10-Q: Gold Rock Holdings Q3 2025: Revenue Up, Losses Persist

Gold Rock Holdings, Inc. reported increased sales for the nine months ended September 30, 2025, driven by its K-Project AI division, but continues to face significant net losses and a going concern warning.

Summary

• Sales for the nine months ended September 30, 2025, increased significantly to $211,500, up from $72,500 in the prior year period.
• The net loss for the nine months ended September 30, 2025, improved to $(64,445) compared to a net loss of $(238,190) for the same period in 2024.
• However, the company reported a net loss of $(675) for the three months ended September 30, 2025, a decline from a net income of $20,405 in the comparable 2024 quarter.
• Cash decreased slightly to $207,499 at September 30, 2025, from $209,614 at December 31, 2024.
• Total liabilities increased to $142,490 at September 30, 2025, from $78,400 at December 31, 2024, primarily due to accrued Board of Director/Officer Compensation.
• The company has an accumulated deficit of $1,171,176 and a going concern warning due to operating losses and insufficient capital.
• Gold Rock Holdings is focused on its LOOT8 Web3 platform and K-Project AI division, including the SAID translation application.

Sentiment

Score: 3

Explanation: While there's revenue growth and an improved nine-month net loss, the persistent accumulated deficit, going concern warning, and material weaknesses in internal controls present significant financial and operational challenges. The reliance on an oral commitment for funding underscores the precarious financial position, outweighing the positive developments in revenue and AI/Web3 initiatives.

Positives

• Nine-month sales revenue significantly increased to $211,500 in 2025 from $72,500 in 2024, primarily driven by the K-Project AI division.
• Net loss for the nine months ended September 30, 2025, substantially improved to $(64,445) from $(238,190) in the prior year.
• Net cash used in operating activities for the nine months ended September 30, 2025, significantly decreased to $(2,115) from $(210,505) in the prior year.
• The K-Project AI division is actively developing and selling AI services, including the SAID (Speech Artificial Intelligence On Demand) translation application.
• LOOT8, Inc. successfully launched a "Singer and Song Writer Contest" on its Web3 platform, showcasing its technical and social media attributes.

Negatives

• The company reported a net loss of $(675) for the three months ended September 30, 2025, a decline from a net income of $20,405 in the same period of 2024.
• Total liabilities increased significantly to $142,490 at September 30, 2025, from $78,400 at December 31, 2024, largely due to accrued Board of Director/Officer Compensation.
• Total stockholders' equity decreased to $113,809 at September 30, 2025, from $175,214 at December 31, 2024.
• The accumulated deficit grew to $1,171,176 at September 30, 2025.
• LOOT8, Inc. currently has no revenue from its core Web3 content management system and the "Singer and Song Writer Contest" costs outweighed sponsorship amounts.
• The company's disclosure controls and procedures were deemed not effective as of September 30, 2025.
• A material weakness in internal control over financial reporting was identified due to inadequate segregation of duties and lack of review in the financial reporting process.

Risks

• **Going Concern**: The company has an accumulated deficit of $1,171,176 and operating losses, raising substantial doubt about its ability to continue as a going concern.
• **Liquidity and Capital Resources**: The company needs additional capital for its business plan and continuing operations, and does not have sufficient revenues to pay operating expenses. Without additional working capital, it may cease operations or substantially change its business.
• **Internal Control Weaknesses**: Inadequate segregation of duties within cash disbursement control design and a lack of review in the financial reporting process constitute a material weakness, potentially leading to undetected material misstatements.
• **Dependence on Financing**: The ability to obtain additional financing through equity or debt is uncertain.
• **New Business Model Risk**: The company changed its business model in October 2023 to acquire technological assets, which may carry inherent risks associated with new ventures and market acceptance.
• **Customer Concentration**: Sales for the K-Project division are concentrated with one customer for AI services.
• **LOOT8 Revenue Generation**: LOOT8, Inc. is in beta testing and has nominal revenue, with its new monetization model still in planned stages. The initial contest costs outweighed sponsorship.
• **Uncertainty of Sponsorship Agreements**: The sponsorship agreement with a University of Houston consultant was terminated, and a direct agreement is yet to be set in place.

Future Outlook

Management intends to fully deploy, market, and utilize its LOOT8 platform, expanding blockchain innovation in digital assets and the SocialFi revolution, while also building out its K-Project Division, focusing on AI software solutions, language learning services, and tools to create specific AI personas for various industries. The company plans to focus on Annual Contract Value (ACV) and Annual Recurring Revenue (ARR) from corporate clients for its enterprise model.

Management Comments

• "Management believes that the [SAID] App could have an enormous application for a number of industry wide uses, including but not limited to health care, first responders, travel, sports, law enforcement, governmental agencies, and other industries."
• "Management believes that the actions presently being taken to further implement the Company's business plan; to expand sales with a dynamic marketing campaign and generate revenues provide the opportunity for the Company to continue as a going concern."
• "Unless the Company is able to raise working capital, it is likely that the Company will either have to cease operations or substantially change its methods of operations or change its business plan."
• "For the next 12 months the Company has an oral commitment from its CEO, Marcus Daley, to advance funds as necessary to meeting our operating requirement."

