10-Q

UNITED

STATES

SECURITIES

AND EXCHANGE COMMISSION

Washington,

D.C. 20549

FORM

10-Q

☒

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

For the quarterly period ended ### September 30, 2025

☐

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

Commission

File No. 000-55219

BluSky AI Inc.
(Exact Name of Registrant as Specified in Its Charter)
Nevada	35-2302128
---	---
(State<br> of Other Jurisdiction<br><br> <br>of<br> Incorporation or Organization)	(IRS<br> Employer<br><br> <br>Identification<br> Number)
5330 South 900 East, Suite 280<br><br> <br>Murray, Utah	84117
(Address<br> of Principal Executive Offices)	(Zip<br> Code)

801-810-8790

(Registrant’s telephone number, including area code)

Copies

to:

Brunson

Chandler & Jones, PLLC

175

South Main Street, Suite 1410

Salt

Lake City, Utah 84111

(801)

303-5721

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232,405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-3 of the Exchange Act.

Large<br> accelerated filer	☐	Accelerated<br> filer	☐	Emerging<br> growth company	☐
Non-accelerated<br> filer	☒	Smaller<br> reporting 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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

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

As of February 4, 2026, there were 24,992,505 shares of the registrant’s common stock issued and outstanding.

BLUSKY

AI INC.

FORM

10-Q

TABLE

OF CONTENTS

PART I – FINANCIAL INFORMATION		F-1
Item 1.	Financial Statements	F-1
	Condensed Balance Sheets as of September 30, 2025 (Unaudited) and December 31, 2024	F-1
	Condensed Statements of Operations for the Three and Nine months Ended September 30, 2025 and 2024 (Unaudited)	F-2
	Condensed Statements of Stockholders’ Deficit for the Three and Nine months Ended September 30, 2025 and 2024 (Unaudited)	F-3
	Condensed Statements of Cash Flows for the Nine months Ended September 30, 2025 and 2024 (Unaudited)	F-4
	Notes to Condensed Financial Statements (Unaudited)	F-5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	7
Item 4.	Controls and Procedures	7
PART II – OTHER INFORMATION		8
Item 1.	Legal Proceedings	8
Item 1A.	Risk Factors	8
Item 2.	Unregistered Sales of Equity Securities and Use of Protocols	8
Item 3.	Defaults Upon Senior Securities	9
Item 4.	Mine Safety Disclosures	9
Item 5.	Other Information	9
Item 6.	Exhibits	10
Signature Page		11

| 2 |

| --- |

| Table of Contents |

| --- |

PART

I – FINANCIAL INFORMATION

Item1. Financial Statements

BluSky

AI, Inc.

(FKAInception Mining, Inc.)

Condensed

Balance Sheets

			December 31, 2024
ASSETS
Current Assets
Cash and cash equivalents	1,295,261		$	-
Prepaid expenses	12,765			-
Other current assets	73,750			-
Total Current Assets	1,381,776			-
Right of use operating lease asset – related party	273,963			-
Solar power asset	1,289,309			-
Other assets	40,531			531
Total Assets	2,985,579		$	531
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current Liabilities
Accounts payable and accrued liabilities	1,802,420		$	1,745,787
Accrued interest - related parties	9,368			30,310
Operating lease liability – related party – current portion	73,057			-
Note payable	60,000			125,000
Notes payable - related parties	1,358,945			992,761
Convertible notes payable - net of discount	-			266,450
Derivative liabilities	-			186,542
Total Current Liabilities	3,303,790			3,346,850
Operating lease liability – related party, net of current portion	223,406			-
Total Liabilities	3,527,196			3,346,850
Commitments and Contingencies	-			-
Stockholders’ Deficit
Preferred stock, 0.00001 par value; 10,000,000 shares authorized, 51 shares issued and outstanding	1			1
Common stock, 0.00001 par value; 10,300,000,000 shares authorized, 24,957,870 and 2,659,773 shares issued and outstanding at September 30, 2025 and December 31, 2024, respectively	250			27
Additional paid-in capital	33,336,259			26,517,017
Accumulated deficit	(33,878,127	)		(29,863,364	)
Total Stockholders’ Deficit	(541,617	)		(3,346,319	)
Total Liabilities and Stockholders’ Deficit	2,985,579		$	531

All values are in US Dollars.

See

accompanying notes to the unaudited condensed financial statements.

| F-1 |

| --- |

| Table of Contents |

| --- |

BluSky

AI, Inc.

(FKAInception Mining, Inc.)

Condensed

Statements of Operations

(Unaudited)

	September 30, 2025			September 30, 2024			September 30, 2025			September 30, 2024
	For the Three Months Ended						For the Nine Months Ended
	September 30, 2025			September 30, 2024			September 30, 2025			September 30, 2024
Operating Expenses
General and administrative	$	504,153		$	109,742		$	2,191,447		$	369,917
Depreciation and amortization		-			182			-			544
Total Operating Expenses		504,153			109,924			2,191,447			370,461
Loss from Operations		(504,153	)		(109,924	)		(2,191,447	)		(370,461	)
Other Income/(Expenses)
Other income (expense)		-			-			96			-
Interest income		4,555			-			4,555			-
Change in derivative liability		-			(139,472	)		186,542			(90,436	)
Loss on extinguishment of debt		(2,101,978	)		(13,043	)		(1,949,847	)		(13,043	)
Initial derivative expense		-			-			-			(193,582	)
Interest expense		(31,656	)		(17,507	)		(64,662	)		(371,933	)
Total Other Income/(Expenses)		(2,129,079	)		(170,022	)		(1,823,316	)		(668,994	)
Net Loss from Operations before Income Taxes		(2,633,232	)		(279,946	)		(4,014,763	)		(1,039,455	)
Provision for Income Taxes		-			-			-			-
Net Loss	$	(2,633,232	)	$	(279,946	)	$	(4,014,763	)	$	(1,039,455	)
Deemed dividend – solar power asset		(8,510,691	)		-			(8,510,691	)		-
Net loss attributable to shareholders	$	(11,143,923	)	$	(279,946	)	$	(12,525,454	)	$	(1,039,455	)
Net loss per share – Basic and Diluted	$	(0.48	)	$	(0.11	)	$	(1.29	)	$	(0.39	)
Weighted average number of shares outstanding during the period – Basic and Diluted		23,098,931			2,652,259			9,707,293			2,643,369

See

accompanying notes to the unaudited condensed financial statements.

| F-2 |

| --- |

| Table of Contents |

| --- |

BluSky

AI, Inc.

(FKAInception Mining, Inc.)

Condensed

Statements of Stockholders’ Deficit

(Unaudited)

****	Shares	Amount		Shares	Amount		Capital		Deficit		****	Deficiency		****
****	Preferred stock			Common stock			Additional		****		****	Total		****
****	(0.00001 Par)			(0.00001 Par)			Paid-in		Accumulated		****	Stockholders’		****
****	Shares	Amount		Shares	Amount		Capital		Deficit		****	Deficiency		****
Balance, December 31, 2024		$	1		$	27	$	26,517,017	$	(29,863,364	)	$	(3,346,319	)
Rounding shares issued with reverse split			-			-		-		-			-
Net income for the period			-			-		-		175,389			175,389
Balance, March 31, 2025			1			27		26,517,017		(29,687,975	)		(3,170,930	)
Shares issued for services			-			18		1,343,082		-			1,343,100
Net loss for the period			-			-		-		(1,556,920	)		(1,556,920	)
Balance, June 30, 2025			1			45		27,860,099		(31,244,895	)		(3,384,750	)
Shares issued for services			-			-		153,000		-			153,000
Shares issued for conversion of notes payable			-			4		3,904,526		-			3,904,530
Shares issued for conversion of accrued liabilities			-			1		129,525		-			129,526
Shares issued for solar power asset			-			200		1,289,109		-			1,289,309
Net loss for the period			-			-		-		(2,633,232	)		(2,633,232	)
Balance, September 30, 2025		$	1		$	250	$	33,336,259	$	(33,878,127	)	$	(541,617	)

All values are in US Dollars.

****	Preferred stock			Common stock			Additional		****		****	Total		****
****	(0.00001 Par)			(0.00001 Par)			Paid-in		Accumulated		****	Stockholders’		****
****	Shares	Amount			Amount		Capital		Deficit		****	Deficiency		****
Balance, December 31, 2023		$	1		$	26	$	26,491,974	$	(28,913,582	)	$	(2,421,581	)
Net income for the period			-			-		-		(256,980	)		(256,980	)
Balance, March 31, 2024			1			26		26,491,974		(29,170,562	)		(2,678,561	)
Net loss for the period			-			-		-		(502,529	)		(502,529	)
Balance, June 30, 2024			1			26		26,491,974		(29,673,091	)		(3,181,090	)
Balance			1			26		26,491,974		(29,673,091	)		(3,181,090	)
Shares issued with extinguishment of debt			-			1		25,043		-			25,044
Net loss for the period			-			-		-		(279,946	)		(279,946	)
Net Income (loss)			-			-		-		(279,946	)		(279,946	)
Balance, September 30, 2024		$	1		$	27	$	26,517,017	$	(29,953,037	)	$	(3,435,992	)
Balance		$	1		$	27	$	26,517,017	$	(29,953,037	)	$	(3,435,992	)

All values are in US Dollars.

See

accompanying notes to the unaudited condensed financial statements.

| F-3 |

| --- |

| Table of Contents |

| --- |

BluSky

AI, Inc.

(FKAInception Mining, Inc.)

