to make a market in our common stock. This could prevent you from reselling your shares and may cause the value of your investment to decline.
A decline in the price of our common stock could affect our ability to raise further working capital, it may adversely impact our ability to continue operations and we may go out of business.
A prolonged decline in the price of our common stock could result in a reduction in the liquidity of our common stock and a reduction in our ability to raise capital. Because we may attempt to acquire a significant portion of the funds we need in order to conduct our planned operations through the sale of equity securities, or convertible debt instruments, a decline in the price of our common stock could be detrimental to our liquidity and our operations because the decline may cause investors to not choose to invest in our stock. If we are unable to raise the funds we require for all our planned operations, we may be forced to reallocate funds from other planned uses and may suffer a significant negative effect on our business plan and operations, including our ability to develop new products and continue our current operations. As a result, our business may suffer, and not be successful and we may go out of business. We also might not be able to meet our financial obligations if we cannot raise enough funds through the sale of our common stock and we may be forced to go out of business.
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Our stock price may be volatile.
The stock market in general has experienced volatility that often has been unrelated to the operating performance of any specific public company. The market price of our common stock is likely to be highly volatile and could fluctuate widely in price in response to various factors, many of which are beyond our control, including the following:
| ● | changes in our industry; |
| ● | competitive pricing pressures; |
| ● | our ability to obtain working capital financing; |
| ● | additions or departures of key personnel; |
| ● | limited “public float” in the hands of a small number of persons whose sales or lack of sales could result in positive or negative pricing pressure on the market prices of our common stock; |
| ● | sales of our common stock; |
| ● | our ability to execute our business plan; |
| ● | operating results that fall below expectations; |
| ● | loss of any strategic relationship; |
| ● | regulatory developments; |
| ● | economic and other external factors; and |
| ● | period-to-period fluctuations in our financial results. |
In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our common stock.
We have never paid a cash dividend on our common stock and we do not anticipate paying any in the foreseeable future.
We have not paid a cash dividend on our common stock to date, and we do not intend to pay cash dividends in the foreseeable future. Our ability to pay dividends will depend on our ability to successfully develop one or more properties and generate revenue from operations. Notwithstanding, we will likely elect to retain any earnings, if any, to finance our growth. Future dividends may also be limited by bank loan agreements or other financing instruments that we may enter into in the future. The declaration and payment of dividends will be at the discretion of our Board of Directors.
We have not voluntarily implemented various corporate governance measures, in the absence of which, shareholders may have more limited protections against interested director transactions, conflicts of interest and similar matters.
Recent federal legislation, including the Sarbanes-Oxley Act of 2002 and the Jumpstart our Business Startups Act of 2012, among others, has resulted in the adoption of various corporate governance measures designed to promote the integrity of the corporate management and the securities markets. Some of these measures have been adopted in response to legal requirements. Others have been adopted by companies in response to the requirements of national securities exchanges, such as the NYSE or The NASDAQ Stock Market, on which their securities are listed. Among the corporate governance measures that are required under the rules of national securities exchanges and NASDAQ are those that address board of directors’ independence, audit committee oversight and the adoption of a code of ethics. While our Board of Directors has adopted a Code of Ethics and Business Conduct, we have not yet adopted any of these corporate governance measures and, since our securities are not listed on a national securities exchange or NASDAQ, we are not required to do so. It is possible that if we were to adopt some or all of these corporate governance measures, shareholders would benefit from somewhat greater assurances that internal corporate decisions were being made by disinterested directors and that policies had been implemented to define responsible conduct. For example, in the absence of audit, nominating and compensation committees comprised of at least a majority of independent directors, decisions concerning matters such as compensation packages to our senior officers and recommendations for director nominees may be made by a majority of directors who have an interest in the outcome of the matters being decided. Prospective investors should bear in mind our current lack of corporate governance measures in formulating their investment decisions.
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Difficulties we may encounter managing our growth could adversely affect our results of operations.
As our business needs expand, we may need to hire a significant number of employees. This expansion may place a significant strain on our managerial and financial resources. To manage the potential growth of our operations and personnel, we will be required to:
| ● | improve existing, and implement new, operational, financial and management controls, reporting systems and procedures; |
| ● | install enhanced management information systems; and |
| ● | train, motivate, and manage our employees. |
We may not be able to install adequate management information and control systems in an efficient and timely manner, and our current or planned personnel, systems, procedures and controls may not be adequate to support our future operations. If we are unable to manage growth effectively, our business would be seriously harmed.
If we lose key personnel or are unable to attract and retain additional qualified personnel, we may not be able to successfully manage our business and achieve our objectives.
We believe our future success will depend upon our ability to retain our key management, primarily Mr. D’Ambrosio, our Chief Executive Officer and Chief Financial Officer. We may not be successful in attracting, assimilating and retaining our employees in the future.
Offers or availability for sale of a substantial number of shares of our common stock may cause the price of our common stock to decline.
If our stockholders sell substantial amounts of our common stock in the public market upon the expiration of any statutory holding period, under Rule 144, or issued upon the exercise of outstanding options or warrants, it could create a circumstance commonly referred to as an “overhang” and in anticipation of which the market price of our common stock could fall. The existence of an overhang, whether or not sales have occurred or are occurring, also could make more difficult our ability to raise additional financing through the sale of equity or equity related securities in the future at a time and price that we deem reasonable or appropriate.
ITEM 1B: UNRESOLVED STAFF COMMENTS
None.
ITEM 1C: CYBERSECURITY
Our board of directors and senior management recognize the critical importance of maintaining the trust and confidence of our clients, business partners and employees. Our management, led by our Chief Executive Officer, is actively involved in oversight of our risk management efforts, and cybersecurity represents an important component of the Company’s overall approach to enterprise risk management (“ERM”). Our cybersecurity processes and practices are fully integrated into the Company’s ERM efforts. In general, we seek to address cybersecurity risks through a cross-functional approach that is focused on preserving the confidentiality, security and availability of the information that we collect and store by identifying, preventing and mitigating cybersecurity threats and effectively responding to cybersecurity incidents when they occur. In addition, we regularly review cybersecurity trends and, partially as a result of our prior cybersecurity exposure, have moved some of our internal servers to off-site locations.
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Data security within a data center:
Is provided by a combination of dedicated security personnel, advanced technologies, and stringent protocols. This includes physical security measures like access control systems, surveillance, and security personnel, as well as cybersecurity measures like firewalls, intrusion detection, and data encryption.
1. Physical Security:
| · | Access Control: Only authorized personnel are allowed access to specific areas of the data center, often using biometric scanners, keycards, and PIN codes. |
| · | Surveillance: CCTV cameras and motion sensors monitor the premises around the clock, deterring unauthorized access and identifying suspicious activities. |
| · | Security Personnel: Trained security guards patrol the perimeter and inside the building, ensuring 24/7 protection. |
| · | Perimeter Security: Fencing, security gates, and other measures restrict access to the data center facility. |
| · | Key Management: Strict procedures are in place for issuing, controlling, and auditing physical keys, ensuring they are not lost or misused. |
2. Cybersecurity:
| · | Firewalls and Intrusion Detection Systems: These technologies monitor network traffic and block unauthorized access, protecting against cyberattacks. |
| · | Data Encryption: Sensitive data is encrypted both in transit and at rest, making it unreadable to unauthorized parties. |
| · | Network Segmentation: Isolating different parts of the network to prevent the spread of malware and other threats. |
| · | Security Operations Centers (SOCs): Dedicated teams monitor the data center for security incidents and respond to threats in real-time. |
| · | Vulnerability Management: Regular assessments and patching of systems and software to address security vulnerabilities. |
| · | Compliance: Adherence to industry standards and regulations, such as PCI DSS for processing payment card information. |
| · | Remote Security Management: Cloud-based security management systems enable staff to monitor and manage security remotely from secure devices. |
| · | Secure Building Management Systems: Securing access to remote technicians who maintain the building, and ensuring that the systems that manage the building are also secured. |
Risk Management and Strategy
As one of the critical elements of our overall ERM approach, our cybersecurity efforts are focused on the following key areas:
● | Governance: Management oversees cybersecurity risk mitigation and reports to the board of directors any cybersecurity incidents. |
● | Collaborative Approach: We have implemented a cross-functional approach to identifying, preventing and mitigating cybersecurity threats and incidents, while also implementing controls and procedures that provide for the prompt escalation of certain cybersecurity incidents so that decisions regarding the public disclosure and reporting of such incidents can be made by management in a timely manner. |
● | Technical Safeguards: We deploy technical safeguards that are designed to protect our information systems from cybersecurity threats, including firewalls, intrusion prevention and detection systems, anti-malware functionality and access controls, which are evaluated and improved through vulnerability assessments and cybersecurity threat intelligence. |
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Third parties also
While we have experienced cybersecurity threats in the past in the normal course of business and expect to continue to experience such threats from time to time, to date,
ITEM 2: PROPERTIES
Corporate Headquarters
We currently maintain our corporate offices at 5330 South 900 East, Suite 280, Murray, Utah 84117. During the year ended December 31, 2024, we paid monthly rent of approximately $1,500 for use of a corporate office.
ITEM 3. 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. Mother Lode Mining has until May 2, 2025 to file a responsive pleading to the Company’s complaint.,. The Company intends to pursue the lawsuit aggressively.
On January 18, 2023, the Company negotiated a settlement with Antilles Family Office, LLC through which the Company paid $1,200,000 to Antilles and the remaining balance of $1,873,532 and the accrued interest of $3,695,059 under the original Secured Redeemable Convertible Promissory Note was forgiven.
The Company’s former subsidiary, Compañía Minera Clavo Rico, S.A. de C.V., was served with a lawsuit filed by SAR, the taxing authority in Honduras, alleging additional tax liability due. The Complaint alleges that HNL7,186,151,96 lempires are due in a demand for execution of a forced extrajudicial title. The Company had accrued $256,674 in this matter, but the liability was extinguished with the sale of the subsidiary.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our common stock is not traded on any exchange. Our common stock is quoted on the Pink tier of the over-the-counter markets administered by OTC Markets Group, Inc. under the trading symbol “BSAI.” We cannot assure you that there will be a market in the future for our common stock.