Industry Context

Gold Rock Holdings is pivoting into the rapidly evolving Web3 and Artificial Intelligence sectors, aiming to capitalize on emerging trends like SocialFi, digital assets, and AI-driven language and persona applications. Its LOOT8 subsidiary is targeting the 'Relationship Economy' and new monetization models, while the K-Project division is developing AI solutions for diverse industrial and commercial applications. This strategic shift places the company in highly competitive and capital-intensive markets, where success depends on innovation, market adoption, and significant investment, contrasting with its prior engineering and construction management services.

Comparison to Industry Standards

• The company's accumulated deficit of over $1.17 million and ongoing operating losses, coupled with a "going concern" warning, indicate performance significantly below industry standards for a stable, profitable technology company.
• The identified material weaknesses in internal controls, particularly regarding segregation of duties and financial reporting review, are below best practices for corporate governance and financial integrity, especially for a publicly traded entity.
• While the company is developing products in high-growth areas like Web3 and AI, its current revenue generation from these new ventures is minimal ($1,500 from LOOT8 in nine months) and its cash position is low ($207,499), suggesting it is far from achieving the scale or profitability seen in established or even rapidly growing startups in these sectors.
• The reliance on an oral commitment from the CEO for future funding is not a standard or sustainable financing strategy for a public company and highlights significant financial instability compared to peers with robust balance sheets or access to capital markets.

Management Changes

Corporate Governance

Legal Proceedings

• No material pending legal proceedings to which the Company is a party or as to which any of its services and products are subject, and no such proceedings are known to the Company to be threatened or contemplated against it.

Related Party Transactions

• A director contributed $700 to the company during the nine months ended September 30, 2024, which will not be reimbursed.
• Consulting agreement with a majority shareholder/board director for $1,000 monthly.
• Board of Director/Officer compensation for the three and nine months ended September 30, 2025, was $37,500 and $187,500, respectively.
• Loot8, Inc. has an agreement to pay its officer (Anthony Denkinger) $12,500 a month, including $2,500 of deferred compensation. $50,000 of deferred compensation is included in accrued compensation at September 30, 2025.
• The company utilizes services from Yes International Inc., controlled by director Richard Kaiser, at no cost except for press release wire services and filing fees ($2,275 for three months and $5,900 for nine months ended September 30, 2025). The company also operates out of Yes International Inc. offices at no cost.
• Marcus Daley (CEO) and Merle Ferguson (President/Chairman) currently have no compensation agreements, agreeing to enter into them when the company's financial status is stronger.

Stakeholder Impact

• **Shareholders**: Face significant dilution risk from potential future capital raises, risk of loss of investment due to the going concern warning, and uncertainty regarding the effectiveness of internal controls. Current equity value has decreased.
• **Employees/Officers**: Some officers (Anthony Denkinger) have deferred compensation, indicating potential payment delays. CEO and Chairman have no current compensation, relying on future financial improvement.
• **Creditors**: Face increased risk due to the company's accumulated deficit, ongoing losses, and going concern warning, which may impact the company's ability to repay liabilities.
• **Customers**: The company's focus on developing new AI and Web3 services could lead to innovative offerings, but the financial instability and customer concentration (one customer for K-Project AI services) pose risks to service continuity and diversification.

Next Steps

• Fully deploy, market, and utilize the LOOT8 Web3 platform.
• Expand blockchain innovation in digital assets and the SocialFi revolution.
• Expand into direct-to-business relationships with the LOOT8 platform.
• Build forward the K-Project Division, focusing on AI software solutions and programs.
• Expand sales and marketing of unique language learning services and other AI initiatives tools.
• Seek additional financing to meet obligations and attain profitability.
• Address and remediate identified material weaknesses in internal control over financial reporting.
• Potentially enter into a direct sponsorship agreement with the University of Houston.
• Marcus Daley (CEO) and Merle Ferguson (President/Chairman) to enter into compensation agreements when the company has a stronger financial status.

Key Dates

Recommendation

The company faces severe financial distress, evidenced by a significant accumulated deficit, ongoing net losses, and an explicit 'going concern' warning. The material weaknesses in internal controls raise serious concerns about financial reporting reliability and corporate governance. While there's revenue growth in the AI division, the overall financial health is precarious, with a heavy reliance on future capital raises and an oral commitment from the CEO for short-term funding. The high risk of business cessation or substantial operational changes, coupled with declining equity, makes this a high-risk investment with a strong likelihood of further value erosion.

Keywords

Gold Rock Holdings, GRHI, 10-Q, Quarterly Report, AI, Web3, SocialFi, SAID translation app, K-Project, LOOT8, Technology assets, Financial results, Going concern, Internal controls, SEC filing