Condensed

Statements of Cash Flows

(Unaudited)

	September 30, 2025			September 30, 2024
	For the Nine Months Ended
	September 30, 2025			September 30, 2024
Cash Flows From Operating Activities:
Net Loss	$	(4,014,763	)	$	(1,039,455	)
Adjustments to reconcile net loss to net cash used in operations
Depreciation and amortization expense		-			544
Common stock issued for services		1,496,100			-
Loss on extinguishment of debt		1,949,847			13,043
Change in derivative liability		(186,542	)		90,436
Default penalty additions		-			88,890
Expenses paid in behalf of the company by related party		-			10,300
Amortization of right-of-use asset		18,264			9,595
Amortization of debt discount		-			219,961
Initial derivative expense		-			193,582
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		(12,764	)		10,000
Other assets		(113,750	)		-
Operating lease liability – related party		4,236			-
Accounts payable and accrued liabilities		123,221			333,600
Accounts payable and accrued liabilities - related parties		55,228			5,216
Net Cash Used In Operating Activities		(680,923	)		(64,288	)
Cash Flows From Investing Activities:
Net Cash Provided By Investing Activities		-			-
Cash Flows From Financing Activities:
Repayment of notes payable-related parties		(121,722	)		(98,475	)
Repayment of convertible notes payable		-			(98,784	)
Proceeds from notes payable-related parties		362,906			111,545
Proceeds from convertible notes payable		1,735,000			150,000
Net Cash Provided by Continuing Financing Activities		1,976,184			64,286
Net Change in Cash		1,295,261			(2	)
Cash at Beginning of Period		-			2
Cash at End of Period	$	1,295,261		$	-
Supplemental disclosure of cash flow information:
Cash paid for interest	$	-		$	11,074
Cash paid for taxes	$	-		$	-
Supplemental disclosure of non-cash investing and financing activities:
Common stock issued for conversion of debt	$	4,034,056		$	25,043
Common stock issued for solar power asset	$	1,289,309		$	-
Recognition of debt discounts on convertible note payable	$	-		$	179,800
Origination of operating lease	$	292,227		$	-
Accounts payable issued for settlement of note payable	$	10,000		$	-
Note payable issued to related party for settlement of convertible note payable	$	125,000		$	-

See

accompanying notes to the unaudited condensed financial statements.

| F-4 |

| --- |

| Table of Contents |

| --- |

BluSky

AI, Inc.

(FKAInception Mining, Inc.)

Notes

to Condensed Financial Statements (Unaudited)

September

30, 2025

1.Nature of Business

BluSky AI, Inc. (formerly known as Inception Mining, Inc.) was incorporated under the name of Golf Alliance Corporation and under the laws of the State of Nevada on July 2, 2007. Inception Mining, Inc. was a precious metal mineral acquisition, exploration and development company. Inception Development, Inc., its wholly owned subsidiary, was incorporated under the laws of the State of Idaho on January 28, 2013.

Golf Alliance Corporation pursued its original business plan to provide opportunities for golfers to play on private golf courses normally closed to them due to the membership requirements of the private clubs. During the year ended July 31, 2010, the Company decided to redirect its business focus toward precious metal mineral acquisition and exploration.

On

March 5, 2010, the Company amended its articles of incorporation to (1) change its name to Silver America, Inc. and (2) increase its authorized common stock from 100,000,000 to 500,000,000. In 2020, the Company increased its authorized common stock from 500,000,000 to 800,000,000. In 2022, the Company increased its authorized common stock from 800,000,000 to 10,300,000,000.

On June 23, 2010, the Company amended its articles of incorporation to change its name to Gold American Mining Corp.

On February 25, 2013, Gold American Mining Corp. and its majority shareholder (the “Majority Shareholder”), and its wholly owned subsidiary, Inception Development Inc. (the “Subsidiary”), entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with Inception Resources, LLC, a Utah corporation (“Inception Resources”), pursuant to which Inception purchased the U.P. and Burlington Gold Mine in consideration of 16,000 shares of common stock of Inception, the assumption of promissory notes in the amount of $950,000 and the assignment of a 3% net royalty. Inception Resources was an entity owned by and under the control of the majority shareholder. This transaction was deemed an asset purchase by entities under common control. The Asset Purchase Agreement closed on February 25, 2013 (the “Closing”). Inception was a “shell company” (as such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended) immediately prior to our acquisition of the gold mine pursuant to the terms of the Asset Purchase Agreement. As a result of such acquisition, the Company’s operations were then focused on the ownership and operation of the mine acquired from Inception Resources and the Company then ceased to be a shell company as it no longer has nominal operations. On February 21, 2020, the Company sold the Up & Burlington property and mineral rights to Ounces High Exploration, Inc. in exchange for $250,000 in cash consideration and 66,974,252 shares of common stock of Hawkstone Mining Limited, a publicly-trade Australian company.

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 240,226 shares of common stock of Inception and assumed promissory notes in the amount of $5,488,980 and accrued interest of $3,434,426. Under this merger agreement, there was a change in control, and it was treated for accounting purposes as a reverse recapitalization with Clavo Rico, Ltd. being the surviving entity. Its workings include several historical underground operations dating back to the early Mayan and Spanish occupation.

| F-5 |

| --- |

| Table of Contents |

| --- |

On January 12, 2023, Inception Mining, Inc. (the “Company”) entered into a non-binding Letter of Intent (the “LOI”) with Mother Lode Mining, Inc. (“MLM”). The LOI became binding on January 24, 2023. Pursuant to the terms of the LOI, the Company agreed to sell all of the shares of its wholly-owned subsidiary, Compañía Minera Cerros Del Sur, S.A. de C.V. (“CMCS”), to MLM. CMCS is the Honduran-based company that owns the Clavo Rico mine.

Since the divestiture of the Clavo Rico Mine, the Company has been operating as a consultant and advisor to the mining industry, including to Mother Lode Mining, the new owner of the Clavo Rico mine. It also has an ongoing financial interest in the Clavo Rico Mine under the LOI, with monthly payments due through February 2025 that are secured by a net smelter royalty.

The Company underwent a significant transformation and rebranding in March 2025 to align with its new strategic direction and name change to “BluSky AI Inc.”. This change reflects BluSky AI Inc.’s commitment to advancing technology and providing unparalleled services in the data center industry. The Company’s operations are primarily in AI-driven data center solutions, combining innovation with regulatory compliance and sustainability. The Company is a modular data center provider focused on high-performance computing infrastructure, strategic site selection, and operational risk management and specializing in artificial intelligence (AI) and as a Neocloud operator). “Neocloud” refers to a new breed of cloud providers that specialize in offering high-performance computing, particularly GPU-as-a-Service (GPUaaS), tailored specifically for demanding AI and machine learning workloads. 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.

The new business model centered on modular data center development and GPU-as-a-Service (GPUaaS), marking a strategic pivot toward scalable, AI-optimized infrastructure. The Company designs and deploys modular data centers engineered for rapid deployment, energy efficiency, and geographic flexibility, enabling tailored solutions for high-performance computing environments. As a Neocloud operator, BluSky AI offers GPUaaS to enterprise and institutional clients, delivering dedicated, on-demand access to advanced GPU clusters optimized for artificial intelligence, machine learning, and large-scale simulation workloads. This model integrates site-specific risk management, regulatory compliance, and sustainability into every deployment, positioning BluSky AI as a next-generation infrastructure provider for mission-critical AI applications.

“Neocloud” refers to a new breed of cloud providers that specialize in offering high-performance computing, particularly GPU-as-a-Service (GPUaaS), tailored specifically for demanding AI and machine learning workloads. Neoclouds are specialist cloud providers filling a crucial gap in the market by offering dedicated and optimized infrastructure for the rapidly expanding field of artificial intelligence.

2.Summary of Significant Accounting Policies

GoingConcern - The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying financial statements, the Company had a net loss of $4,014,763 during the nine-month period ended September 30, 2025 and had a working capital deficit of $1,922,014 as of September 30, 2025. These along with other factors indicate that the Company has substantial doubt of being able to continue as a going concern for a period of 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.

Basisof Presentation - The Company prepares its financial statements in accordance with accounting principles generally accepted in the United States of America.

| F-6 |

| --- |

| Table of Contents |

| --- |

CondensedFinancial Statements -The interim financial statements included herein have been prepared by BluSky AI, Inc. (“BluSky” or the “Company”) without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC” or the “Commission”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. These interim financial statements should be read in conjunction with the financial statements and notes thereto included in this filing and the Form 10-K for the year ended December 31, 2024 filed with the SEC on April 1, 2025.

In the opinion of management, all adjustments have been made consisting of normal recurring adjustments necessary to present fairly the financial position of the Company and as of September 30, 2025, the results of its statements of operations and comprehensive income (loss) for the three and nine-month period ended September 30, 2025, its condensed statement of stockholders’ deficit and its cash flows for the nine-month period ended September 30, 2025. The results of operations for the interim periods are not necessarily indicative of the results for the full year.

Useof Estimates – In preparing financial statements in conformity with generally accepted accounting principles, we are required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenditures during the reported periods. Actual results could differ materially from those estimates. Estimates may include those pertaining to valuation of the estimated useful lives and valuation of properties, plant and equipment, deferred tax assets, convertible preferred stock, derivative assets and liabilities, stock-based compensation and payments, and contingent liabilities.

Cashand 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 September 30, 2025 and December 31, 2024, the Company had $1,295,261 and $0 in cash equivalents, respectively. The aggregate cash balance on deposit in these accounts is insured by the Federal Deposit Insurance Corporation up to $250,000. The Company has never experienced any losses in such accounts.

FairValue 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<br> 1: Quoted market prices in active markets for identical assets or liabilities.
Level<br> 2: Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets<br> with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs<br> are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the<br> assets or liabilities.
Level<br> 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.

| F-7 |

| --- |

| Table of Contents |

| --- |

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.

NotesReceivable - Notes receivable include amounts due to the Company pursuant to financial agreements stipulating interest rates, payment terms and maturity dates. As of September 30, 2025 and December 31, 2024, notes receivable balance includes one note due from Mother Load Mining, Inc. in the amounts of $2,219,442 and $2,219,442, respectively, net of reserves of $2,219,442 and $2,219,442 (see Note 4 – Note Receivable).

Long-LivedAssets - 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 and Equipment - We record properties 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:

Schedule of Property and Equipment Useful Lives

Building	7 to 15 years
Vehicles and equipment	3 to 7 years
Furniture and fixtures	2 to 3 years
Processing and laboratory	5 to 15 years

StockIssued 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-BasedCompensation - For stock-based transactions, compensation expense is recognized over the requisite service period, which is generally the vesting period, based on the estimated fair value on the grant date of the award.