OTC securities are not listed and traded on the floor of an organized national or regional stock exchange. Instead, OTC securities transactions are conducted through a telephone and computer network connecting dealers. OTC issuers are traditionally smaller companies that do not meet the financial and other listing requirements of a national or regional stock exchange.
Classes of Stock
We have two classes of stock: common stock and Series A Preferred Stock. On August 30, 2016, the Board of Directors of the Company, pursuant to Article II of the Company’s Articles of Incorporation, approved the designation of fifty-one (51) shares of its authorized capital stock as “Series A Preferred Stock”. The Certificate of Designation for the Series A Preferred Stock was filed on August 31, 2016. These shares have preferential voting rights and no conversion rights.
Holders
As of March 26, 2025, there were 1,479 holders of record of our common stock and one holder of record for our preferred stock.
Dividends
To date, we have not paid dividends on shares of our common stock and we do not expect to declare or pay dividends on shares of our common stock in the foreseeable future. The payment of any dividends will depend upon our future earnings, if any, our financial condition, and other factors deemed relevant by our Board of Directors.
Equity Compensation Plans
As of the date of this Annual Report, we have an equity compensation plan: the 2013 Incentive Stock Plan.
Recent Sales of Unregistered Securities
We claimed exemption from registration under the Securities Act for the sales and issuances of securities in the following transactions were made in reliance on Sections 3(a)(9) and 4(a)(2) of the Securities Act as the common stock was issued in exchange for debt securities of the Company held by each shareholder, there was no additional consideration for the exchange, there was no remuneration for the solicitation of the exchange, there was no general solicitation, and the transactions did not involve a public offering.
On August 2, 2024 the Company issued 20,870 restricted shares of Common Stock to 1800 Diagonal Lending LLC upon the conversion of $12,000 in existing debt owed to the shareholder that has been accrued by the Company.
ITEM 6: SELECTED FINANCIAL DATA
Not required for smaller reporting companies.
ITEM 7: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward Looking Statements
Except for historical information, the following Management’s Discussion and Analysis contains forward-looking statements based upon current expectations that involve certain risks and uncertainties. Such forward-looking statements include statements regarding, among other things, (a) discussions about mineral resources and mineralized material, (b) our projected sales and profitability, (c) our growth strategies, (d) anticipated trends in our industry, (e) our future financing plans, (f) our anticipated needs for working capital, (g) our lack of operational experience and (h) the benefits related to ownership of our common stock. Forward-looking statements, which involve assumptions and describe our future plans, strategies, and expectations, are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” or “project” or the negative of these words or other variations on these words or comparable terminology. This information may involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from the future results, performance, or achievements expressed or implied by any forward-looking statements. These statements may be found under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Description of Business,” as well as in this Report generally. Actual events or results may differ materially from those discussed in forward-looking statements as a result of various factors, including, without limitation, the risks outlined under “Risk Factors” and matters described in this Report generally. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this Report will in fact occur as projected.
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Overview
BluSky AI Inc. is revolutionizing the AI compute landscape by addressing the immediate global supply shortage with a cutting-edge, turnkey solution. Our strategy centers on deploying rapidly deployable, plug-and-play, modular compute centers on powered land assets—sites that already possess permitted energy infrastructure. This approach not only accelerates time to market but also positions BluSky AI as the premier AI compute infrastructure provider dedicated to meeting the surging demand for advanced AI services.
Historically, we have operated in the mining industry and provided consulting services to the mining industry in 2023 and 2024.
Clavo Rico Mine
On October 2, 2015, the Company consummated a merger with Clavo Rico Ltd. (“Clavo Rico”) through which it acquired companies (including Compañía Minera Cerros del Sur, S.A de C.V.) with principal mining operations in Honduras, Central America. Its workings include several historical underground mining operations dating back to the early Mayan and Spanish occupation.
The Clavo Rico mine operations were divested on January 24, 2023 when the Company sold Compañía Minera Cerros del Sur, S.A de C.V. 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, the obligations of which are being litigated.
Results of Operations
Year ended December 31, 2024 compared to the year ended December 31, 2023
We had a net loss of $949,782 for the year ended December 31, 2024, which was $13,705,441 more than the net income of $12,755,659 for the year ended December 31, 2023. This change in our results over the two periods is primarily the result of an increase in interest expense of $138,191, the change of derivative liabilities of ($3,132,140), a decrease in gain on extinguishment of debt of ($6,326,145) and income from discontinued operations of ($6,732,872). The following table summarizes key items of comparison and their related increase (decrease) for the years ended December 31, 2024 and 2023.
|
| Years Ended December, |
|
| Increase/ |
| ||||||
|
| 2024 |
|
| 2023 |
|
| (Decrease) |
| |||
General and Administrative |
| $ | 520,378 |
|
| $ | 1,065,893 |
|
| $ | (545,515 | ) |
Depreciation and Amortization Expenses |
|
| 727 |
|
|
| 725 |
|
|
| 2 |
|
Total Operating Expenses |
|
| 521,105 |
|
|
| 1,066,618 |
|
|
| (545,513 | ) |
Income (Loss) from Operations |
|
| (521,105 | ) |
|
| (1,066,618 | ) |
|
| 545,513 |
|
Change in Derivative Liabilities |
|
| 196,321 |
|
|
| 3,328,461 |
|
|
| (3,132,140 | ) |
Initial Derivative Expense |
|
| (193,582 | ) |
|
| (55,065 | ) |
|
| (138,517 | ) |
Bad Debt Expense on Note Receivable |
|
| - |
|
|
| (2,219,442 | ) |
|
| 2,219,442 |
|
Loss on Disposal of Property, Plant and Equipment |
|
| (2,531 | ) |
|
| - |
|
|
| (2,531 | ) |
Loss on Extinguishment of Debt |
|
| (13,043 | ) |
|
| 6,313,102 |
|
|
| (6,326,145 | ) |
Interest Expense |
|
| (415,842 | ) |
|
| (277,651 | ) |
|
| (138,191 | ) |
Income (Loss) from Operations Before Taxes |
|
| (949,782 | ) |
|
| 6,022,787 |
|
|
| (6,972,569 | ) |
Net Income (Loss) from Continued Operations |
|
| (949,782 | ) |
|
| 6,022,787 |
|
|
| (6,972,569 | ) |
Net Income (Loss) from Discontinued Operations |
|
| - |
|
|
| (497,581 | ) |
|
| 497,581 |
|
Gain on Sale of Mine Property in Discontinued Operations |
|
| - |
|
|
| 7,230,453 |
|
|
| (7,230,453 | ) |
Net Income (Loss) from Discontinued Operations |
|
| - |
|
|
| 6,732,872 |
|
|
| (6,732,872 | ) |
Net Income (Loss) |
| $ | (949,782 | ) |
| $ | 12,755,659 |
|
| $ | (13,705,441 | ) |
| 21 |
| Table of Contents |
Operating Expenses
Operating expenses for the years ended December 31, 2024 and 2023 were $521,105 and $1,066,618, respectively. The decrease in operating expenses for 2024 compared to 2023 were comprised primarily of an decrease in consulting fees.
Other Income (Expenses)
Other income (expenses) for the years ended December 31, 2024 and 2023 were ($428,677) and $7,089,405, respectively. For the year ended December 31, 2024, other income (expenses) was comprised of $196,321 for change in derivative liability, ($193,582) in initial derivative expenses, ($13,043) for loss on extinguishment of debt and ($415,842) for interest expense. For the year ended December 31, 2023, other income (expenses) was comprised of $3,328,461 for change in derivative liability, ($55,065) in initial derivative expense, ($2,219,442) for bad debt expense on note receivable, $6,313,102 for gain on extinguishment of debt and ($277,651) for interest expense.
Net Income (Loss)
Net loss for the year ended December 31, 2024 was $949,782 while the net income for the year ended December 31, 2023 was $12,755,659.
Liquidity and Capital Resources
Our balance sheet as of December 31, 2024, reflects current assets of $0. As we had cash in the amount of $0 and a working capital deficit in the amount of $3,346,850 as of December 31, 2024, 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
|
| December 31, 2024 |
|
| December 31, 2023 |
| ||
Current assets |
| $ | - |
|
| $ | 10,002 |
|
Current liabilities |
|
| 3,346,850 |
|
|
| 1,576,379 |
|
Working capital deficit |
| $ | (3,346,850 | ) |
| $ | (1,566,347 | ) |
We anticipate generating losses and, therefore, may be unable to continue operations in the future. If we require additional capital, we will have to issue debt or equity or enter into a strategic arrangement with a third party.
Going Concern Consideration
As reflected in the accompanying financial statements, the Company has an accumulated deficit of $29,863,364. In addition, there is a working capital deficiency of $3,346,850 and a stockholder’s deficiency of $3,346,319 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.
| 22 |
| Table of Contents |
Cash Flows
|
| Years Ended December 31, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
Net Cash Provided by (Used in) Operating Activities |
| $ | (127,139 | ) |
| $ | 1,327,675 |
|
Net Cash Provided by (Used in) Investing Activities |
|
| - |
|
|
| (652 | ) |
Net Cash Provided by (Used in) Financing Activities |
|
| 127,137 |
|
|
| (1,328,126 | ) |
Effects of Exchange Rate Changes on Cash |
|
| - |
|
|
| 1,105 |
|
Net Increase (Decrease) in Cash |
| $ | (2 | ) |
| $ | 2 |
|
Operating Activities
Net cash flow used in operating activities during the year ended December 31, 2024, was $127,139, a decrease of $1,369,814 from the $1,242,675 net cash provided by operating activities during the year ended December 31, 2023. This decrease is mostly due to the net loss in 2024 versus the net income in 2023.
Investing Activities
Cash used in investing activities during the year ended December 31, 2024, was $0, a decrease of $652 from the $652 net cash used during the year ended December 31, 2023. This decrease was due to discontinued operations and no new investments.
