10-Q: Gold Rock Holdings Reports Strong Revenue Growth and Reduced Losses Amidst Business Model Shift to AI and Web3

Gold Rock Holdings, Inc. reported significant revenue increases and a narrowed net loss for the six months ended June 30, 2025, driven by its new AI and Web3 technology focus, despite ongoing concerns about its ability to continue as a going concern and identified internal control weaknesses.

Summary

• Sales revenue for the three months ended June 30, 2025, increased to $70,800 from $6,500 in the prior year period.
• Sales revenue for the six months ended June 30, 2025, surged to $138,300 compared to $6,500 for the same period in 2024.
• The K-Project AI division generated $136,800 in revenue from one customer for the six months ended June 30, 2025.
• The Loot8, Inc. Web3 content management system subsidiary generated $1,500 in revenue from one customer for the six months ended June 30, 2025.
• Gross margins remained at 100% for both the three and six months ended June 30, 2025 and 2024.
• Net income for the three months ended June 30, 2025, was $15,385, a significant improvement from a net loss of $92,999 in the prior year period.
• Net loss for the six months ended June 30, 2025, was reduced to $63,770 from $258,595 in the same period of 2024.
• Net cash provided by operating activities for the six months ended June 30, 2025, was $430, a substantial improvement from $191,174 used in the prior year period.
• Total assets as of June 30, 2025, were $258,844, with cash at $210,044 and accounts receivable at $48,800.
• Total liabilities increased to $147,400 as of June 30, 2025, primarily due to accrued Board of Directors/Officer Compensation.
• The company reported an accumulated deficit of $1,170,501 as of June 30, 2025.
• Working capital as of June 30, 2025, was $111,444.
• The company changed its business model on October 2, 2023, from engineering and construction management services to acquiring and managing technological assets, focusing on Web3 and AI.

Sentiment

Score: 3

Explanation: While the company shows significant percentage growth in revenue and a reduction in net losses, moving to a quarterly profit and positive cash from operations, these improvements are from a very low base. The explicit 'going concern' warning, substantial accumulated deficit, and identified material weaknesses in internal controls indicate severe underlying financial instability and governance issues. The reliance on an oral commitment for funding further highlights the precarious financial position. The positive operational trends are overshadowed by fundamental risks.

Positives

• Sales revenue for the three months ended June 30, 2025, increased over 10-fold to $70,800 from $6,500 in the prior year.
• Sales revenue for the six months ended June 30, 2025, increased over 20-fold to $138,300 from $6,500 in the prior year.
• Achieved a net income of $15,385 for the three months ended June 30, 2025, a significant turnaround from a $92,999 net loss in the comparable prior period.
• Reduced the net loss for the six months ended June 30, 2025, to $63,770 from $258,595 in the prior year, indicating improved operational efficiency.
• Generated positive net cash flow from operating activities of $430 for the six months ended June 30, 2025, compared to using $191,174 in the prior year.
• Maintained 100% gross margins for both the three and six-month periods.
• Successfully launched the 'Singer and Song Writer Contest' on the Loot8 Web3 platform, showcasing its technical and social media attributes.
• The K-Project division is actively developing the SAID (Speech Artificial Intelligence On Demand) translation application, which offers offline, multi-language translation capabilities with broad potential applications.

Negatives

• The company has an accumulated deficit of $1,170,501 as of June 30, 2025, raising substantial doubt about its ability to continue as a going concern.
• Identified material weaknesses in internal control over financial reporting, including inadequate segregation of duties within cash disbursement and deficiencies in the financial reporting process.
• The 'Singer and Song Writer Contest' on Loot8, Inc. had costs that outweighed the sponsorship amounts received, despite its success in showcasing technology.
• The company does not have sufficient revenues to pay its operating expenses at this time and will need additional capital for continuing operations.
• The CEO and President/Chairman currently have no compensation agreements, deferring payment until the company has a stronger financial status, indicating financial strain.
• A portion of the Loot8, Inc. CEO's compensation ($2,500 per month) is deferred and not expected until the company or subsidiary has stronger financial status.

Risks

• Substantial doubt about the company's ability to continue as a going concern due to an accumulated deficit of $1,170,501 and insufficient revenues to cover operating expenses.
• Dependence on generating profitable operations or obtaining necessary financing to meet obligations and repay liabilities.
• Cash position may not be significant enough to support daily operations.
• Inadequate segregation of duties within cash disbursement control design, posing a risk of financial errors or fraud.
• Deficiencies in the financial reporting process, with duties performed by the same individuals, leading to a lack of review and potential for undetected material misstatements.
• Reliance on an oral commitment from the CEO, Marcus Daley, to advance funds for operating requirements, with no assurances to that effect.
• The company's ability to obtain additional financing through equity issuance or debt is uncertain.
• Operating losses are anticipated before realizing growth in revenue and attaining profitability.

Future Outlook

The company intends to grow and further establish itself through mergers, acquisitions, and management of technological assets. Management's business plan is to fully deploy, market, and utilize its LOOT8 platform, expanding blockchain innovation in digital assets and the SocialFi revolution, and expanding into direct-to-business relationships. The K-Project Division expects to expand its sales and marketing of unique language learning services and other AI initiatives, including tools to create specific AI personas for various industries. The company anticipates incurring additional losses before realizing growth in revenue and will depend on additional financing to meet continuing obligations and attain profitability.