Income(Loss) per Common Share -Basic net income (loss) per common share is computed by dividing net income (loss), less the preferred stock dividends, by the weighted average number of common shares outstanding. Dilutive income (loss) per share includes any additional dilution from common stock equivalents, such as stock options and warrants, and convertible instruments, if the impact is not antidilutive. 0 and 1,027,273 common share equivalents have been excluded from the diluted loss per share calculation for the nine-month periods ended September 30, 2025 and 2024, respectively, because it would be anti-dilutive.

DerivativeLiabilities - Derivative liabilities are recorded at fair value when issued and the subsequent change in fair value each period is recorded in other income (expense) in the statements of operations. We do not hold or issue any derivative financial instruments for speculative trading purposes.

| F-8 |

| --- |

| Table of Contents |

| --- |

IncomeTaxes -The Company’s income tax expense and deferred tax assets and liabilities reflect management’s best assessment of estimated future taxes to be paid. Significant judgments and estimates are required in determining the income tax expense.

Deferred income taxes arise from temporary differences between the tax and financial statement recognition of revenue and expense. In evaluating the Company’s ability to recover its deferred tax assets, management considers all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial operations. In projecting future taxable income, the Company develops assumptions including the amount of future state and federal pretax operating income, the reversal of temporary differences, and the implementation of feasible and prudent tax planning strategies. These assumptions require significant judgment about the forecasts of future taxable income and are consistent with the plans and estimates that the Company is using to manage the underlying businesses. The Company provides a valuation allowance for deferred tax assets for which the Company does not consider realization of such deferred tax assets to be more likely than not.

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.

BusinessSegments – The Company operates in one segment and therefore segment information is not presented.

OperatingLease – In accordance with ASC 842, the Company determines whether or not a contract contains a lease based on whether or not it provides the Company with the use of a specifically identified asset for a period of time, as well as both the right to direct the use of that asset and receive the significant economic benefits of the asset. The Company elected the transition relief package of practical expedients, and as a result, we did not assess 1) whether existing or expired contracts contain embedded leases, 2) lease classification for any existing or expired leases, and 3) whether lease origination costs qualified as initial direct costs. We elected the short-term lease practical expedient by establishing an accounting policy to exclude leases with a term of 12 months or less.

**RecentlyIssued 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.

| F-9 |

| --- |

| Table of Contents |

| --- |

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 September 30, 2025:

Schedule of Changes in Fair Value of the Company’s Level 3 Financial Liabilities

	Debt<br><br> <br>Derivative<br><br> <br>Liabilities
Balance, December 31, 2024	$	186,542
Settlement of derivative liabilities		(186,542	)
Balance, September 30, 2025	$	-

**DerivativeLiabilities –**The Company issued convertible promissory notes which are convertible into common stock, at holders’ option, at a discount to the market price of the Company’s common stock. The Company has identified the embedded derivatives related to these notes relating to certain anti-dilutive (reset) provisions. These embedded derivatives included certain conversion features. The accounting treatment of derivative financial instruments requires that the Company record fair value of the derivatives as of the inception date of debenture and to fair value as of each subsequent reporting date.

Based upon ASC 840-15-25 (EITF Issue 00-19, paragraph 11) the Company has adopted a sequencing approach regarding the application of ASC 815-40 to its outstanding convertible notes. Pursuant to the sequencing approach, the Company evaluates its contracts based upon earliest issuance date.

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) $204,200 was delivered by MLM to the Company on January 3, 2023 to pay outstanding debts owed by the Corporation; (b) $300,000 was delivered by MLM to the Company on January 5, 2023 to satisfy existing debts of the Company; (c) $100,000 was delivered by MLM to the Company on January 16, 2023; (d) $200,000 was delivered by MLM to the Company on January 17, 2023; (e) $1,200,000 was delivered by MLM to the Company on January 18, 2023, to pay a settlement amount for existing debt of the Company; (f) $500,000 was delivered by MLM to the Company on January 23, 2023, to satisfy existing debts of the Company; (g) $500,000 was delivered by MLM to the Corporation on January 24, 2023 to satisfy existing debts of the Corporation.

| F-10 |

| --- |

| Table of Contents |

| --- |

In

addition to the amounts already delivered under the LOI, an additional amount of $2,700,000 shall be paid by MLM to the Company over a period of twenty-four (24) months (the “Monthly Payments”). The Monthly Payments shall be paid as follows: (i) $25,000 due March 1, 2023, (ii) $50,000 due on the first day of each of April, May and June 2023, and (iii) $100,000 due on the first day of each month for the following twenty months, until February 1, 2025 at which point all amounts due and payable hereunder shall be delivered in a final balloon payment. The Company has received several payments leaving an outstanding balance of $2,219,442 as of March 31, 2025. MLM paid an additional $80,000 in initial payments than the agreement called for. Based on the additional funds, MLM has paid less than the scheduled payments to make up the cash outflow to them. Outstanding balances and missed Monthly Payments will 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 will receive 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.

The following table summarizes the note receivable of the Company as of September 30, 2025 and December 31, 2024:

Schedule of Note Receivable

	September 30, 2025			December 31, 2024
Note Receivable from Mother Load Mining, Inc. pursuant to a Letter of Intent dated effective January 12, 2023, in the original principal amount of $5,700,000, accruing no interest, with monthly payments beginning on March 31, 2023, maturing February 1, 2025.	$	2,219,442		$	2,219,442
Less: Payments received		-			-
Total Note Receivable outstanding		2,219,442			2,219,442
Less: Allowance for Doubtful Note Receivable		(2,219,442	)		(2,219,442	)
Total Note Receivable	$	-		$	-

5. SolarPower Asset

On

July 7, 2025, BluSky AI Inc., entered into an Acquisition and Power Assignment Agreement with Digital Asset Medium, LLC (“DAM”), a Wyoming limited liability company, whose managing member, Trent D'Ambrosio, is also the Company’s CEO. DAM assigned to the Company its exclusive right to utilize solar and grid-interconnected power at a data center project located in the Milford area of Beaver County, Utah. In exchange for the assignment of the Power Commitment in the Acquisition Agreement, the Company issued 20,000,000 shares of its restricted common stock to DAM. The solar power asset was valued at $1,289,309. This asset will not be placed into service until the Milford project has been built and is beginning to use power. Once this milestone has been achieved, the Company will begin amortizing the value of this asset over the remaining life of the agreement. Currently, there is no amortization expense or cash flows related to this asset.

6. AccountsPayable and Accrued Liabilities

Accounts payable and accrued liabilities at September 30, 2025 and December 31, 2024 consisted of the following:

Schedule of Accounts Payable and Accrued Liabilities

	September 30, 2025		December 31, 2024
Accounts Payable	$	351,835	$	518,930
Deferred Salaries Payable		1,311,788		1,226,857
Accrued Interest Payable		138,797		-
Total Accrued Liabilities	$	1,802,420	$	1,745,787

7. NotesPayable

Notes payable were comprised of the following as of September 30, 2025 and December 31, 2024:

Schedule of Notes Payable

Notes Payable	September 30, 2025			December 31, 2024
Phil Zobrist	$	60,000		$	60,000
Antczak Polich Law LLC		-			65,000
Total Notes Payable		60,000			125,000
Less Short-Term Notes Payable		(60,000	)		(125,000	)
Total Long-Term Notes Payable	$	-		$	-

PhilZobrist – On January 11, 2013, the Company issued an unsecured Promissory Note to Phil Zobrist in the principal amount of $60,000 (the “Note”) due on demand and bearing 0% per annum interest. The total net proceeds the Company received was $60,000. On October 2, 2015, the Company entered into a new convertible note with Phil Zobrist that matures on December 31, 2016 and bears 18% per annum interest. The Company agreed to accrue interest from inception of these Notes in the amount of $29,412 and charged this amount to interest expense during the year ended December 31, 2015. The Note is convertible into common stock, at holder’s option, at a price of $0.99 (0.18 pre-split) or a 50% discount to the average of the three lowest VWAP of the common stock during the 20-trading day period prior to conversion. On October 2, 2016, the Company renegotiated the note payable. The convertible feature was removed, and the note was extended until December 31, 2024. The Company recognized a gain on the extinguishment of debt of $121,337 for the remaining derivative liability and of $11,842 for the remaining debt discount. As of September 30, 2025, the gross balance of the note was $60,000 and accrued interest was $137,441.

| F-11 |

| --- |

| 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 $75,000 (the “Note”) and does not accrue interest. This note is due on December 31, 2023 and requires monthly payments of $10,000 starting July 2023 with any remaining balance paid in full by December 31, 2023. The Company made one payment of $10,000 during the fiscal year ended December 31, 2023. On September 30, 2025, the Company paid $10,000 towards the balance of this note and then Antczak elected to convert the remaining $55,000 into 11,000 shares of common stock valued at $65,780. The Company recognized a loss on extinguishment of debt of $10,780. As of September 30, 2025, the gross balance of the note was $0.

8.Notes Payable – Related Parties

Notes payable – related parties were comprised of the following as of September 30, 2025 and December 31, 2024:

Schedule of Related Parties Notes Payable

Notes Payable - Related Parties	Relationship	September 30, 2025			December 31, 2024
Cluff-Rich PC 401K	Affiliate - Controlled by Director	$	46,000		$	51,000
Whit Cluff	Director		15,327			15,327
Digital Asset Medium, LLC	Affiliate - Controlled by Director		480,000			-
Debra D’ambrosio	Immediate Family Member		422,618			531,434
Francis E. Rich	Immediate Family Member		100,000			100,000
Pine Valley Investments	Affiliate - Controlled by Director		295,000			295,000
Total Notes Payable - Related Parties			1,358,945			992,761
Less Short-Term Notes Payable - Related Parties			(1,358,945	)		(992,761	)
Total Long-Term Notes Payable - Related Parties		$	-		$	-

**Cluff-RichPC 401K –**On June 29, 2022, the Company issued an unsecured Short-Term Promissory Note to Cluff-Rich PC 401K in the principal amount of 60,000 (the “Note”) due on December 31, 2022 and bears a 5.0% interest rate. On February 1, 2023, the Company re-negotiated this note which extended it to March 1, 2025 and made it non-interest bearing. The Company issued 5,143 shares of common stock on February 1, 2023 as settlement for the accrued interest of $18,000. During the fiscal ended December 31, 2023, the Company made a payment of $9,000 towards the principal balance. On July 16, 2025, the Company made a payment of $5,000 towards the balance of the note. As of September 30, 2025, the gross balance of the notes was $46,000.