Financing Activities
Financing activities during the year ended December 31, 2024, provided $127,137, an increase of $1,370,263 from the $1,243,126 used in financing activities during the year ended December 31, 2023. During the year ended December 31, 2024, the company received $174,396 in notes payable from related parties, $150,000 in convertible notes payable, made payments of $98,475 in cash on notes payable – related parties, and $98,784 in cash on convertible notes. During the year ended December 31, 2023, the company received $39,303 in notes payable from related parties, $100,000 in convertible notes payable, made payments of $39,000 in cash on notes payable – related parties, and $1,343,429 in cash on convertible notes.
Critical Accounting Policies and Estimates
Going Concern - The accompanying consolidated 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 consolidated financial statements during year ended December 31, 2024, the Company recorded a net loss of $949,782 and used $127,139 in cash from operating activities. The Company has an accumulated net loss since inception of $29,863,364. In addition, there is a working capital deficiency of $3,346,850 and a stockholder’s deficiency of $3,346,319 as of December 31, 2024. These factors among others indicate that the Company may be unable to continue as a going concern for one year from the issuance of these financial statements.
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.
Principles of Consolidation - The accompanying consolidated financial statements include the accounts of Inception Mining, Inc. and its wholly owned subsidiaries, Inception Development, Corp., Clavo Rico Development Corp., Clavo Rico, Ltd. and Compañía Minera Cerros del Río, S.A. de C.V., and its controlling interest subsidiaries, Compañía Minera Cerros del Sur, S.A. de C.V. and Compañía Minera Clavo Rico, S.A. de C.V. (collectively, the “Company”). All intercompany accounts have been eliminated upon consolidation through the date the subsidiaries were disposed of on January 24, 2023.
| 23 |
| Table of Contents |
Basis of Presentation - The Company prepares its consolidated financial statements in accordance with accounting principles generally accepted in the United States of America.
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 allowances on notes receivable, deferred tax assets, derivative assets and liabilities, stock-based compensation and payments, and contingent liabilities.
Notes Receivable – Notes receivable include amounts due to the Company pursuant to financial agreements stipulating interest rates, payment terms and maturity dates. The Company uses payment history, timeliness of payments, economic environment and potential disagreements with noteholder and debtor and other potential indicators to evaluate the collectability of the note receivable and to determine if an allowance for doubtful notes is required.
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.
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.
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.
The Company recognizes its derivative liabilities as level 3 and values its derivatives using the methods discussed below. While the Company believes that its valuation methods are appropriate and consistent with other market participants, it recognizes that the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. The primary assumptions that would significantly affect the fair values using the methods discussed below are that of volatility and market price of the underlying common stock of the Company.
| 24 |
| Table of Contents |
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.
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 |
| 7 to 15 years |
Vehicles and equipment |
| 3 to 7 years |
Processing and laboratory |
| 5 to 15 years |
Furniture and fixtures |
| 2 to 3 years |
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 consolidated statements of operations. We do not hold or issue any derivative financial instruments for speculative trading purposes.
At December 31, 2024, the Company marked to market the fair value of the debt derivatives and determined a fair value of $186,542. The Company recorded a gain from change in fair value of debt derivatives of $196,321 for the year ended December 31, 2024. The fair value of the embedded derivatives was determined using the Monte Carlo Valuation Model. The Monte Carlo Valuation Model was based on the following assumptions: (1) expected volatility of 155.5%, (2) weighted average risk-free interest rate of 4.30% and (3) expected life of 0.13 years.
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 consolidated 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 the realization of such deferred tax assets to be more likely than not.
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.
Operating Lease – The Company leases its corporate headquarters and administrative offices in Salt Lake City, Utah on a month-to-month basis.
The Company incurred rent expense of $22,484 and $15,772 for the years ended December 31, 2024 and 2023.
Non-Controlling Interest Policy – Non-controlling interest (NCI) is the portion of equity ownership in a subsidiary not attributable to the parent company, who has a controlling interest and consolidates the subsidiary’s financial results with its own. The amount of equity relating to the non-controlling interest is separately identified in the equity section of the balance sheet and the amount of the net income (loss) relating to the non-controlling interest is separately identified on the statement of operations.
| 25 |
| Table of Contents |
Recent Accounting Pronouncements
For recent accounting pronouncements, please refer to the notes to the financial statements section of this Annual Report.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements of the Company required by Article 8 of Regulation S-X are attached to this report, beginning at page F-1.
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A: 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 and due to reasons listed below, management concluded that our disclosure controls and procedures were not effective as of December 31, 2024.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is designed to provide reasonable assurances regarding the reliability of financial reporting and the preparation of the financial statements of the Company in accordance with U.S. generally accepted accounting principles, or GAAP. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree or compliance with the policies or procedures may deteriorate.
With the participation of our Chief Executive Officer and Chief Financial Officer, our management conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2024 based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO-2013”). Based on our evaluation and the material weaknesses described below, management concluded that the Company’s internal controls were not effective based on financial reporting as of December 31, 2024 based on the COSO framework criteria. Management has identified control deficiencies regarding the lack of segregation of duties. Management of the Company believes that these material weaknesses are due to the small size of the Company’s management and accounting staff and reliance on outside consultants for external reporting. The small size of the Company’s accounting staff may prevent adequate controls in the future and the internal controls may continue to be not effective, such as segregation of duties, due to the cost/benefit of such remediation.
| 26 |
| Table of Contents |
To mitigate the current limited resources and limited employees, we rely heavily on direct management oversight of transactions, along with the use of legal and outside accounting consultants. As we grow, we expect to increase our number of employees, which will enable us to implement adequate segregation of duties within the internal control framework.
These control deficiencies could result in a misstatement of account balances that would result in a reasonable possibility that a material misstatement to our consolidated financial statements may not be prevented or detected on a timely basis. Accordingly, we have determined that these control deficiencies as described above together constitute a material weakness.
In light of this material weakness, we performed additional analyses and procedures in order to conclude that our consolidated financial statements for the year ended December 31, 2024 included in this Annual Report on Form 10-K were fairly stated in accordance with US GAAP. Accordingly, management believes that despite our material weaknesses, our consolidated financial statements for the year ended December 31, 2024 are fairly stated, in all material respects, in accordance with US GAAP.
This Annual Report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management’s report in this Annual Report on Form 10-K.
Limitations on Effectiveness of Controls and Procedures
Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. A 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. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. 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 the Company have been detected. These inherent limitations include, but are not limited to, the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. 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 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. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
Changes in Internal Controls
During the year ended December 31, 2024, there have been no changes in our internal control over financial reporting that have materially affected or are reasonably likely to materially affect our internal controls over financial reporting.
ITEM 9B: OTHER INFORMATION
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").
In addition to the Reverse Stock Split, a name change of the Company was announced by FINRA as of the Effective Date. 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."
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
| 27 |
| Table of Contents |
PART III
ITEM 10: DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
Identification of Directors and Executive Officers
Our Bylaws state that our authorized number of directors shall be one or more and shall be set by resolution of our Board of Directors. We currently have two directors.
Our current directors and officers are as follows:
Name and Business Address |
| Age |
| Position |
|
|
|
|
|
Trent D’Ambrosio |
| 60 |
| CEO, CFO and Director |
|
|
|
|
|
Whit Cluff |
| 74 |
| Director |
Our directors will serve in that capacity until our next annual shareholder meeting or until a successor is elected and qualified. Officers hold their positions at the will of our Board of Directors. There are no arrangements, agreements or understandings between non-management security holders and management under which non-management security holders may directly or indirectly participate in or influence the management of our affairs.
Trent D’Ambrosio, Chief Executive Officer, Chief Financial Officer, and Director
Mr. D’Ambrosio has been a Director of the Company since February 28, 2013. From October 2011 through March 2013, Mr. D’Ambrosio held the positions of Interim Chief Executive Officer and Chief Financial Officer of Inception Holdings LLC, a resource exploration company, and was the responsible for the overall strategic direction for the organization. His professional record includes 25 years of management and financial services experience with companies ranging from Fortune 500 companies to start-ups. Mr. D’Ambrosio holds a B.S. in Business Management, an MBA and a Certificate of Mining Studies.
Whit Cluff, Director
Mr. Cluff has over 35 years of experience in the commercial real estate industry. Mr. Cluff has been involved in all disciplines of real estate land development, mixed-use development, retail tenant representation, developer representation, industrial property procurement and asset management. Mr. Cluff has an extensive background in public and private businesses giving him strong analytical, planning, and organization ability with effective negotiation skills. From 2003 through the present, Mr. Cluff has worked in commercial real estate. Mr. Cluff attended the University of Utah and served in the United States Army.
Other Directorships
Other than as set forth above, none of our directors hold any other directorships in any company with a class of securities registered pursuant to Section 12 of the Exchange Act or subject to the requirements of Section 15(d) of such Act or any company registered as an investment company under the Investment Company Act of 1940.
| 28 |
| Table of Contents |
Board of Directors and Director Nominees
Since our Board of Directors does not include a majority of independent directors, the decisions of the Board regarding director nominees are made by persons who have an interest in the outcome of the determination. The Board will consider candidates for directors proposed by security holders, although no formal procedures for submitting candidates have been adopted. Unless otherwise determined, at any time not less than 90 days prior to the next annual Board meeting at which a slate of director nominees is adopted, the Board will accept written submissions from proposed nominees that include the name, address and telephone number of the proposed nominee; a brief statement of the nominee’s qualifications to serve as a director; and a statement as to why the security holder submitting the proposed nominee believes that the nomination would be in the best interests of our security holders. If the proposed nominee is not the same person as the security holder submitting the name of the nominee, a letter from the nominee agreeing to the submission of his or her name for consideration should be provided at the time of submission. The letter should be accompanied by a résumé supporting the nominee’s qualifications to serve on the Board, as well as a list of references.
The Board identifies director nominees through a combination of referrals from different people, including management, existing Board members and security holders. Once a candidate has been identified, the Board reviews the individual’s experience and background and may discuss the proposed nominee with the source of the recommendation. If the Board believes it to be appropriate, Board members may meet with the proposed nominee before making a final determination whether to include the proposed nominee as a member of the slate of director nominees submitted to security holders for election to the Board.