Management Comments

• Management believes that the SAID (Speech Artificial Intelligence On Demand) translation application could have enormous application for a number of industry-wide uses, including health care, first responders, travel, sports, law enforcement, and governmental agencies.
• Marcus Daley, Chief Executive Officer and Director, and Merle Ferguson, President and Chairman, have no compensation agreements with the company as of the filing date, agreeing to enter into agreements at a future time when the company has a stronger financial status.
• Anthony Denkinger, COO of Gold Rock Holdings, Inc. and CEO of LOOT8, Inc., has a compensation agreement with LOOT8, Inc. for $10,000 per month, with $2,500 being deferred and not expected until the company and/or wholly-owned subsidiary has stronger financial status.

Industry Context

Gold Rock Holdings, Inc. is pivoting its business model to align with emerging technology trends in Web3 and Artificial Intelligence. Its Loot8 subsidiary is developing a Web3 content management system focused on the 'Relationship Economy' and SocialFi, aiming to monetize relationships beyond traditional influencer models, which is a growing area in the creator economy and decentralized web. The K-Project division's focus on AI development, particularly the SAID translation app and AI persona coding services, positions the company in the rapidly expanding AI market, targeting diverse industrial and commercial applications. This strategic shift places the company in high-growth, innovative sectors, but also exposes it to the inherent volatility and competitive pressures of these nascent industries.

Comparison to Industry Standards

• The company's 100% gross margin is exceptionally high, indicating that its current revenue streams (AI services, Web3 content) have minimal direct cost of sales, which is common for software and service-based models, but may not be sustainable if scaling requires significant infrastructure or personnel costs.
• The company's accumulated deficit of over $1.1 million and explicit 'going concern' warning are significant red flags, contrasting sharply with established, profitable technology companies that typically demonstrate strong balance sheets and positive cash flows.
• The reliance on an 'oral commitment' for funding from the CEO is highly unusual and falls far short of the robust financing strategies seen in well-capitalized tech startups or public companies, which typically secure formal equity rounds or debt facilities.
• The identified material weaknesses in internal control over financial reporting, particularly regarding segregation of duties and financial statement preparation, are below industry best practices and regulatory expectations for publicly traded companies, indicating a high risk environment compared to peers with mature governance structures.

Management Changes

Corporate Governance

Related Party Transactions

• A director of the company paid one invoice of $700 during the six months ended June 30, 2024, which was treated as a capital contribution and will not be reimbursed.
• The company has a consulting agreement with a majority shareholder/board of director for $1,000 monthly; consulting expenses were $3,000 for the three months ended June 30, 2025 and 2024, and $7,000 and $6,000 for the six months ended June 30, 2025 and 2024, respectively.
• A compensation agreement for $95,000 annually, payable in common stock, with the Board Chairman was terminated in October 2023, and a new contract has not yet been agreed upon.
• An additional contract was approved for the Chief Financial Officer and Secretary for a three-year term effective January 1, 2023, in the amount of $75,000 annually to be paid in shares.
• Loot8, Inc. has an agreement to pay its officer $12,500 a month, which includes $2,500 of deferred compensation; $42,500 and $27,500 of deferred compensation are included in accrued board of director/officer compensation at June 30, 2025 and December 31, 2024, respectively.
• Board of director/officer compensation for the three and six months ended June 30, 2025, was $37,500 and $150,000, respectively (compared to $37,500 and $137,500 in 2024).
• The company utilizes services of Yes International Inc., controlled by Board member Mr. Richard Kaiser, which provides all services at no cost except for press release wire services and filing fees ($2,841 for six months ended June 30, 2025).
• The company operates out of Yes International Inc. offices at no cost.

Stakeholder Impact

• Shareholders face significant risk due to the 'going concern' warning, accumulated deficit, and reliance on uncertain future financing, potentially leading to dilution if new equity is raised.
• Employees and officers, particularly the CEO and President/Chairman, are deferring compensation, indicating potential financial strain on personnel.
• Customers of the K-Project AI division and Loot8, Inc. may benefit from the company's focus on innovative AI and Web3 technologies, but the company's financial instability could pose risks to service continuity.
• Creditors face elevated risk due to the company's 'going concern' status and accumulated deficit, which may impact its ability to meet future obligations.

Next Steps

• Fully deploy, market, and utilize the LOOT8 platform, expanding 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 from the K-Project.
• Create specific AI personas for various industries including health care, law enforcement, governmental agencies, education, shipping logistics, and travel.
• Management is attempting to continue operations and generate revenues.
• Management is taking actions to further implement the company's business plan and expand sales with a dynamic marketing campaign.
• The company will need to obtain additional financing to meet its obligations and repay liabilities, and to continue operations.
• The company will need to address and remediate the identified material weaknesses in internal control over financial reporting.

Key Dates

Recommendation

Despite significant percentage increases in revenue and a reduction in net losses, the company explicitly states 'substantial doubt about the Company's ability to continue as a going concern' due to its accumulated deficit and insufficient revenues. Material weaknesses in internal controls further compound the risk. The reliance on an 'oral commitment' for funding is highly precarious. While the business model pivot to AI and Web3 is strategically sound, the current financial instability and governance issues present an unacceptably high risk for seasoned investors, making a 'sell' recommendation appropriate.

Keywords

AI, Web3, Artificial Intelligence, Blockchain, SocialFi, Content Management System, SAID translation app, K-Project, Loot8, Technology Acquisition, Software as a Service, Platform as a Service, SEC Filing, Quarterly Report, Financial Performance, Going Concern, Internal Controls