**DigitalAsset Medium, LLC (Affiliate – Director) –**On January 9, 2025, the Company formalized an unsecured Short-Term Promissory Notes to Digital Asset Medium, LLC in principal amounts totaling $480,000 (the “Note”), which bears a 15.00% interest rate and matures on January 31, 2026. This lender directly paid $125,000 to settle the notes held by 1800 Diagonal Lending, LLC (see Note 9). On September 30, 2025, the Company issued 13,007 shares of common stock valued at $77,782 for the conversion of accrued interest of $29,129 and accounts payable of $35,908. The Company recognized a loss on extinguishment of debt of $12,745. As of September 30, 2025, the gross balance of the note was $480,000 and accrued interest was $8,601.

**D.D’Ambrosio (Immediate Family Member of Director) –**On January 1, 2023, there were six notes outstanding with outstanding balance of the Notes of $446,210 and accrued interest of $81,204. During January 2023, the Company issued an unsecured Short-Term Promissory Notes to D. D’Ambrosio in principal amounts totaling $6,408 (the “Note”) that bears a 3.00% interest rate. On February 1, 2023, the Company re-negotiated these notes into one note with a maturity date of March 1, 2025 and is non-interest bearing. The Company issued 23,201 shares of common stock on February 1, 2023 as settlement for the accrued interest of $81,204. During the year ended December 31, 2023, the Company made a payment of $30,000 towards the principal balance. As of September 30, 2025, the gross balance of the note was $422,618 and accrued interest was $0.

| F-12 |

| --- |

| Table of Contents |

| --- |

**D.D’Ambrosio (Immediate Family Member of Director) –**During June through September, 2024, the Company received funds in the amount of $50,395. On October 1, 2024, the Company formalized an unsecured Short-Term Promissory Notes to D. D’Ambrosio in principal amounts totaling $50,395 (the “Note”), which bears a 5.00% interest rate and matures on October 31, 2025. During the year ended December 31, 2024, the Company made payments of $4,430 towards the principal balance. On August 5, 2025, the Company paid-off the balance of this note of $45,965. As of September 30, 2025, the gross balance of the note was $0 and accrued interest was $0.

**D.D’Ambrosio (Immediate Family Member of Director) –**During October through December, 2024, the Company received funds in the amount of $62,851. On November 1, 2024, the Company formalized an unsecured Short-Term Promissory Notes to D. D’Ambrosio in principal amounts totaling $62,851 (the “Note”), which bears a 15.00% interest rate and matures on November 30, 2025. During the nine months ended September 30 2025, the Company paid $62,851 towards the balance of this note. As of September 30, 2025, the gross balance of the note was $0 and accrued interest was $0.

**D.D’Ambrosio (Immediate Family Member of Director) –**On January 1, 2025, the Company formalized an unsecured Short-Term Promissory Notes to D. D’Ambrosio in principal amounts totaling $406 (the “Note”), which bears a 15.00% interest rate and matures on December 31, 2025. On September 1, 2025, the Company paid-off the balance of this note of $406. As of September 30, 2025, the gross balance of the note was $0 and accrued interest was $0.

On

September 24, 2025, the Company issued 9,408 shares of common stock to D. D’Ambrosio valued at $51,744 for the accrued interest on all of the D. D’Ambrosio notes of $47,042 and recognized a loss on extinguishment of debt of $4,702.

Francis

E. Rich –On January 1, 2023, there were two notes outstanding with outstanding balance of the Notes of $100,000 and accrued interest of $47,500. On February 1, 2023, the Company re-negotiated these notes into one note with a maturity date of March 1, 2025 and is non-interest bearing. The Company issued 16,429 shares of common stock as settlement for the accrued interest of $57,500. As of September 30, 2025, the gross balance of the notes was $100,000.

Pine

Valley Investments, LLC –On January 1, 2023, there were three Notes outstanding with outstanding balance of the Notes of $295,000 and accrued interest of $115,250. On February 1, 2023, the Company re-negotiated these notes into one note with a maturity date of March 1, 2025 and is non-interest bearing. The Company issued 32,929 shares of common stock as settlement for the outstanding accrued interest of $115,250. As of September 30, 2025, the gross balance of the notes was $295,000.

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 $15,327 (the “Note”) due on April 30, 2025 and bears a 5.0% interest rate. As of September 30, 2025, the gross balance of the note was $15,327 and accrued interest was $766.

9.Convertible Notes Payable

Convertible notes payable were comprised of the following as of September 30, 2025 and December 31, 2024:

Schedule of Convertible Notes Payable

Convertible<br> Notes Payable	September 30,<br> 2025		December 31,<br> 2024
1800<br> Diagonal Lending	$	-	$	266,450
Total Convertible Notes Payable		-		266,450
Less<br> Unamortized Discount		-		-
Total Convertible Notes Payable,<br> Net of Unamortized Debt Discount		-		266,450
Less<br> Short-Term Convertible Notes Payable		-		(266,450	)
Total<br> Long-Term Convertible Notes Payable, Net of Unamortized Debt Discount	$	-	$	-

| F-13 |

| --- |

| Table of Contents |

| --- |

1800Diagonal 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 $63,250 (the “Note”) due on October 30, 2024 and bears 12% per annum interest, due at maturity. The total net proceeds the Company received was $50,000 (less an original issue discount (“OID”) of $13,250). The Note is convertible into common stock, at holder’s option, at a 25% discount of the average of the three lowest trading price of the common stock during the 10 trading day period prior to conversion. During the nine months ended September 30, 2024, the Company paid $23,613 towards the principal balance of $21,083 and $2,530 in accrued interest. For the nine months ended September 30, 2024, the Company amortized $63,250 of debt discount to current period operations as interest expense. On June 4, 2024, the Company was notified by the lender that the note was in default. The Company recognized default penalties for principal of $21,083 and interest of $2,530. On January 9, 2025, the Company negotiated a settlement on this note and the second note with the lender noted below and paid the note in full. As of September 30, 2025, the gross balance of the note was $0 and accrued interest was $0.

1800Diagonal 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 $116,550 (the “Note”) due on February 15, 2025 and bears 12% per annum interest, due at maturity. The total net proceeds the Company received was $100,000 (less an original issue discount (“OID”) of $16,550). The Note is convertible into common stock, at holder’s option, at a 35% discount of the lowest trading price of the common stock during the 10 trading day period prior to conversion. For the nine months ended September 30, 2024, the Company amortized $116,550 of debt discount to current period operations as interest expense. On June 4, 2024, the Company was notified by the lender that the note was in default. The Company recognized default penalties for principal of $58,275 and interest of $6,993. On January 9, 2025, the Company negotiated a settlement on this note and the note with the lender noted above and paid the note in full. As of September 30, 2025, the gross balance of the note was $0 and accrued interest was $0.

On

January 9, 2025, the Company negotiated the settlement of both notes with the lender and agreed to pay $125,000

to settle both notes in full. The Company took a note from

a related party (see Note 8) to pay the $125,000

to the lender. The Company recognized a gain on forgiveness

of debt of $338,673

.

This gain is made of $152,131

of default principal and interest and $186,542

in change in derivative liability.

Regulation

D Convertible Notes Payable – In August and September 2025, BluSky AI Inc. raised $1,735,000

in

gross proceeds through a Regulation D offering, issuing convertible promissory notes to 13 accredited lenders. These notes bore interest at 15.0

%

per annum and were scheduled to mature 12 months from issuance. Initially, the notes included a voluntary conversion at 80% of market price if the stock hits a market price of $5.00 per share and a mandatory conversion feature at 80% of market triggered if the Company’s common stock traded above $8.00

per

share for a specified period. Prior to conversion, the Company and the noteholders mutually agreed to amend the conversion terms, reducing the conversion price from the original contractual rate to $4.00

per

share. This amendment was executed to align with the Company’s evolving capital structure strategy, simplify the cap table ahead of anticipated additional financings, and reward early supporters with a more favorable conversion rate in recognition of their risk tolerance during a critical growth phase. In mid-August 2025, following the Company’s common stock trading above the $8.00

threshold,

all outstanding notes were mandatorily converted into an aggregate of 433,750

shares

of common stock at the amended $4.00

per

share conversion price. As a result of this modification and subsequent conversion, the Company recognized a non-cash loss on extinguishment of debt totaling $2,103,750 , reflecting the difference between the fair value of the common stock issued and the carrying value of the notes at the time of conversion.

10. Operating Leases

---

The Company leases its corporate headquarters and administrative offices in Salt Lake City, Utah. This lease expired

in August 2024 and is now a month-to-month lease and thus is exempt from operating lease accounting under ASC 842. The Company made cash payments of $3,269 and $9,595 for the nine months ended September 30, 2025 and 2024, respectively.

On

July 11, 2025, the Company entered into a Ground Lease with an Option to Purchase (the “Lease”) with Wild Mustang Ventures LLC, a Wyoming limited liability company (the “Landlord”), through which the Company leased 51.6 acres in Milford, Utah (the “Milford Land”) for a two-year term. Wild Mustang Ventures, LLC is deemed an affiliate of the Company. The base rent is $90,000 annually, which shall accrue until the earlier of the expiration of the lease or until the Company exercises its option to purchase the Milford Land. Payments on the lease are being deferred until the Company is in a better cash flow position, so no lease payments have been made. The Lease contains standard other provisions and includes a mutual indemnification clause which requires that the parties indemnify each other except in the case of gross negligence or willful misconduct.

The supplemental balance sheet information related to the operating lease for the periods is as follows:

Schedule of Balance Sheet Operating Lease

	September 30, 2025		December 31, 2024
Operating leases
Long-term right-of-use assets	$	273,963	$	-
Short-term operating lease liabilities	$	73,057	$	-
Long-term operating lease liabilities		223,406		-
Total operating lease liabilities	$	296,463	$	-

Maturities of the Company’s undiscounted operating lease liabilities are as follows:

Schedule of Operating Lease Liabilities Maturities

Year Ending	Operating Leases
2025	$	45,000
2026		90,000
2027		90,000
2028		90,000
2029		45,000
Total lease payments		360,000
Less: Imputed interest/present value discount		(63,537	)
Present value of lease liabilities	$	296,463

The

Company incurred rent expense of $36,785

and $10,633

for the nine months ended September 30, 2025 and 2024, respectively.