Some of the factors, which the Board considers when evaluating proposed nominees, include their knowledge of and experience in business matters, finance, capital markets and mergers and acquisitions. The Board may request additional information from each candidate prior to reaching a determination, and it is under no obligation to formally respond to all recommendations, although as a matter of practice, it will endeavor to do so.
Conflicts of Interest
Our directors are not obligated to commit their full time and attention to our business and, accordingly, they may encounter a conflict of interest in allocating their time between our operations and those of other businesses. In the course of their other business activities, they may become aware of investment and business opportunities which may be appropriate for presentation to us as well as other entities to which they owe a fiduciary duty. As a result, they may have conflicts of interest in determining to which entity a particular business opportunity should be presented. They may also in the future become affiliated with entities that are engaged in business activities similar to those we intend to conduct.
In general, officers and directors of a corporation are required to present business opportunities to the corporation if:
| ● | the corporation could financially undertake the opportunity; |
| ● | the opportunity is within the corporation’s line of business; and |
| ● | it would be unfair to the corporation and its stockholders not to bring the opportunity to the attention of the corporation. |
We plan to adopt a code of ethics that obligates our directors, officers and employees to disclose potential conflicts of interest and prohibits those persons from engaging in such transactions without our consent.
Significant Employees
Other than as described herein, we do not expect any other individuals to make a significant contribution to our business.
| 29 |
| Table of Contents |
Legal Proceedings
None of our directors, executive officers or control persons has been involved in any of the following events during the past five years:
| ● | any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; |
| ● | any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); |
| ● | being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or |
| ● | being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, where the judgment has not been reversed, suspended, or vacated. |
No Audit Committee or Financial Expert
The Company does not have an audit committee or a financial expert serving on the Board of Directors. The Company plans to form and implement an audit committee as soon as practicable.
Family Relationships
There are no family relationships among our officers, directors, or persons nominated for such positions.
Code of Ethics
We have not yet adopted a code of ethics that applies to our principal executive officer and principal accounting officer, but intend to do so this year.
Section 16(a) Beneficial Ownership Reporting Compliance
Under Section 16(a) of the Exchange Act, all executive officers, directors, and each person who is the beneficial owner of more than 10% of the common stock of a company that files reports pursuant to Section 12 of the Exchange Act of 1934, are required to report the ownership of such common stock, options, and stock appreciation rights (other than certain cash only rights) and any changes in that ownership with the Securities and Exchange Commission. The Company has evaluated all relevant Section 16(a) filings and has determined that the company is compliant with this section to the best of its knowledge, with the exception of a Form 4 that was filed late in 2025.
ITEM 11: EXECUTIVE COMPENSATION
Our Board of Directors has not established a separate compensation committee. Instead, the Board of Directors reviews and approves executive compensation policies and practices, reviews salaries and bonuses for our officer(s), decides on benefit plans, and considers other matters as may, from time to time, be referred to it. We do not currently have a Compensation Committee Charter. Our Board continues to emphasize the important link between our performance, which ultimately benefits all shareholders, and the compensation of our executives. Therefore, the primary goal of our executive compensation policy is to closely align the interests of the shareholders with the interests of the executive officer(s). In order to achieve this goal, we attempt to (i) offer compensation opportunities that attract and retain executives whose abilities and skills are critical to our long-term success and reward them for their efforts in ensuring our success and (ii) encourage executives to manage from the perspective of owners with an equity stake in us.
| 30 |
| Table of Contents |
Compensation Table for Executives
Name and Principal Position |
| Year |
|
| Salary |
|
| Bonus |
|
| Stock Awards |
|
| Option Awards |
|
| Non-equity Incentive Plan Compensation |
|
| Non-qualified Deferred Compensation Earnings |
|
| All Other Compensation |
|
| Total |
| |||||||||
|
|
|
|
|
|
| ($) |
|
|
| ($) |
|
|
| ($) |
|
|
| ($) |
|
|
| ($) |
|
|
| ($) |
|
|
| ($) |
|
|
| ($) |
|
Trent D’Ambrosio, Chief Executive Officer, Chief Financial Officer, |
|
| 2024 |
|
|
| 300,000 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 300,000 |
|
President, Secretary, and Director |
|
| 2023 |
|
|
| 300,000 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 300,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
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|
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|
|
Whit Cluff, |
|
| 2024 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Director |
|
| 2023 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
(1) | Mr. D’ambrosi’s employment agreement compensates him $300,000 per year. However, the Company didn’t pay him that full amount during the fiscal years ended December 31, 2024 and 2023. For the years ended December 31, 2024 and 2023, he was paid $0 and $175,000, respectively. The Company also recorded $300,000 and $125,000 as deferred salaries payable for the fiscal years ended December 31, 2024 and 2023, respectively. |
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 $300,000 annually. This agreement is effective for 60 months. Additionally, the employment agreement provides for benefits and an optional annual bonus to be determined by the Board of Directors.
Outstanding Equity Awards at Fiscal Year-End
None.
Compensation of Directors
We have no formal plan for compensating our directors for their services. We have no formal plan to compensating our directors in the future in their capacity as directors, although such directors are expected in the future to receive options to purchase shares of our common stock as awarded by our Board of Directors or by any compensation committee that may be established.
Pension, Retirement or Similar Benefit Plans
There are no arrangements or plans in which we provide pension, retirement or similar benefits to our directors or executive officers. We have no material bonus or profit-sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options may be granted at the discretion of the Board of Directors or a committee thereof.
| 31 |
| Table of Contents |
Compensation Committee
We do not currently have a compensation committee of the Board of Directors or a committee performing similar functions. All members of the Board of Directors participate in the consideration of executive officer and director compensation.
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Security Ownership of Certain Beneficial Owners
The following tables list, as of March 26, 2025, the number of shares of common stock of our Company that are beneficially owned by (i) each person or entity known to our Company to be the beneficial owner of more than 5% of the outstanding common stock; (ii) each officer and director of our Company; and (iii) all officers and directors as a group. Information relating to beneficial ownership of common stock by our principal shareholders and management is based upon information furnished by each person using beneficial ownership‚ concepts under the rules of the Securities and Exchange Commission. Under these rules, a person is deemed to be a beneficial owner of a security if that person has or shares voting power, which includes the power to vote or direct the voting of the security, or investment power, which includes the power to vote or direct the voting of the security. The person is also deemed to be a beneficial owner of any security of which that person has a right to acquire beneficial ownership within 60 days. Under the Securities and Exchange Commission rules, more than one person may be deemed to be a beneficial owner of the same securities, and a person may be deemed to be a beneficial owner of securities as to which he or she may not have any pecuniary beneficial interest. Except as noted below, each person has sole voting and investment power.
The percentages below are calculated based on 2,665,126 shares of our common stock issued and outstanding as of March 26, 2025. Unless otherwise indicated, the address of each person listed is c/o BluSky AI, Inc., 5330 South 900 East, Suite 280, Murray, UT 84117.
Title of Class |
| Name and Address of Beneficial Owner |
| Amount and Nature of Beneficial Ownership |
|
| Percent of Class |
| ||
|
|
|
|
|
|
|
|
| ||
Common Stock |
| Jason Briggs (2) |
|
|
|
|
|
|
|
|
|
| 782 E. Pioneer Road |
|
|
|
|
|
|
|
|
|
| Draper, Utah 84120 |
|
| 1,389,386 |
|
|
| 52.13 | % |
|
|
|
|
|
|
|
|
|
|
|
Common Stock |
| Trent D’Ambrosio (3) |
|
|
|
|
|
|
|
|
|
| 5330 South 900 East, Suite 280 |
|
|
|
|
|
|
|
|
|
| Murray, Utah 84117 |
|
| 393,276 |
|
|
| 14.76 | % |
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock |
|
|
|
| 51 |
|
|
| 100 | % |
|
|
|
|
|
|
|
|
|
|
|
All 5% beneficial owners as a group |
|
|
|
| 1,782,662 |
|
|
| 66.89 | % |
| 32 |
| Table of Contents |
| (1) | Percentage of ownership is based on 2,665,126 common shares outstanding as of March 26, 2025. The number and percentage of shares beneficially owned is determined under the rules of the SEC and the ownership includes any shares as to which the individual has sole or shared voting power or investment power and also any shares, which the individual has the right to acquire within 60 days through the exercise of any stock option or other right.
|
| (2) | Mr. Briggs owns 312 shares in his personal name and is considered the beneficial owner of other shares included in this table including those shares that are owned by trusts for which Mr. Briggs serves as trustee or owned by corporations or individuals over which Mr. Briggs has voting control. This includes 624 shares owned by the Debbie Briggs Irrevocable Trust, 314,572 shares owed by the LW Briggs Irrevocable Trust, 406 shares owned by the LWB Irrevocable Trust, 11,686 shares owned by Legends Capital, 2,496 shares owned by Madison, LLC, 965,138 shares owned by Clavo Rico, Inc., 52,858 shares owned by Claymore Management, 1,982 shares owned by Debbie Briggs, 1,982 shares owned by Lynn W. Briggs, 1,560 shares owned by Silverbrook LTD., 1,248 shares owned by Calico, LTD., 1,078 shares owned by Cornerstone Holdings LTD., 515 shares owned by Yellow Jacket, LTD., and 32,929 shares owned by Pine Valley Investments.