---

11.Stockholders’ Deficit

CommonStock

The

Company is authorized to issue 10,300,000,000 shares of common stock with a par value of $0.00001 per share. As of September 30, 2025 and December 31, 2024, there were 24,957,870 and 2,659,773 shares of common stock issued and outstanding, respectively.

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 1,000-for-1 (the “Reverse Stock Split”). The Reverse Stock Split became effective on March 10, 2025 (the “Effective Date”). All share amounts presented in this 10-Q have been retroactively adjusted to reflect the Reverse Stock Split.

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.

| F-14 |

| --- |

| Table of Contents |

| --- |

On

April 1, 2025, the Company issued 200,000 restricted shares of Common Stock to an individual for services rendered at the market price of $0.51 per share for a total value of $102,000.

On

June 10, 2025, the Company issued 1,100,000 restricted shares of Common Stock to five individuals for services rendered at the market price of $0.401 per share for a total value of $441,100. With 600,000 shares issued to related parties.

On

June 24, 2025, the Company issued 500,000 restricted shares of Common Stock to an individual for services rendered at the market price of $1.60 per share for a total value of $800,000.

On

July 7, 2025, BluSky AI Inc., entered into an Acquisition and Power Assignment Agreement with Digital Asset Medium, LLC (“DAM”), a Wyoming limited liability company, whose managing member, Trent D'Ambrosio, is also the Company’s CEO (see Note 5). In exchange for the assignment of the Power Commitment in the Acquisition Agreement, the Company issued 20,000,000

shares of its restricted common stock to DAM. The Company used

a large block stock valuation model to value this stock issuance, which resulted in a valuation of $9,800,000

.

The solar power asset, which was reviewed by a valuation specialist, was valued at $1,289,309

.

The difference of $8,510,691

has been treated as a deemed dividend by the Company. Normally, this dividend would be recorded in retained earnings. However, the Company has a negative retained earnings balance, so the difference was recorded against additional paid-in capital.

In

August and September 2025, the Company issued 433,750

shares of common stock at $4.00

per share. See note 8 for more details.

On

September 4, 2025, the Company issued 25,500 shares of common stock to five consultants per consulting agreements. These shares were valued at $6.00 per share and the Company recognized consulting fees of $153,000.

On

September 24, 2025, the Company issued 9,408 shares of common stock to D. D’Ambrosio for the conversion of accrued interest of $47,042. These shares were valued at $5.50 per share for a total value of $51,744 and the Company recognized a loss on extinguishment of debt of $4,702.

---

On

September 30, 2025, the Company issued 13,007 shares of common stock to Digital Asset Medium, LLC (“DAM”), a related entity, for the conversion of accrued interest of $29,129 and accounts payable of $35,908. These shares were valued at $5.98 per share for a total value of $77,782 and the Company recognized a loss on extinguishment of debt of $12,745.

---

On

September 30, 2025, the Company issued 11,000 shares of common stock to a lender for the conversion of a note payable with a balance of $55,000. These shares were valued at $5.98 per share for a total value of $65,780 and the Company recognized a loss on extinguishment of debt of $10,780.

---

12.Related Party Transactions

Consulting

Agreement – In February 2014, the Company entered into a consulting agreement with stockholder/director Trent D’Ambrosio. The Company agreed to pay $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 April 1, 2019 (see Employment Agreements below). As of September 30, 2025, there is $1,311,788 in deferred salaries in accounts payable and accrued liabilities.

Mr. Cluff currently serves as a director of the Company and has a separate agreement as a consultant of the Company effective as of October 2, 2015.

Employment

Agreements – The Company has an employment agreement with its chief executive officer, Trent D’Ambrosio. The employment agreement was effective as of April 1, 2019 and provides for compensation of $300,000 annually.

| F-15 |

| --- |

| Table of Contents |

| --- |

Notes

Payable –The Company took one short-term note payable from Debra D’Ambrosio, an immediate family member related party and one short-term note payable from Digital Asset Medium, LLC, an affiliate of a direct during the nine months ended September 30, 2025. The Company received $362,906 in cash from related parties, made payments of $121,722 in cash to related parties and $125,000 was paid directly to another lender to settle their outstanding notes (See Notes 8 and 9 for more details).

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 September 30, 2025, there is $104,839 in accounts payable and accrued liabilities.

Land

Lease Agreement – On July 11, 2025, the Company entered into a Ground Lease with an Option to Purchase (the “Lease”) with Wild Mustang Ventures LLC, a Wyoming limited liability company (the “Landlord”), through which the Company leased 51.6 acres in Milford, Utah (the “Milford Land”) for a two-year term. Wild Mustang Ventures, LLC is deemed an affiliate of the Company. The base rent is $90,000 annually, which shall accrue until the earlier of the expiration of the lease or until the Company exercises its option to purchase the Milford Land. Payments on the lease are being deferred until the Company is in a better cash flow position, so no lease payments have been made. The Lease contains standard other provisions and includes a mutual indemnification clause which requires that the parties indemnify each other except in the case of gross negligence or willful misconduct.

On

June 10, 2025, the Company issued 500,000 restricted shares of Common Stock to Trent D’Ambrosio for services rendered at the market price of $0.401 per share for a total value of $200,500.

On

June 10, 2025, the Company issued 100,000 restricted shares of Common Stock to Whit Cluff for services rendered at the market price of $0.401 per share for a total value of $40,100.

13.Commitments and Contingencies

On July 11, 2025, BluSky AI Inc, (the “Company”) entered into an Acquisition

and Power Assignment Agreement (the “Acquisition Agreement”) with Digital Asset Management, LLC (“DAM”), a Wyoming limited liability company, through which DAM assigned to the Company its exclusive right to utilize of solar and grid-interconnected power (the “Power Commitment”), for the operational life of Buyer’s data center project located in the Milford area of Beaver County, Utah (the “Project”). The term of the Acquisition Agreement is the length of the Project. In exchange for the assignment of the Power Commitment in the Acquisition Agreement, the Company issued 20,000,000 shares of its restricted common stock to DAM. The shares have been recorded at par of $0.00001 there are additional agreements that need to be completed to finalize the transaction. Including additional terms and conditions for use, a system impact study and an “energy services agreement” from the local provider. The final valuation can’t be established at this time since there isn’t a final measurement date. Since this is an entity under common control, the power rights will be recorded at its historical value.

Litigation

The Company at times is subject to other legal proceedings that arise in the ordinary course of business. The following is a summary of pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of operations of the Company.

March

4, 2024, the Company filed a complaint against Mother Lode Mining, Inc., a Canadian company, and Robert Salna (the “Defendants”), alleging an amount of not less than $2,237,800 (plus interest, additional costs and attorneys’ fees) due from Defendants as a result of their breach of their obligations and duties arising from the sale of Compañía Minera Cerros Del Sur, S.A. de C.V. in 2023 (the “Sale”). In the complaint, filed in the United States District Court for the District of Utah, Central Division, the Company asserts claims related to alleged breach of contract and unjust enrichment against the Defendants, and seeks a monetary judgment and an award of attorneys’ fees and other expenses. The complaint arises from the Defendants’ failure to convey agreed-upon consideration to the Company as contracted for the sale of CMCS. The Company was able to effect service of process on Mother Lode Mining, Inc. through Alternative Service and litigation has proceeded since that time. On May 2, 2025, Mother Lode Mining filed a Motion to Dismiss For Failure to State a Claim against the Company, and the Company disputes the premise of their argument. The Company intends to continue to pursue the lawsuit aggressively.

In the opinion of management, as of September 30, 2025, the amount of ultimate liability with respect to such matters, if any, may be likely to have a material impact on the Company’s business, financial position, results of operations or liquidity. However, as the outcome of litigation and other claims is difficult to predict significant changes in the estimated exposures could exist.

On

September 22, 2023, the Company entered into a consulting agreement with William McCluskey. This agreement requires the Company to pay $200,000 in consulting fees to William McCluskey before March 31, 2025. This amount is currently reported in accounts payable and accrued liabilities at September 30, 2025.

14.Subsequent Events

Management has evaluated subsequent events, in accordance with ASC 855, “Subsequent Events,” through the date which the financial statements were available to be issued and there are no material subsequent events, except as noted below.

On October 15, 2025, BluSky AI Inc. raised $50,000

through its Regulation D offering, issuing a convertible promissory note to an accredited lender. This note bears interest at 15.0% per annum and is scheduled to mature 12 months from issuance. The note includes a voluntary conversion at 80% of market price if the stock hits a market price of $5.00 per share and a mandatory conversion feature at 80% of market triggered if the Company’s common stock traded above $8.00 per share for a specified period.

On

October 31, 2025, the Company issued 5,000

shares of common stock to a consultant per the consulting agreement.

On

October 15, 2025, BluSky AI Inc. raised $50,000 through its Regulation D offering, issuing a convertible promissory note to an accredited lender. This note bears interest at 15.0% per annum and is scheduled to mature 12 months from issuance. The note includes a voluntary conversion at 80% of market price if the stock hits a market price of $5.00 per share and a mandatory conversion feature at 80% of market triggered if the Company’s common stock traded above $8.00 per share for a specified period. On January 10, 2026, the lender elected to convert this note into common stock. The Company issued 13,694 shares of common stock to a lender for the conversion of the $50,000 promissory note.

On November 9, 2025, BluSky AI Inc. raised $50,000

through its Regulation D offering, issuing a convertible promissory note to an accredited lender. This note bears interest at 15.0% per annum and is scheduled to mature 12 months from issuance. The note includes a voluntary conversion at 80% of market price if the stock hits a market price of $5.00 per share and a mandatory conversion feature at 80% of market triggered if the Company’s common stock traded above $8.00 per share for a specified period. On December 12, 2025, the lender elected to convert this note into common stock. The Company issued 13,441 shares of common stock to a lender for the conversion of the $50,000 promissory note.