|
| (3) | Mr. D’Ambrosio, the CEO and a Director of the Company, owns 51 shares of preferred stock with voting rights per share equal to (x) 0.019607 multiplied by the total issued and outstanding shares of Common Stock eligible to vote at the time of the respective vote (the “Numerator”), divided by (y) 0.49, minus (x) the Numerator. He is also the beneficial owner of 23,201 shares through his wife, Debra D’Ambrosio. |
|
|
| Amount and |
|
|
| ||||
|
|
| Nature of |
|
|
| ||||
|
| Title of |
| Beneficial |
|
| Percent of |
| ||
Name and Address of Beneficial Owner |
| Class |
| Ownership (1) |
|
| Class (2) |
| ||
|
|
|
|
|
|
|
|
| ||
Trent D’Ambrosio (3) |
| Common Stock |
|
| 393,276 |
|
|
| 14.76 | % |
|
| Preferred Stock |
|
| 51 |
|
|
| 100.00 | % |
Whit Cluff |
| Common Stock |
|
| 67,504 |
|
|
| 2.53 | % |
All Officers and Directors as a Group |
|
|
|
| 460,780 |
|
|
| 17.29 | % |
| (1) | Percentage of ownership is based on 2,665,126 common shares outstanding as of March 26, 2025. The number and percentage of shares beneficially owned is determined under the rules of the SEC and the ownership includes any shares as to which the individual has sole or shared voting power or investment power and also any shares, which the individual has the right to acquire within 60 days through the exercise of any stock option or other right. The persons named in the table have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them, subject to community property laws where applicable and the information contained in the footnotes to this table. |
|
|
|
| (2) | SEC Rule 13d-3 generally provides that beneficial owners of securities include any person who, directly or indirectly, has or shares voting power and/or investment power with respect to such securities, and any person who has the right to acquire beneficial ownership of such security within 60 days. Any securities not outstanding which are subject to such options, warrants or conversion privileges exercisable within 60 days are treated as outstanding for the purpose of computing the percentage of outstanding securities owned by that person. Such securities are not treated as outstanding for the purpose of computing the percentage of the class owned by any other person. At the present time there are no outstanding options or warrants. |
|
|
|
| (3) | Mr. D’Ambrosio, the CEO and a Director of the Company, owns 51 shares of preferred stock with voting rights per share equal to (x) 0.019607 multiplied by the total issued and outstanding shares of Common Stock eligible to vote at the time of the respective vote (the “Numerator”), divided by (y) 0.49, minus (x) the Numerator. He is also the beneficial owner of 23,201 shares through his wife, Debra D’Ambrosio. |
|
|
|
| (4) | Mr. Cluff, a Director of the Company, owns 45,631 shares personally and beneficially owns 16,429 shares through his wife, Fran Rich, and 5,143 shares through the Cluff-Rich 401K. |
| 33 |
| Table of Contents |
SEC Rule 13d-3 generally provides that beneficial owners of securities include any person who, directly or indirectly, has or shares voting power and/or investment power with respect to such securities, and any person who has the right to acquire beneficial ownership of such security within 60 days. Any securities not outstanding which are subject to such options, warrants or conversion privileges exercisable within 60 days are treated as outstanding for the purpose of computing the percentage of outstanding securities owned by that person. Such securities are not treated as outstanding for the purpose of computing the percentage of the class owned by any other person. At the present time there are no outstanding options or warrants held by directors or officers of the Company.
Changes in Control
On February 1, 2023, the Company issued 2,117,098 shares of its common stock to certain service providers and to certain creditors in conversion of debt.
Securities Authorized for Issuance under Equity Compensation Plans
As of December 31, 2024, we have one equity compensation plan: the 2013 Incentive Stock Plan.
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Related Party Transactions
In February 2014, the Company entered into a consulting agreement with the Company’s chief executive officer (CEO), stockholder and director. The Company agreed to pay $18,000 per month for twelve months. This agreement was renegotiated in October 2017 and the Company agreed to pay the stockholder/director $25,000 per month starting in October 2017. This agreement was superseded by an Employment Agreement as of July 1, 2018 (see Employment Agreements below). As of December 31, 2022, the Company owed $1,035,000 to the stockholder/director in accrued consulting fees. The accrued consulting fees were converted to equity on February 1, 2023.
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.
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 $300,000 annually. This agreement is effective for 60 months. Additionally, the employment agreement provides for benefits and an optional annual bonus to be determined by the Board of Directors.
The Company took a few short-term notes payable from related parties during 2024. The Company received $174,396 in cash from related parties and paid out $98,475 in cash to related parties on notes payable (see Note 8).
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 December 31, 2024, there is $260,828 in accounts payable and accrued liabilities.
| 34 |
| Table of Contents |
Director Independence
Our securities are quoted on the OTC Markets, which does not have any director independence requirements. Once we engage further directors and officers, we plan to develop a definition of independence and scrutinize our Board of Directors with regard to this definition.
Parents of the Smaller Reporting Company
We have no parents.
ITEM 14: PRINCIPAL ACCOUNTING FEES AND SERVICES
The following is a summary of the fees billed to us by our principal accountants during the fiscal years ended December 31, 2024, and 2023:
Fee Category |
| 2024 |
|
| 2023 |
| ||
Audit Fees |
| $ | 55,250 |
|
| $ | 92,432 |
|
Audit-related Fees |
|
| - |
|
|
| - |
|
Tax Fees |
|
| - |
|
|
| - |
|
All Other Fees |
|
| - |
|
|
| - |
|
Total Fees |
| $ | 55,250 |
|
| $ | 92,432 |
|
Audit Fees - Consists of fees for professional services rendered by our principal accountants for the audit of our annual financial statements and review of the financial statements included in our Forms 10-Q and Form 10-K or services that are normally provided by our principal accountants in connection with statutory and regulatory filings or engagements.
Audit-related Fees - Consists of fees for assurance and related services by our principal accountants that are reasonably related to the performance of the audit or review of our financial statements and are not reported under “Audit fees.”
Tax Fees - Consists of fees for professional services rendered by our principal accountants for tax compliance, tax advice and tax planning.
All Other Fees - Consists of fees for products and services provided by our principal accountants, other than the services reported under “Audit fees,” “Audit-related fees,” and “Tax fees” above.
Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors
We have not adopted an Audit Committee; therefore, there is no Audit Committee policy in this regard. However, we do require approval in advance of the performance of professional services to be provided to us by our principal accountant. Additionally, all services rendered by our principal accountant are performed pursuant to a written engagement letter between us and the principal accountant.
| 35 |
| Table of Contents |
PART IV
ITEM 15: EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)(1)(2) |
| Financial Statements. See the audited financial statements for the year ended December 31, 2024 contained in Item 8 above which are incorporated herein by this reference. |
|
|
|
(a)(3) |
| Exhibits. The following exhibits are filed as part of this Annual Report: |
| 36 |
| Table of Contents |
| 37 |
| Table of Contents |
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. |
|
|
(1) | Incorporated by reference from Form SB-2 filed with the SEC on October 31, 2007. |
|
|
(2) | Incorporated by reference from Form 8-K filed with the SEC on March 10, 2010. |
|
|
(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 Form 8-K filed with the SEC on August 5, 2013. |
|
|
(6) | Incorporated by reference from Form 8-K filed with the SEC on March 1, 2013. |
|
|
(7) | Incorporated by reference from Form 8-K filed with the SEC on September 6, 2013. |
|
|
(8) | Incorporated by reference from Form 10-Q filed with the SEC on June 20, 2014. |
|
|
(9) | Incorporated by reference from Form 8-K filed with the SEC on March 12, 2014. |
|
|
(10) | Incorporated by reference from Form 8-K filed with the SEC on October 7, 2014. |
|
|
(11) | Incorporated by reference from Form 8-K filed with the SEC on October 7, 2015. |
|
|
(12) | Incorporated by reference from the Form 10-K filed with the SEC on May 3, 2016. |
|
|
(13) | Incorporated by reference from the Form 10-K filed with the SEC on April 17, 2017. |
|
|
(14) | Incorporated by reference from the Form 10-Q filed with the SEC on May 16, 2017. |
|
|
(15) | Incorporated by reference from the Form 8-K filed with the SEC on October 19, 2017. |
|
|
(16) | Incorporated by reference from the Form S-1 filed with the SEC on June 2, 2019. |
|
|
(17) | Incorporated by reference from the Form 8-K filed with the SEC on January 25, 2023. |
|
|
(18) | Incorporated by reference from the Form 8-K filed with the SEC on February 8, 2023. |
| 38 |
| Table of Contents |
SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) 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. |
| |
|
|
|
|
Date: March 31, 2025 | By: | /s/ Trent D’Ambrosio |
|
| Name: | Trent D’Ambrosio |
|
| Title: | Chief Executive Officer |
|
|
| (Principal Executive Officer) |
|
|
|
|
|
Date: March 31, 2025 | By: | /s/ Trent D’Ambrosio |
|
| Name: | Trent D’Ambrosio |
|
| Title: | Chief Financial Officer |
|
|
| (Principal Financial and Accounting Officer) |
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
SIGNATURE |
| TITLE |
| DATE |
|
|
|
|
|
/s/ Trent D’Ambrosio |
|
|
|
|
Trent D’Ambrosio |
| Director |
| March 31, 2025 |
|
|
|
|
|
/s/ Whit Cluff |
|
|
|
|
Whit Cluff |
| Director |
| March 31, 2025 |
| 39 |
| Table of Contents |
BLUSKY AI, INC.
(fka INCEPTION MINING, INC.)
CONTENTS
| F-1 |
| Table of Contents |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of BluSky AI Inc, (fka Inception Mining, Inc.):
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of BluSky AI Inc. (fka Inception Mining, Inc.) (“the Company”) as of December 31, 2024 and 2023, the related consolidated statements of operations and comprehensive income (loss), stockholders’ deficit, and cash flows for each of the years in the two-year period ended December 31, 2024 and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.
Explanatory Paragraph Regarding Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency and negative cash flows from operations which raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) related to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgements. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Determination and Valuation of Derivative Liabilities
Critical Audit Matter Description
As described further in Note 3 of the consolidated financial statements, during the year ended December 31, 2024 and in prior periods, the Company issued convertible notes and that required management to assess whether the conversion features of the convertible notes required bifurcation and separate valuation as a derivative liability. The Company determined that the conversion features of certain of its convertible notes are required to be accounted for as derivative liabilities due to: (1) certain conversion features did not contain an explicit limit on the number of shares to be delivered in share settlement; and (2) the fact the Company could not assert it had sufficient authorized but unissued shares available to settle certain instruments considering all other stock-based commitments. The derivative liabilities were recorded at fair value when issued and subsequently re-measured to fair value upon settlement or at the end of each reporting period. The Company utilized valuation models to determine the fair value of the derivative liabilities depending on the features embedded in the instruments. These models use certain assumptions related to exercise price, term, expected volatility, and risk-free interest rate.
We identified auditing the determination and valuation of the derivative liabilities as a critical audit matter due to the significant judgements used by the Company in determining whether the embedded conversion features required derivative accounting treatment, and the significant judgements used in determining the fair value of the derivative liabilities. Auditing the determination and valuation of the derivative liabilities involved a high degree of auditor judgement, and specialized skills and knowledge were needed.
How the Critical Audit Matter was Addressed in the Audit
Our audit procedures related to the following:
| · | We inspected and reviewed debt and other agreements to evaluate the Company's determination of whether derivative accounting was required, including assessing and evaluating management's application of relevant accounting standards to such transactions. |
| · | We evaluated the appropriateness and mechanical accuracy of each model utilized. |
| · | We tested the reasonableness of the assumptions used by the Company in the respective models, including exercise price, expected term, expected volatility, risk-free interest rate, and market capitalization. |
| · | We tested the accuracy and completeness of data used by the Company in developing the assumptions used in the valuation models. |
| · | We developed an independent expectation for comparison to the Company's estimate. |
| · | We evaluated the accuracy and completeness of the Company's presentation of these instruments in the financial statements and related disclosures in Note 3, including evaluating whether such disclosures were in accordance with relevant accounting standards. |
Professionals with specialized skill and knowledge were utilized by the Firm to assist in the evaluation of the valuation models deployed by management.
/s/
We have served as the Company’s auditor since 2015.
March 31, 2025
| F-2 |
| Table of Contents |
Blusky AI, Inc.
(fka Inception Mining, Inc.)
Consolidated Balance Sheets
|
| December 31, 2024 |
|
| December 31, 2023 |
| ||
ASSETS |
| |||||||
Current Assets |
|
|
|
|
|
| ||
Cash and cash equivalents |
| $ |
|
| $ |
| ||
Prepaid expenses and other current assets |
|
|
|
|
|
| ||
Total Current Assets |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net |
|
|
|
|
|
| ||
Right of use operating lease asset |
|
|
|
|
|
| ||
Other assets |
|
|
|
|
|
| ||
Total Assets |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||
Current Liabilities |
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities |
| $ |
|
| $ |
| ||
Accrued interest - related parties |
|
|
|
|
|
| ||
Operating lease liability |
|
|
|
|
|
| ||
Note payable |
|
|
|
|
|
| ||
Notes payable - related parties – current portion |
|
|
|
|
|
| ||
Convertible notes payable - net of discount |
|
|
|
|
|
| ||
Derivative liabilities |
|
|
|
|
|
| ||
Total Current Liabilities |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Long-term notes payable - related parties, net of current portion |
|
|
|
|
|
| ||
Total Liabilities |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Commitments and Contingencies |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Stockholders' Deficit |
|
|
|
|
|
|
|
|
Preferred stock, $ |
|
|
|
|
|
| ||
Common stock, $ |
|
|
|
|
|
| ||
Additional paid-in capital |
|
|
|
|
|
| ||
Accumulated deficit |
|
| ( | ) |
|
| ( | ) |
Total Stockholders' Deficit |
|
| ( | ) |
|
| ( | ) |
Total Liabilities and Stockholders' Deficit |
| $ |
|
| $ |
| ||
See accompanying notes to the consolidated financial statements.
| F-3 |
| Table of Contents |
Blusky AI, Inc.
(fka Inception Mining, Inc.)
Consolidated Statements of Operations and Comprehensive Income (Loss)
|
| For the Years Ended |
| |||||
|
| December 31, 2024 |
|
| December 31, 2023 |
| ||
Operating Expenses |
|
|
|
|
|
| ||
General and administrative |
| $ |
|
| $ |
| ||
Depreciation and amortization |
|
|
|
|
|
| ||
Total Operating Expenses |
|
|
|
|
|
| ||
Loss from Operations |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
Other Income/(Expenses) |
|
|
|
|
|
|
|
|
Change in derivative liability |
|
|
|
|
|
| ||
Bad debt expense on note receivable |
|
|
|
|
| ( | ) | |
Initial derivative expense |
|
| ( | ) |
|
| ( | ) |
Loss on disposal of property, plant and equipment |
|
| ( | ) |
|
|
| |
Loss on extinguishment of debt |
|
| ( | ) |
|
|
| |
Interest expense |
|
| ( | ) |
|
| ( | ) |
Total Other Income/(Expenses) |
|
| ( | ) |
|
|
| |
|
|
|
|
|
|
|
|
|
Net Income (Loss) from Operations before Income Taxes |
|
| ( | ) |
|
|
| |
Provision for Income Taxes |
|
|
|
|
|
| ||
Net Income (Loss) from Continuing Operations |
|
| ( | ) |
|
|
| |
Net Income (Loss) from Discontinued Operations |
|
|
|
|
| ( | ) | |
Gain on Sale of Mine Property in Discontinued Operations |
|
|
|
|
|
| ||
Provision for Income Taxes on Discontinued Operations |
|
|
|
|
|
| ||
Net Income (Loss) from Discontinued Operations |
|
|
|
|
|
| ||
Net Income (Loss) |
|
| ( | ) |
|
|
| |
Net Income (Loss) - Non-Controlling Interest |
|
|
|
|
| ( | ) | |
Net Income (Loss) - Controlling Interest |
| $ | ( | ) |
| $ |
| |
|
|
|
|
|
|
|
|
|
Net income (loss) per share - Continuing Operations - Basic and Diluted |
| $ | ( | ) |
| $ |
| |
Net income (loss) per share - Discontinued Operations - Basic and Diluted |
| $ |
|
| $ |
| ||
Net income (loss) per share - Basic |
| $ | ( | ) |
| $ |
| |
Net income (loss) per share - Diluted |
| $ | ( | ) |
| $ |
| |
Weighted average number of shares outstanding during the period - Basic |
|
|
|
|
|
| ||
Weighted average number of shares outstanding during the period - Diluted |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Net Income (Loss) |
| $ | ( | ) |
| $ |
| |
Other Comprehensive Income (Loss) |
|
|
|
|
|
|
|
|
Exchange differences arising on translating foreign operations |
|
|
|
|
| ( | ) | |
Total Comprehensive Income (Loss) |
|
| ( | ) |
|
|
| |
Total Comprehensive Income (Loss) - Non-Controlling Interest |
|
|
|
|
| - |
| |
Total Comprehensive Income (Loss) - Controlling Interest |
| $ | ( | ) |
| $ |
| |
See accompanying notes to the consolidated financial statements.
| F-4 |
| Table of Contents |
Blusky AI, Inc.
(fka Inception Mining, Inc.)
Consolidated Statement of Stockholders’ Deficit
|
| Preferred stock |
|
| Common stock |
|
| Additional |
|
|
|
|
| Other |
|
| Non- |
|
| Total |
| |||||||||||||||
|
| ($0.00001 Par) |
|
| ($0.00001 Par) |
|
| Paid-in |
|
| Accumulated |
|
| Comprehensive |
|
| Controlling |
|
| Stockholders' |
| |||||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Capital |
|
| Deficit |
|
| Income (Loss) |
|
| Interest |
|
| Deficiency |
| |||||||||
Balance, December 31, 2022 |
|
|
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) | |||||
Shares issued for services |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Shares issued with extinguishment of debt |
|
| - |
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Effects of sale of mine property |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
| ||||||
Foreign currency translation adjustment |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
| ( | ) | |||||
Net income for the Year |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Balance, December 31, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
| ( | ) | |||||||
Shares issued with extinguishment of debt |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Net loss for the Period |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
| ( | ) | |||||
Balance, December 31, 2024 |
|
|
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
|
| $ |
|
| $ | ( | ) | |||||||
See accompanying notes to the consolidated financial statements.
| F-5 |
| Table of Contents |
Blusky AI, Inc.
(fka Inception Mining, Inc.)
Consolidated Statements of Cash Flows
|
| For the Years Ended |
| |||||
|
| December 31, 2024 |
|
| December 31, 2023 |
| ||
Cash Flows From Operating Activities: |
|
|
|
|
|
| ||
Net Income (Loss) |
| $ | ( | ) |
| $ |
| |
Net Income (Loss) from discontinued operations |
|
|
|
|
|
| ||
Gain on sale of mine property in discontinued operations |
|
|
|
|
| ( | ) | |
Adjustments to reconcile net income (loss) to net cash used in operations |
|
|
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|
|
|
|
Depreciation and amortization expense |
|
|
|
|
|
| ||
Common stock issued for services |
|
|
|
|
|
| ||
Allowance for doubtful note receivable |
|
|
|
|
|
| ||
Loss on disposition of property, plant and equipment |
|
|
|
|
|
| ||
(Gain) loss on extinguishment of debt |
|
|
|
|
| ( | ) | |
Change in derivative liability |
|
| ( | ) |
|
| ( | ) |
Default penalty additions |
|
|
|
|
|
| ||
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 |
|
|
|
|
|
| ||
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Other receivables |
|
|
|
|
|
| ||
Prepaid expenses and other current assets |
|
|
|
|
| ( | ) | |
Accounts payable and accrued liabilities |
|
|
|
|
|
| ||
Accounts payable and accrued liabilities - related parties |
|
|
|
|
| ( | ) | |
Net Cash Provided By (Used In) Continuing Operations |
|
| ( | ) |
|
|
| |
Net Cash Provided By (Used In) Discontinued Operations |
|
|
|
|
| ( | ) | |
Net Cash Provided By (Used In) Operating Activities |
|
| ( | ) |
|
|
| |
|
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities: |
|
|
|
|
|
|
|
|
Investing activities of discontinued operations |
|
|
|
|
| ( | ) | |
Net Cash Provided By (Used In) Investing Activities |
|
|
|
|
| ( | ) | |
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities: |
|
|
|
|
|
|
|
|
Repayment of notes payable-related parties |
|
| ( | ) |
|
| ( | ) |
Repayment of convertible notes payable |
|
| ( | ) |
|
| ( | ) |
Proceeds from notes payable-related parties |
|
|
|
|
|
| ||
Proceeds from convertible notes payable |
|
|
|
|
|
| ||
Net Cash Provided by (Used in) Continuing Financing Activities |
|
|
|
|
| ( | ) | |
Effects of exchange rate changes on cash |
|
|
|
|
|
| ||
Net Change in Cash |
|
| ( | ) |
|
|
| |
Cash at Beginning of Period |
|
|
|
|
|
| ||
Cash at End of Period |
|
|
|
|
|
| ||
Less Cash of Discontinued Operations at End of Period |
|
|
|
|
|
| ||
Cash of Continued Operations at End of Period |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
|
|
Cash paid for interest |
| $ |
|
| $ |
| ||
Cash paid for taxes |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Supplemental disclosure of non-cash investing and financing activities: |
|
|
|
|
|
|
|
|
Note receivable acquired for sale of mine property |
| $ |
|
| $ |
| ||
Common stock issued for conversion of debt |
| $ |
|
| $ |
| ||
Common stock issued for settlement of notes payable - related parties |
| $ |
|
| $ |
| ||
Recognition of debt discounts on convertible note payable |
| $ |
|
| $ |
| ||
See accompanying notes to the consolidated financial statements.
| F-6 |
| Table of Contents |
Blusky AI, Inc.