On December 15, 2025, the Company issued 2,500

shares of common stock to a consultant per the consulting agreement.

| F-16 |

| --- |

| Table of Contents |

| --- |

ITEM

2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ForwardLooking Statements

The statements contained in the following MD&A and elsewhere throughout this Quarterly Report on Form 10-Q, including any documents incorporated by reference, that are not historical facts, including statements about our beliefs and expectations, are “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements preceded by, followed by or that include the words “may,” “could,” “would,” “should,” “believe,” “expect,” “anticipate,” “plan,” “estimate,” “target,” “project,” “intend” and similar words or expressions. In addition, any statements that refer to expectations, projections, or other characterizations of future events or circumstances are forward-looking statements.

These forward-looking statements, which reflect our management’s beliefs, objectives, and expectations as of the date hereof, are based on the best judgement of our management. All forward-looking statements speak only as of the date on which they are made. Such forward-looking statements are subject to certain risks, uncertainties and assumptions relating to factors that could cause actual results to differ materially from those anticipated in such statements, including, without limitation, the following: economic, social and political conditions, global economic downturns resulting from extraordinary events such as the COVID-19 pandemic and other securities industry risks; interest rate risks; liquidity risks; credit risk with clients and counterparties; risk of liability for errors in clearing functions; systemic risk; systems failures, delays and capacity constraints; network security risks; competition; reliance on external service providers; new laws and regulations affecting our business; net capital requirements; extensive regulation, regulatory uncertainties and legal matters; failure to maintain relationships with employees, customers, business partners or governmental entities; the inability to achieve synergies or to implement integration plans and other consequences associated with risks and uncertainties detailed in our filings with the SEC, including our most recent filings on Forms 10-K and 10-Q.

We caution that the foregoing list of factors is not exclusive, and new factors may emerge, or changes to the foregoing factors may occur, that could impact our business. We undertake no obligation to publicly update or revise these statements, whether as a result of new information, future events or otherwise, except to the extent required by the federal securities laws.

This discussion should be read in conjunction with our financial statements on our 2024 Form 10-K, and our financial statements and the notes thereto contained elsewhere in this Quarterly Report on Form 10-Q.

Introduction to Interim Financial Statements.

The interim financial statements included herein have been prepared by BluSky AI Inc. (“BluSky AI” or the “Company”) without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “Commission”). Certain information and footnote disclosure normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. These interim financial statements should be read in conjunction with the financial statements and notes thereto included in this filing.

In the opinion of management, all adjustments have been made consisting of normal recurring adjustments and consolidating entries, necessary to present fairly the financial position of the Company and subsidiaries as of September 30, 2025, the results of its statements of operations for the three and nine-month periods ended September 30, 2025 and 2024, and its cash flows for the nine-month periods ended September 30, 2025 and 2024. The results of operations for the interim periods are not necessarily indicative of the results for the full year.

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

---

| 3 |

| --- |

| Table of Contents |

| --- |

---

Overviewand Plan of Operation

Overview

BluSky AI Inc., is a pioneering company in AI-driven data center solutions, combining innovation with regulatory compliance and sustainability. The Company is a modular data center provider focused on high-performance computing infrastructure, strategic site selection, and operational risk management and specializing in artificial intelligence (AI) and as a Neocloud Provider. 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. The Company operates with a focus on innovation, scalability, and environmental sustainability.

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.

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. On January 12, 2023, the Company entered into an agreement through which the Company divested its ownership interest in the Clavo Rico mine, resulting in the transfer of operations to Mother Lode Mining and full control of the Clavo Rico mine asset.

CurrentOperations

BluSkyAI 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.

Resultsof Operations

Three months ended September 30, 2025 compared to the three months ended September 30, 2024

We had a net loss of $2,633,232 for the three-month period ended September 30, 2025, and a net loss of $279,946 for the three-month period ended September 30, 2024. This change in our results over the two periods is primarily the result of an increase in consulting expense, the change in the derivative liabilities, the increase in the loss on extinguishment of debt and an increase in interest expense. The following table summarizes key items of comparison and their related increase (decrease) for the three-month periods ended September 30, 2025 and 2024:

	Three<br> Months Ended						Increase/
	September<br> 30, 2025			September<br> 30, 2024			(Decrease)
General and Administrative	$	504,153		$	109,742		$	394,411
Depreciation<br> and Amortization Expenses		-			182			(182	)
Total<br> Operating Expenses		504,153			109,924			394,229
Loss from Operations		(504,153	)		(109,924	)		(394,229	)
Interest Income		4,555			-			4,555
Change in Derivative Liabilities		-			(139,472	)		139,472
Loss on Extinguishment of<br> Debt		(2,101,978	)		(13,043	)		(2,088,935	)
Interest<br> Expense		(31,656	)		(17,507	)		(14,149	)
Loss from Operations<br> Before Taxes		(2,633,232	)		(279,946	)		(2,353,286	)
Provision<br> for Income Taxes		-			-			-
Net Loss	$	(2,633,232	)	$	(279,946	)	$	(2,353,286	)

| 4 |

| --- |

| Table of Contents |

| --- |

General and administrative expenses increased for the three-month period ended September 30, 2025 because of an increase in consulting, legal and investor relations expenses, compared to the three-month period ended September 30, 2024.

Changes in derivative liabilities was due to the elimination of the derivative liabilities in the current year that was reported under the gain on extinguishment of debt in the first three months of the 2025 fiscal year.

Interest expense increased for the three-month period ended September 30, 2025 because of the interest expense related to additions to notes from related parties.

Nine months ended September 30, 2025 compared to the Nine months ended September 30, 2024

We had net loss of $4,014,763 for the nine-month period ended September 30, 2025, and a net loss of $1,039,455 for the nine-month period ended September 30, 2024. This change in our results over the two periods is primarily the result of an increase in consulting expense, the increase in the loss on extinguishment of debt and the elimination of derivative liabilities during the current period. The following table summarizes key items of comparison and their related increase (decrease) for the three-month periods ended September 30, 2025 and 2024:

	Nine<br> Months Ended						Increase/
	September<br> 30, 2025			September<br> 30, 2024			(Decrease)
General and Administrative	$	2,191,447		$	369,917		$	1,821,530
Depreciation<br> and Amortization Expenses		-			544			(544	)
Total<br> Operating Expenses		2,191,447			370,461			1,820,986
Loss from Operations		(2,191,447	)		(370,461	)		(1,820,986	)
Other Income (expense)		96			-			96
Interest Income		4,555			-			4,555
Change in Derivative Liabilities		186,542			(90,436	)		276,978
Initial Derivative Expense		-			(193,582	)		193,582
Loss on Extinguishment of<br> Debt		(1,949,847	)		(13,043	)		(1,936,804	)
Interest<br> Expense		(64,662	)		(371,933	)		307,271
Loss from Operations<br> Before Taxes		(4,014,763	)		(1,039,455	)		(2,975,308	)
Provision<br> for Income Taxes		-			-			-
Net Loss	$	(4,014,763	)	$	(1,039,455	)	$	(2,975,308	)

General and administrative expenses increased for the nine-month period ended September 30, 2025 because of higher consulting and investor relations expenses, compared to the nine-month period ended September 30, 2024.

Changes in derivative liabilities was because of the elimination of the derivative liabilities in the current year that was reported under the gain on extinguishment of debt.

Interest expense decreased in 2025 because of the interest expense related to settled notes was lower and the decrease of amortization of existing debt discounts.

| 5 |

| --- |

| Table of Contents |

| --- |

Liquidityand Capital Resources

Our balance sheet as of September 30, 2025 reflects assets of $1,696,470. We had cash in the amount of $1,295,261 and working capital deficit in the amount of $1,922,014 as of September 30, 2025. Thus, we do not have sufficient working capital to enable us to carry out our stated plan of operation for the next twelve months.

Working Capital

	September<br> 30, 2025			December<br> 31, 2024
Current assets	$	1,381,776		$	-
Current<br> liabilities		3,303,790			3,346,850
Working<br> capital deficit	$	(1,922,014	)	$	(3,346,850	)

We anticipate generating losses and, therefore, may be unable to continue operations in the future, if we don’t acquire additional capital and issue debt or equity or enter into a strategic arrangement with a third party.

Going Concern Consideration

As reflected in the accompanying unaudited condensed financial statements, the Company and has an accumulated deficit of $33,878,127. In addition, there is a working capital deficit of $1,922,014 as of September 30, 2025. This raises substantial doubt about its ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital and implement its business plan. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

	Nine<br> Months Ended
	September<br> 30, 2025			September 30,<br> 2024
Net Cash Provided<br> by (Used in) Operating Activities	$	(680,923	)	$	(64,288	)
Net Cash Provided by (Used<br> in) Investing Activities		-			-
Net Cash<br> Provided by (Used in) Financing Activities		1,976,184			64,286
Net<br> Increase (Decrease) in Cash	$	1,295,261		$	(2	)

Operating Activities

Net cash flow used in operating activities during the nine months ended September 30, 2025 was $680,923, an increase of $616,635 from the $64,288 net cash used during the nine months ended September 30, 2024. This increase in the cash used in operating activities was primarily due to the increase in net loss for 2025 that used more cash from operations for the period.

Investing Activities

Investing activities during the nine months ended September 30, 2025 provided $0, a decrease of $0 from the $0 provided by investing activities during the nine months ended September 30, 2024.

Financing Activities

Financing activities during the nine months ended September 30, 2025 provided cash of $1,976,184, an increase of $1,911,898 from the $64,286 provided by financing activities during the nine months ended September 30, 2024. During the nine months ended September 30, 2025, the Company received $362,906 in proceeds from notes payable - related parties and $1,735,000 in proceeds from convertible notes payable and made $121,722 in payments on notes payable – related parties.

| 6 |

| --- |

| Table of Contents |

| --- |

CriticalAccounting Policies

Our financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles used in the United States. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management’s application of accounting policies. We believe that understanding the basis and nature of the estimates and assumptions involved with the following aspects of our financial statements is critical to an understanding of our financials.