(fka Inception Mining, Inc.)
Notes to Consolidated Financial Statements
As of December 31, 2024 and 2023
1. Nature of Business
BluSky AI Inc, (formerly know as Inception Mining, Inc.) (formerly known as Gold American Mining Corp.) 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. is 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) to change its name to Silver America, Inc. and (2) increased 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 November 21, 2012, the Company implemented a
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 of
On January 11, 2016, the Company implemented a
| F-7 |
| 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.
COVID-19 – The Company has been impacted significantly by the COVID-19 global pandemic. In response to COVID-19, national and local governments around the world have instituted certain measures, including travel bans, prohibitions on group events and gatherings, shutdowns of certain businesses, curfews, shelter-in-place orders, and recommendations to practice social distancing. Based on management’s assessment as of December 31, 2024, the ultimate impact of COVID-19 on the Company’s business, results of operations, financial condition and cash flows is dependent on future developments, including the duration of the pandemic and the related length of its impact on the global economy, which are uncertain and cannot be predicted at this time.
2. Summary of Significant Accounting Policies
Going Concern – The accompanying consolidated 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 consolidated financial statements during year ended December 31, 2024, the Company has an accumulated deficit 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.
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 inventories and mineralized material on leach pads, the estimated useful lives and valuation of properties, plant and equipment, mineral rights and properties, deferred tax assets, convertible preferred stock, derivative assets and liabilities, reclamation liabilities, stock-based compensation and payments, and contingent liabilities.
Principles of Consolidation – The accompanying consolidated financial statements include the accounts of Inception Mining, Inc. and its wholly owned subsidiaries, Inception Development, Corp., Clavo Rico Development Corp., Clavo Rico, Ltd. and Compañía Minera Cerros del Río, S.A. de C.V., and its controlling interest subsidiaries, Compañía Minera Cerros del Sur, S.A. de C.V. and Compañía Minera Clavo Rico, S.A. de C.V. (collectively, the “Company”). All intercompany accounts have been eliminated upon consolidation through the date the subsidiaries were disposed of on January 24, 2023.
| F-8 |
| Table of Contents |
Basis of Presentation – The Company prepares its consolidated financial statements in accordance with accounting principles generally accepted in the United States of America.
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 December 31, 2024 and December 31, 2023, the Company had no cash equivalents. The aggregate cash balance on deposit in these accounts are insured by the Federal Deposit Insurance Corporation up to $
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.
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.
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.
The fair value of financial instruments on December 31, 2024 are summarized below:
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Debt derivative liabilities |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total Liabilities |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
| F-9 |
| Table of Contents |
The fair value of financial instruments on December 31, 2023 are summarized below:
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Warrant liabilities |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
Debt derivative liabilities |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total Liabilities |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
The Company recognizes its derivative liabilities as level 3 and values its derivatives using the methods discussed below in Note 3. While the Company believes that its valuation methods are appropriate and consistent with other market participants, it recognizes that the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. The primary assumptions that would significantly affect the fair values using the methods discussed below in Note 3 are that of volatility and market price of the underlying common stock of the Company.
Notes Receivable – Notes receivable include amounts due to the Company pursuant to financial agreements stipulating interest rates, payment terms and maturity dates. As of December 31, 2024 and 2023, notes receivable balances include 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.
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 | |
Vehicles and equipment | |
Processing and laboratory | |
Furniture and fixtures |
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 anti-dilutive.
| F-10 |
| Table of Contents |
The following tables summaries the changes in the net earnings per common share for the years ended December 31, 2024 and 2023:
|
| For the Years Ended |
| |||||
Numerator |
| December 31, 2024 |
|
| December 31, 2023 |
| ||
Net Income (Loss) - Controlling Interest |
| $ | ( | ) |
| $ |
| |
Gain on Extinguishment of Debt |
|
|
|
|
| ( | ) | |
Interest Expense |
|
|
|
|
|
| ||
Change in Derivative Liabilities |
|
|
|
|
| ( | ) | |
Adjusted Net Income (Loss) - Controlling Interest |
| $ | ( | ) |
| $ |
| |
Denominator |
| Shares |
|
| Shares |
| ||
Basic Weighted Average Number of Shares Outstanding during Period |
|
|
|
|
|
| ||
Dilutive Shares |
|
| - |
|
|
|
| |
Diluted Weighted Average Number of Shares Outstanding during Period |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Diluted Net Income (Loss) per Share |
| $ | ( | ) |
| $ |
| |
Comprehensive Loss – Comprehensive loss is made up of the exchange differences arising on translating foreign operations and the net loss for the years ended December 31, 2024 and 2023.
Derivative Liabilities – Derivatives 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 consolidated 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 consolidated 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.
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 expires in August 2024.
| F-11 |
| Table of Contents |
The supplemental balance sheet information related to the operating lease for the periods is as follows:
|
| December 31, 2024 |
|
| December 31, 2023 |
| ||
Operating leases |
|
|
|
|
|
| ||
Long-term right-of-use assets |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Short-term operating lease liabilities |
| $ |
|
| $ |
| ||
Long-term operating lease liabilities |
|
|
|
|
|
| ||
Total operating lease liabilities |
| $ |
|
| $ |
| ||
The Company made cash payments of $
Non-Controlling Interest Policy – Non-controlling interest (NCI) is the portion of equity ownership in a subsidiary not attributable to the parent company, who has a controlling interest and consolidates the subsidiary’s financial results with its own. The amount of equity relating to the non-controlling interest is separately identified in the equity section of the balance sheet and the amount of the net income (loss) relating to the non-controlling interest is separately identified on the statement of operations.
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 December 31, 2024:
|
| Debt Derivative Liabilities |
| |
Balance, December 31, 2023 |
| $ |
| |
Transfers in upon initial fair value of derivative liabilities |
|
|
| |
Change in fair value of derivative liabilities and warrant liability |
|
| ( | ) |
Balance, December 31, 2024 |
| $ |
| |
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.
| F-12 |
| Table of Contents |
At December 31, 2024, the Company marked to market the fair value of the debt derivatives and determined a fair value of $
Based upon ASC 840-15-25, 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.
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 December 31, 2024 and 2023:
|
| December 31, 2024 |
|
| December 31, 2023 |
| ||
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 |
| $ |
|
| $ |
| ||
| F-13 |
| Table of Contents |
5. Properties, Plant and Equipment, Net
Properties, plant and equipment of continuing operations at December 31, 2024 and 2023 consisted of the following:
|
| December 31, 2024 |
|
| December 31, 2023 |
| ||
Machinery and Equipment |
| $ |
|
| $ |
| ||
Office Equipment and Furniture |
|
|
|
|
|
| ||
|
|
|
|
|
|
| ||
Less Accumulated Depreciation |
|
| ( | ) |
|
| ( | ) |
Less Loss on Disposal of Property, Plant and Equipment |
|
| ( | ) |
|
|
| |
Total Property, Plant and Equipment |
| $ |
|
| $ |
| ||
During the years ended December 31, 2024 and 2023, the Company recognized depreciation expense of $
6. Accounts Payable and Accrued Liabilities
Accounts Payable and accrued liabilities of continuing operations at December 31, 2024 and 2023 consisted of the following:
|
| December 31, 2024 |
|
| December 31, 2023 |
| ||
Accounts Payable |
| $ |
|
| $ |
| ||
Accrued Liabilities |
|
|
|
|
|
| ||
Accrued Salaries and Benefits |
|
|
|
|
|
| ||
Total Accrued Liabilities |
| $ |
|
| $ |
| ||
7. Notes Payable
Notes payable of continuing operations were comprised of the following as of December 31, 2024 and 2023:
Notes Payable |
| December 31, 2024 |
|
| December 31, 2023 |
| ||
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 $
| F-14 |
| Table of Contents |
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 $
8. Notes Payable – Related Parties
Notes payable – related parties of continuing operations were comprised of the following as of December 31, 2024 and 2023:
Notes Payable - Related Parties |
| Relationship |
| December 31, 2024 |
|
| December 31, 2023 |
| ||
Cluff-Rich PC 401K |
|
| $ |
|
| $ |
| |||
Whit Cluff |
|
|
|
|
|
|
| |||
Debra 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 (Affiliate – Controlled by Significant Shareholder) – On June 29, 2022, the Company issued an unsecured Short-Term Promissory Note to Cluff-Rich PC 401K in the principal amount of
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) – On January 1, 2024, the Company issued an unsecured Short-Term Promissory Notes to D. D’Ambrosio in principal amounts totaling $
D. D’Ambrosio (Immediate Family Member of Director) – On January 31, 2024, the Company issued an unsecured Short-Term Promissory Notes to D. D’Ambrosio in principal amounts totaling $
D. D’Ambrosio (Immediate Family Member of Director) – On March 31, 2024, the Company issued an unsecured Short-Term Promissory Notes to D. D’Ambrosio in principal amounts totaling $
| F-15 |
| Table of Contents |
D. D’Ambrosio (Immediate Family Member of Director) – On May 1, 2024, the Company issued an unsecured Short-Term Promissory Notes to D. D’Ambrosio in principal amounts totaling $
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 $
Francis E. Rich (Immediate Family Member of Director) – On January 1, 2023, there were two notes outstanding with outstanding balance of the Notes of $
Pine Valley Investments, LLC (Affiliate – Controlled by Significant Shareholder) – 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.