BluSky AI Inc. (“the Company”) is a publicly traded, development-stage enterprise specializing in the design, deployment, and operation of prefabricated modular data centers that deliver GPU-as-a-Service (“GPUaaS”) infrastructure. Operating within the emerging NeoCloud sector, the Company is focused on scalable, energy-optimized compute solutions for AI-native and enterprise customers. As of the reporting date, the Company is pre-revenue and actively evaluating multiple development sites across diverse regulatory and utility jurisdictions.

The preparation of the Company’s condensed consolidated financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, expenses, and related disclosures. These estimates are based on historical experience, current conditions, and various other factors that management believes to be reasonable under the circumstances. Actual results may differ materially from these estimates. The Company considers the following accounting policies and estimates to be critical to the understanding of its financial statements:

1.Income (Loss) per Common Share

Basic net income (loss) per common share is computed by dividing net income (loss), less the preferred stock dividends, by the weighted average number of common shares outstanding. Dilutive income (loss) per share includes any additional dilution from common stock equivalents, such as stock options and warrants, and convertible instruments, if the impact is not antidilutive. 0 and 1,027,273 common share equivalents have been excluded from the diluted loss per share calculation for the nine-month periods ended September 30, 2025 and 2024, respectively, because it would be anti-dilutive.

2.Convertible Instruments and Embedded Features

The Company has issued convertible notes with features such as mandatory conversion triggers and variable conversion prices. These instruments are assessed, Debt with Conversion and Other Options, and, Derivatives and Hedging, to determine whether embedded features require bifurcation and separate accounting. Fair value estimates of such features, when applicable, are based on inputs and require significant judgment regarding volatility, discount rates, and probability-weighted outcomes.

3.Fair Value Measurements

The Company applies, Fair Value Measurement, in the valuation of non-cash transactions, including equity issuances and debt conversions. Given the Company’s pre-revenue status and limited trading history, observable market inputs may be supplemented with internal valuation models to estimate the fair value of common stock and other instruments. These estimates impact the recognition of stock-based compensation, extinguishment of debt, and other equity-linked transactions.

4.Stock-Based Compensation

The Company will account for stock-based compensation in accordance with, Compensation—Stock Compensation. The fair value of equity awards granted to employees, directors, and consultants is estimated on the grant date using the Black-Scholes option pricing model or other appropriate valuation techniques. Key assumptions include expected volatility, risk-free interest rate, expected term, and forfeiture rates. As a public company, the Company uses its own trading history to estimate volatility, supplemented by peer data where appropriate.

5.Going Concern Assessment

In accordance, Presentation of Financial Statements—Going Concern, the Company evaluates whether there are conditions or events that raise substantial doubt about its ability to continue as a going concern within one year from the issuance of the financial statements. This assessment includes consideration of available cash, committed financing, anticipated capital raises, and the timing of potential revenue-generating deployments. Management has concluded that, while the Company is pre-revenue, its current capital structure and financing plans support its ability to continue operations for the foreseeable future.

RecentAccounting Pronouncements

For recent accounting pronouncements, please refer to the notes to financial statements in Part I, Item 1 of this Quarterly Report.

Off-BalanceSheet Arrangements

The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

ITEM

3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a smaller reporting company, we are not required to include disclosures under this item.

ITEM

4. CONTROLS AND PROCEDURES

Evaluationof Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that material information required to be disclosed in our periodic reports filed under the Securities Exchange Act of 1934, as amended, or 1934 Act, is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and to ensure that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer as appropriate, to allow timely decisions regarding required disclosure. We carried out an evaluation, under the supervision and with the participation of our management, including the principal executive officer and the principal financial officer (principal financial officer), of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13(a)-15(e) under the 1934 Act, as of the end of the period covered by this report. Based on this evaluation, because of the Company’s limited resources and limited number of employees, management concluded that our disclosure controls and procedures were not effective as of September 30, 2025.

Changesin Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the period covered by this Quarterly Report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

| 7 |

| --- |

| Table of Contents |

| --- |

PART

II – OTHER INFORMATION

ITEM

1. LEGAL PROCEEDINGS

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties and an adverse result in these or other matters may arise from time to time that may harm our business. Except as set forth below, we are currently not aware of any such pending or threatened legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results.

March 4, 2024, the Company filed a complaint against Mother Lode Mining, Inc., a Canadian company, and Robert Salna (the “Defendants”), alleging an amount of not less than $2,237,800 (plus interest, additional costs and attorneys’ fees) due from Defendants as a result of their breach of their obligations and duties arising from the sale of Compañía Minera Cerros Del Sur, S.A. de C.V. in 2023 (the “Sale”). In the complaint, filed in the United States District Court for the District of Utah, Central Division, the Company asserts claims related to alleged breach of contract and unjust enrichment against the Defendants, and seeks a monetary judgment and an award of attorneys’ fees and other expenses. The complaint arises from the Defendants’ failure to convey agreed-upon consideration to the Company as contracted for the sale of CMCS. The Company was able to effect service of process on Mother Lode Mining, Inc. through Alternative Service and litigation has proceeded since that time. On May 2, 2025, Mother Lode Mining filed a Motion to Dismiss for Failure to State a Claim against the Company, and the Company disputes the premise of their argument. The Company continues to pursue the lawsuit aggressively.

ITEM

1A. RISK FACTORS

As a smaller reporting company, we are not required to include disclosure under this item. We refer readers to our Form 10-K for additional risk factor disclosures.

ITEM

2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuanceof Common Stock

The Company has claimed exemption from registration under the Securities Act for the sales and issuances of securities in the following transactions under Section 4(a)(2) and 3(a)(9) of the Securities Act and/or Regulation D promulgated thereunder, in that such sales and issuances did not involve a public offering, as the shareholders were accredited and/or financially sophisticated and had adequate access, through business or other relationships, to information about the Company, and the sales did not involve a public offering of securities or any general solicitation or under Rule 701 promulgated under the Securities Act, in that they were offered and sold either pursuant to written compensatory plans or pursuant to a written contract relating to compensation.

On July 7, 2025, the Company issued 20,000,000 shares of common stock to Digital Asset Medium, LLC (“DAM”), a related entity, pursuant to an agreement dated July 7, 2025.

In August and September 2025, the Company issued promissory notes to investors in the aggregate amount of $1,735,000 through a Regulation D offering to thirteen lenders. On September 23, 2025, these notes were converted into 433,750 shares of common stock at $4.00 per share pursuant to a mandatory conversion feature of the notes.

On September 4, 2025, the Company issued 25,500 shares of common stock to five consultants per consulting agreements at $6.00 per share.

On September 24, 2025, the Company issued 9,408 shares of common stock to Debra D’Ambrosio for the conversion of accrued interest of $47,042 at $5.00 per share. The shares were valued at $5.50 per share and the Company recognized a loss on conversion of debt of $4,702.

---

On September 30, 2025, the Company issued 13,007 shares of common stock to DAM, a related entity, for the conversion of accrued interest of $29,129 and accounts payable of $35,908 at $5.00 per share. The shares were valued at $5.98 per share and the Company recognized a loss on conversion of debt of $12,745.

---

On September 30, 2025, the Company issued 11,000 shares of common stock to a lender for the conversion of a note payable $55,000 at $5.00 per share. The shares were valued at $5.98 per share and the Company recognized a loss on conversion of debt of $10,780.

| 8 |

| --- |

| Table of Contents |

| --- |

ITEM

3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM

4. MINE SAFETY DISCLOSURES

Not applicable as the Company conducts no mining operations in the U.S. or its territories.

ITEM

5. OTHER INFORMATION

On August 26, 2025 (the “Execution Date”), BluSky AI, Inc. (the “Company”) entered into a Contract to Buy and Sell Real Estate (Land) (the “Agreement”) with Snowy River Ranches, LLC (“SRR”). The Agreement sets forth the terms through which the Company will acquire 36.06 acres in Walsenberg, Colorado, including the Purchase Price ($248,000), Earnest Money ($10,000) Due Diligence deadlines, Closing Date and other items.

| 9 |

| --- |

| Table of Contents |

| --- |

ITEM

6. EXHIBITS

Exhibit Number	Exhibit Description
3.1	Articles of Incorporation (1)
3.2	Certificate of Amendment, effective March 5, 2010(2)
3.3	Certificate of Amendment, effective June 23, 2010(3)
3.4	Articles of Merger, effective May 17, 2013 (4)
3.5	Bylaws (1)
10.1+	Employment Agreement with Trent D’Ambrosio (5)
10.18	Settlement Agreement with Antilles Family Office, LLC dated January 18, 2023 (6)
10.19	Letter of Intent with Mother Lode Mining, Inc. effective as of January 24, 2023 (7)
10.20	Acquisition and Power Assignment Agreement with Digital Asset Medium LLC*
10.21	Contract to Buy and Sell Real Estate (Land) Agreement with Snowy River Ranches, LLC dated August 26, 2025 (8)
31.1*	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*	Certification of Chief Financial Officers pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	Inline<br> XBRL Instance Document
101.SCH	Inline<br> XBRL Schema Document
101.CAL	Inline<br> XBRL Calculation Linkbase Document
101.DEF	Inline<br> XBRL Definition Linkbase Document
101.LAB	Inline<br> XBRL Label Linkbase Document
101.PRE	Inline<br> XBRL Presentation Linkbase Document
104	Cover<br> Page Interactive Data File (embedded within the Inline XBRL document)
*	Filed<br> herewith.
---	---
+	Employment<br> Agreement
(1)	Incorporated<br> by reference from Form SB-2 filed with the SEC on October 31, 2007.
(2)	Incorporated<br> by reference from Form 8-K filed with the SEC on March 10, 2010.
(3)	Incorporated<br> by reference from Form 8-K filed with the SEC on June 28, 2010.
(4)	Incorporated<br> by reference from Form 10-Q filed with the SEC on May 20, 2013.
(5)	Incorporated<br> by reference from the Form S-1 filed with the SEC on June 2, 2019.
(6)	Incorporated<br> by reference from the Form 8-K filed with the SEC on January 25, 2023.
(7)	Incorporated<br> by reference from the Form 8-K filed with the SEC on February 8, 2023.
(8)	Incorporated<br> by reference from the Form 8-K filed with the SEC on September 2, 2025.

| 10 |

| --- |

| Table of Contents |

| --- |

SIGNATURES

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

	BLUSKY AI INC.
Date:<br> February 5, 2026	By:	/s/ Trent D’Ambrosio
	Name:	Trent<br> D’Ambrosio
	Title:	Chief<br> Executive Officer (Principal Executive Officer)
		Chief<br> Financial Officer (Principal Financial and Accounting Officer)

| 11 |

| --- |

Exhibit10.20

ACQUISITIONAND POWER ASSIGNMENT AGREEMENT

---

This Acquisition and Power Assignment Agreement (the “Agreement”) is entered into on July 7, 2025 to be effective as of July 7, 2025 (the “Effective Date”), by and between:

DigitalAsset Medium, LLC, a Wyoming limited liability company, with its principal place of business at 412 N Main St Suite 100 Buffalo, Wyoming 82834 (the “Seller”), and BluSky AI Inc., a Nevada corporation, with its principal place of business at 5330 S 900 E STE 280 Murray, Utah 84117(the “Buyer”).

Collectively, the parties are referred to as the “Parties” and individually, each is referred to as a “Party.”

RECITALS

---

WHEREAS, Seller owns the exclusive right to utilize nine and three-tenths (9.3) megawatts (“MW”) of solar and grid-interconnected power (the “Power Commitment”);

WHEREAS, the Buyer is a modular data center company dedicated to providing innovative and sustainable infrastructure solutions that power AI that is publicly-traded on the OTC Markets under the symbol “BSAI”;

WHEREAS, the Buyer desires to purchase the Seller’s rights to the Power Commitment in exchange for shares of its common stock in exchange for the consideration and upon the terms set forth below; and

WHEREAS, the Board of Directors of Buyer and Seller have each approved the proposed transaction, contingent upon satisfaction of all of the terms and conditions of this Agreement.

NOW, THEREFORE, in consideration of the foregoing recitals, which shall be considered an integral part of this Agreement, and the covenants, conditions, representations and warranties hereinafter set forth, the parties hereby agree as follows:

1.Assignment of Power Commitment

---

In exchange for the consideration as set forth herein, Seller hereby assigns, transfers, and conveys to Buyer the exclusive right to utilize nine and three-tenths (9.3) megawatts (“MW”) of solar and grid-interconnected power (the “Power Commitment”) at Seller’s existing cost of $0.068 per kilowatt-hour (“kWh”), subject to adjustment as described in Section 2, for the operational life of Buyer’s data center project located in the Milford Area of Beaver County, Utah (the “Project”). The Seller shall execute all necessary documents to show the effective assignment of the Power Commitment, including the Assignment and Transfer of Powers attached hereto as Exhibit A. All payments to the power company for the Power Commitment shall be paid by the Buyer directly. All liability under the original contract between Seller and the power company shall remain with the Seller.

2.Cost of Power

---

●	Seller<br> shall provide Buyer with written notice of any change in Seller’s cost of power as<br> soon as reasonably practicable following such change.
●	Following<br> the notification of the change in Seller’s cost of power, Buyer shall pay Seller for<br> actual kWh usage at Seller’s then-current cost, commencing upon Buyer’s absorption<br> and utilization of the Power Commitment (“Absorption Date”).

3.Consideration

---

As full and complete consideration for the assignment of the Power Commitment, Buyer shall issue to Seller twenty million (20,000,000) restricted shares of the Buyer’s common stock (the “Shares”) upon execution of this Agreement.

●	The<br> Shares shall be fully paid, non-assessable, and issued pursuant to applicable securities<br> laws.
●	The<br> Parties acknowledge and agree that the valuation of the Power Commitment and the Shares is<br> fair and reasonable.
●	Once<br> issued, the Shares will be restricted and will not be registered under the Securities<br> Act, but will be issued pursuant to applicable exemptions from such registration requirements<br> for transactions not involving a public offering under the Securities Act of 1933, as amended<br> (the “Securities Act”). Accordingly, the Shares shall be considered “restricted<br> securities” for purposes of the Securities Act, and the holders of Shares will not<br> be able to transfer such shares except upon compliance with the registration requirements<br> of the Securities Act or in reliance upon an available exemption therefrom. The certificates<br> evidencing the Shares shall contain a legend to the foregoing effect.

4.Closing and Effective Time. Subject to the provisions of this Agreement, the parties shall hold a closing (the “Closing”) at such time and place as the parties hereto may agree. Notwithstanding the foregoing, July 7, 2025, shall be considered the effective date of the Exchange for tax and accounting purposes (the “Effective Time”).

---

Term

---

Following the Effective Time, this Agreement shall remain in effect for the duration of the Project’s operational life, unless earlier terminated by mutual written agreement of the Parties.

5.Representations and Warranties

---

5.1Seller represents and warrants that:

---

●	It<br> has full right, title, and authority to assign the Power Commitment;
●	The<br> Power Commitment is not subject to any lien, encumbrance, or prior assignment;
●	The<br> cost of power stated herein is accurate as of the Effective Date.
●	It<br> is acquiring the Shares for its own account, for investment<br> purposes and not with a view towards, or for resale in connection with, the public sale or<br> distribution thereof, except pursuant to sales registered under or exempt from the registration<br> requirements of the Securities Act.
●	It<br> is an “accredited investor” as that term is defined in Rule 501(a) of Regulation<br> D of the Securities Act.

5.2Buyer represents and warrants that:

---

●	It<br> has full corporate authority to enter into this Agreement and issue the Shares;
●	The<br> Shares will be issued in compliance with all applicable laws and regulations.

6.Indemnification

---

Each Party shall indemnify, defend, and hold harmless the other Party from and against any and all claims, losses, liabilities, and expenses arising out of any breach of its representations, warranties, or obligations under this Agreement.

7.Miscellaneous

---

●	Governing Law: This Agreement shall be governed by and construed in accordance with the laws of<br> the State of Nevada, without regard to its conflict of laws principles.
●	Entire Agreement: This Agreement constitutes the entire agreement between the Parties with respect<br> to the subject matter hereof and supersedes all prior agreements or understandings.
●	Amendments:<br> Any amendment or modification must be in writing and signed by both Parties.
●	Counterparts:<br> This Agreement may be executed in counterparts, each of which shall be deemed an original.

IN WITNESS WHEREOF, the Parties have executed this Agreement as of the Effective Date.

SELLER:
Digital Asset Medium, LLC
By:	/s/ Trent D’Ambrosio
Name:	Trent D’Ambrosio
Title:	Managing Member
BUYER:
BluSky AI Inc.
By:	/s/ Trent D’Ambrosio
Name:	Trent D’Ambrosio
Title:	CEO

---

EXHIBIT31.1

OFFICER’SCERTIFICATE

PURSUANTTO SECTION 302

I, Trent D’Ambrosio, certify that:

1.	I<br> have reviewed this Quarterly Report on Form 10-Q of BluSky AI Inc.;
2.	Based<br> on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary<br> to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to<br> the period covered by this report;
3.	Based<br> on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material<br> respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in<br> this report;
4.	I<br> am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and<br> 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant<br> and have:
(a)	Designed<br> such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to<br> ensure that material information relating to the registrant is made known to me by others<br> within those entities, particularly during the period in which this report is being prepared;
---	---
(b)	Designed<br> such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my<br> supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements<br> for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated<br> the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about<br> the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;<br> and
(d)	Disclosed<br> in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s<br> most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected,<br> or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.	I<br> have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors<br> and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
---	---
(a)	All<br> significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are<br> reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information;<br> and
---	---
(b)	Any<br> fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s<br> internal control over financial reporting.
Date:<br> February 5, 2026	By:	/s/ Trent D’Ambrosio
---	---	---
	Name:	Trent<br> D’Ambrosio
	Title:	Chief<br> Executive Officer (Principal Executive Officer)

EXHIBIT31.2

OFFICER’SCERTIFICATE

PURSUANTTO SECTION 302

I, Trent D’Ambrosio, certify that:

1.	I<br> have reviewed this Quarterly Report on Form 10-Q of BluSky AI Inc.;
2.	Based<br> on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary<br> to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to<br> the period covered by this report;
3.	Based<br> on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material<br> respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in<br> this report;
4.	I<br> am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and<br> 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant<br> and have:
(a)	Designed<br> such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to<br> ensure that material information relating to the registrant is made known to me by others<br> within those entities, particularly during the period in which this report is being prepared;
---	---
(b)	Designed<br> such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my<br> supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements<br> for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated<br> the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about<br> the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;<br> and
(d)	Disclosed<br> in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s<br> most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected,<br> or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.	I<br> have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors<br> and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
---	---
(a)	All<br> significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are<br> reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information;<br> and
---	---
(b)	Any<br> fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s<br> internal control over financial reporting.
Date:<br> February 5, 2026	By:	/s/ Trent D’Ambrosio
---	---	---
	Name:	Trent<br> D’Ambrosio
	Title:	Chief<br> Financial Officer (Principal Accounting Officer)

EXHIBIT32.1

CERTIFICATIONPURSUANT TO

18U.S.C. SECTION 1350

ASADOPTED PURSUANT TO

SECTION906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of BluSky AI Inc. (the “Company”) for the period ended September 30, 2025, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Trent D’Ambrosio, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

1.	The<br> Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2.	The<br> information contained in the Report fairly presents, in all material respects, the financial condition and results of operations<br> of the Company.
Date:<br> February 5, 2026	By:	/s/ Trent D’Ambrosio
---	---	---
	Name:	Trent<br> D’Ambrosio
	Title:	Chief<br> Executive Officer (Principal Executive Officer)

EXHIBIT32.2

CERTIFICATIONPURSUANT TO

18U.S.C. SECTION 1350

ASADOPTED PURSUANT TO

SECTION906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of BluSky AI Inc. (the “Company”) for the period ended September 30, 2025, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Trent D’Ambrosio, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

1.	The<br> Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2.	The<br> information contained in the Report fairly presents, in all material respects, the financial condition and results of operations<br> of the Company.
Date:<br> February 5, 2026	By:	/s/ Trent D’Ambrosio
---	---	---
	Name:	Trent<br> D’Ambrosio
	Title:	Chief<br> Financial Officer (Principal Accounting Officer)