9. Convertible Notes Payable
Convertible notes payable were comprised of the following as of December 31, 2024 and 2023:
Convertible Notes Payable |
| December 31, 2024 |
|
| December 31, 2023 |
| ||
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 |
| $ |
|
| $ |
| ||
| F-16 |
| Table of Contents |
1800 Diagonal Lending LLC – On September 12, 2023, 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 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 $
Antczak Polich Law, LLC – On August 1, 2018, the Company issued an unsecured Convertible Promissory Note (“Note”) to Antczak Polich Law, LLC (“Antczak”), in the principal amount of $
Antczak Polich Law, LLC – On December 1, 2018, the Company issued an unsecured Convertible Promissory Note (“Note”) to Antczak Polich Law, LLC (“Antczak”), in the principal amount of $
| F-17 |
| Table of Contents |
Antilles Family Office LLC – On May 20, 2019, the Company issued a secured Convertible Promissory Note (“Note”) to an Investor, in the principal amount of $
Scotia International of Nevada, Inc. – On January 10, 2019, the Company issued an unsecured Convertible Promissory Note (“Note”) to Scotia International of Nevada, Inc. (“Scotia”), in the principal amount of $
10. Stockholders’ Deficit
Common Stock
On August 2, 2024 upon the conversion of $
On January 1, 2023, the Company issued
On January 1, 2023, the Company issued
| F-18 |
| Table of Contents |
On February 1, 2023, the Company issued
On February 1, 2023, the Company issued
On February 1, 2023, the Company issued
On February 1, 2023, the Company issued
On February 1, 2023, the Company issued
On February 1, 2023, the Company issued
On February 1, 2023, the Company issued
On February 1, 2023, the Company issued
On February 1, 2023, the Company issued
On February 1, 2023, the Company issued
On February 17, 2023, the Company issued
On February 17, 2023, the Company issued
On February 17, 2023, the Company issued
On February 17, 2023, the Company issued
On September 22, 2023, the Company issued
| F-19 |
| Table of Contents |
11. Income Taxes
The Company’s former subsidiaries, Compania Minera Cerros del Sur and Compania Minera Clavo Rico, which are located in Honduras, are required to pay income tax and solidarity tax on their income and/or assets annually. During 2022, the Company paid $
The Company accounts for U.S. income taxes under FASB Codification Topic 740-10-25 (“ASC 740-10-25”). Under ASC 740-10-25, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740-10-25, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
The provision for income tax expense (recovery) is comprised the following amounts:
Tax Reconciliations |
| December 31, 2024 |
|
| December 31, 2023 |
| ||
Tax at Statutory Rate |
| $ | ( | ) |
| $ |
| |
Meals and Entertainment |
|
| ( | ) |
|
| ( | ) |
Change in Derivative Liability |
|
| ( | ) |
|
| ( | ) |
Amortization of Debt Discount |
|
|
|
|
| ( | ) | |
Accrued Interest |
|
|
|
|
|
| ||
Change in Valuation of Allowance |
|
|
|
|
| ( | ) | |
Tax Provision |
| $ |
|
| $ |
| ||
The components of deferred income tax in the accompanying balance sheets are as follows:
Deferred Tax Assets |
| December 31, 2024 |
|
| December 31, 2023 |
| ||
(21% Federal, 5% Average Corporate Rate) |
|
|
|
|
|
| ||
Net Operating Loss Carry-forwards |
| $ |
|
| $ |
| ||
Depreciation |
|
|
|
|
|
| ||
Accrued Interest |
|
| ( | ) |
|
| ( | ) |
Valuation Allowance |
|
| ( | ) |
|
| ) | |
Deferred Tax Assets |
| $ |
|
| $ |
| ||
As of December 31, 2024 and 2023, the Company had net operating loss carry-forwards for U.S. federal income tax purposes of approximately $
The valuation allowance was established to reduce the deferred tax asset to the amount that will more likely than not be realized. This is necessary due to the Company’s continued operating losses and the uncertainty of the Company’s ability to utilize all of the net operating loss carry-forwards before they will expire through the year 2044.
The Company is subject to income tax in the U.S. federal jurisdiction. The Company has not been audited by the U.S. Internal Revenue Service in connection with income taxes. The Company’s tax years beginning with the year ended June 30, 2012 through December 31, 2024 generally remain open to examination by the Internal Revenue Service until its net operating loss carry-forwards are utilized and the applicable statutes of limitation have expired.
| F-20 |
| Table of Contents |
12. Related Party Transactions
Consulting Agreement – In February 2014, the Company entered into a consulting agreement with the Company’s chief executive officer, stockholder and director. The Company agreed to pay $
Employment Agreements – 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.
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 six short-term notes payable from Debra D’ambrosio, an immediate family member related party during the year ended December 31, 2024. 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 December 31, 2024, there is $
13. 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.
On March 4, 2024, the Company filed a lawsuit against Mother Lode Mining, Inc., a Canadian company, and Robert Salna (the “Defendants"), alleging an amount of not less than $
On January 18, 2023, the Company negotiated a settlement with Antilles Family Office, LLC through which the Company paid $
The Company’s former subsidiary, Compañía Minera Clavo Rico, S.A. de C.V., was served with a lawsuit filed by SAR, the taxing authority in Honduras, alleging additional tax liability due. The Complaint alleges that HNL7,186,151,96 lempires are due in a demand for execution of a forced extrajudicial title. The Company had accrued $
| F-21 |
| Table of Contents |
Other Commitments
On September 22, 2023, the Company entered into a consulting agreement with William McCluskey. This agreement requires the Company to pay $
14. Discontinued Operations
During the year ended December 31, 2022, the Company decided to discontinue all of its operating activities. Based on that decision, the Company’s board of directors committed to a plan to sell the CMCS entity operating the mine in Honduras.
In accordance with the provisions of ASC 205-20, the Company has zero reported assets and liabilities of the discontinued operations (held for sale) in the consolidated balance sheets as of December 31, 2024 and 2023.
In accordance with the provisions of ASC 205-20, the Company has not included in the results of continuing operations the results of operations of the discontinued operations in the consolidated statements of operations and comprehensive loss. The results of operations from discontinued operations for the years ended December 31, 2024 and 2023 have been reflected as discontinued operations in the consolidated statements of operations and comprehensive loss for the years ended December 31, 2024 and 2023, and consist of the following.
|
| Years Ended |
| |||||
|
| December 31, 2024 |
|
| December 31, 2023 |
| ||
Precious Metals Income |
| $ |
|
| $ |
| ||
Cost of goods sold |
|
|
|
|
|
| ||
Gross profit |
|
|
|
|
| ( | ) | |
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES OF DISCONTINUED OPERATIONS: |
|
|
|
|
|
|
|
|
General and administrative |
|
|
|
|
|
| ||
Depreciation and amortization |
|
|
|
|
|
| ||
|
|
|
|
|
|
| ||
OPERATING INCOME (LOSS) OF DISCONTINUED OPERATIONS |
|
|
|
|
| ( | ) | |
|
|
|
|
|
|
|
|
|
OTHER (INCOME) EXPENSE OF DISCONTINUED OPERATIONS |
|
|
|
|
|
|
|
|
Interest expense |
|
|
|
|
|
| ||
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
INCOME (LOSS) BEFORE INCOME TAXES OF DISCONTINUED OPERATIONS |
|
|
|
|
| ( | ) | |
Provision for income taxes of discontinued operations |
|
|
|
|
|
| ||
NET INCOME (LOSS) OF DISCONTINUED OPERATIONS |
| $ |
|
| $ | ( | ) | |
| F-22 |
| Table of Contents |
The Company recognized a gain on the sale of mine property in discontinued operations of $
In accordance with the provisions of ASC 205-20, the Company has separately reported the cash flow activity of the discontinued operations in the consolidated statements of cash flows. The cash flow activity from discontinued operations for the years ended December 31, 2024 and 2023 have been reflected as discontinued operations in the consolidated statements of cash flows for the years ended December 31, 2024 and 2023, and consist of the following.
|
| Years Ended |
| |||||
|
| December 31, 2024 |
|
| December 31, 2023 |
| ||
DISCONTINUED OPERATING ACTIVITIES |
|
|
|
|
|
| ||
Net loss |
| $ |
|
| $ | ( | ) | |
Depreciation expense |
|
|
|
|
|
| ||
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Trade receivables |
|
|
|
|
|
| ||
Inventories |
|
|
|
|
| ( | ) | |
Prepaid expenses and other current assets |
|
|
|
|
| ( | ) | |
Accounts payable and accrued liabilities |
|
|
|
|
| ( | ) | |
Accounts payable and accrued liabilities - related parties |
|
|
|
|
|
| ||
Net cash provided by operating activities of discontinued operations |
| $ |
|
| $ | ( | ) | |
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES OF DISCONTINUED OPERATIONS |
|
|
|
|
|
|
|
|
Purchase of property, plant and equipment |
| $ |
|
| $ | ( | ) | |
Net cash provided by (used in) investing activities of discontinued operations |
| $ |
|
| $ | ( | ) | |
16. Subsequent Events
Management has evaluated subsequent events, in accordance with FASB ASC Topic 855, “Subsequent Events,” through the date which the consolidated financial statements were available to be issued and there are no material subsequent events, except as noted below.
On January 9, 2025, the Company entered into a 12 month, $
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 $
| F-23 |