10-Q: BluSky AI Pivots to AI Data Centers Amidst Mounting Losses

Sentiment:

Quarterly Report 5 February 2026 4:53 PM

BluSky AI Inc. reports a significant net loss and working capital deficit for Q3 2025, signaling financial challenges despite a strategic pivot to AI-driven data center solutions.

Delay expectedPayments on the Ground Lease for the Milford, Utah land are being deferred until the Company is in a better cash flow position.The solar power asset will not be placed into service until the Milford project has been built and is beginning to use power, indicating a delay in asset utilization and amortization.

Capital raiseRaised $1,735,000 in gross proceeds through a Regulation D offering of convertible promissory notes in August and September 2025.Subsequent to the reporting period, raised an additional $50,000 through a Regulation D offering on October 15, 2025.Subsequent to the reporting period, raised another $50,000 through a Regulation D offering on November 9, 2025.The company anticipates generating losses and may be unable to continue operations without acquiring additional capital and issuing debt or equity or entering into a strategic arrangement.

Worse than expectedNet loss significantly increased from $(1,039,455) for the nine months ended September 30, 2024, to $(4,014,763) for the same period in 2025.The company continues to operate with a substantial working capital deficit of $(1,922,014).Management explicitly stated substantial doubt about the company's ability to continue as a going concern.Disclosure controls and procedures were deemed ineffective, indicating internal weaknesses.

Summary

BluSky AI Inc. (formerly Inception Mining, Inc.) rebranded in March 2025, shifting its business focus from mining to AI-driven data center solutions, operating as a Neocloud provider specializing in GPU-as-a-Service (GPUaaS).
The company reported a net loss of $2,633,232 for the three months ended September 30, 2025, a substantial increase from $279,946 for the same period in 2024.
For the nine months ended September 30, 2025, the net loss was $4,014,763, compared to $1,039,455 for the corresponding period in 2024.
As of September 30, 2025, the company had a working capital deficit of $1,922,014 and an accumulated deficit of $33,878,127.
Cash and cash equivalents increased to $1,295,261 as of September 30, 2025, from $0 at December 31, 2024, primarily due to financing activities.
BluSky AI issued 20,000,000 restricted common shares to Digital Asset Medium, LLC (a related party) for the assignment of a 9.3 MW solar and grid-interconnected power commitment, valued at $1,289,309, which resulted in a deemed dividend of $8,510,691.
The company raised $1,735,000 through a Regulation D offering of convertible promissory notes in August and September 2025, which were subsequently converted into 433,750 shares of common stock at $4.00 per share.
A lawsuit against Mother Lode Mining, Inc. for breach of contract, seeking not less than $2,237,800, is ongoing, with Mother Lode Mining having filed a Motion to Dismiss.
Management concluded that disclosure controls and procedures were not effective as of September 30, 2025, citing limited resources and employees.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this as a high-risk, early-stage venture with significant financial distress (going concern doubt, increasing losses) despite an ambitious pivot into a promising industry. The reliance on related-party financing and ineffective internal controls further dampens sentiment.

Positives

Successfully pivoted to the high-growth AI-driven data center and GPU-as-a-Service (GPUaaS) market, positioning itself as a Neocloud operator.
Secured an exclusive right to utilize 9.3 megawatts (MW) of solar and grid-interconnected power for a data center project in Milford, Utah, at a competitive cost of $0.068 per kilowatt-hour (kWh).
Increased cash and cash equivalents to $1,295,261 as of September 30, 2025, from $0 at December 31, 2024, primarily through financing activities.
Successfully raised $1,735,000 through a Regulation D offering and converted these notes into equity, simplifying the capital structure.
Negotiated a settlement for two convertible notes with 1800 Diagonal Lending, LLC for $125,000, resulting in a gain on forgiveness of debt of $338,673.
Entered into an agreement to acquire 36.06 acres in Walsenberg, Colorado, for future development.

Negatives

Reported a substantial net loss of $4,014,763 for the nine months ended September 30, 2025, significantly higher than the $1,039,455 loss for the same period in 2024.
Maintained a significant working capital deficit of $1,922,014 as of September 30, 2025.
Accumulated deficit reached $33,878,127 as of September 30, 2025.
Management explicitly identified substantial doubt about the company's ability to continue as a going concern for a period of one year from the issuance of the financial statements.
Experienced a significant increase in general and administrative expenses, primarily driven by higher consulting, legal, and investor relations costs.
Recognized a non-cash loss on extinguishment of debt totaling $2,103,750 from the mandatory conversion of Regulation D notes.
Disclosure controls and procedures were deemed ineffective as of September 30, 2025, due to limited resources and employees.
Ongoing litigation against Mother Lode Mining, Inc. for breach of contract, seeking over $2.2 million, presents an uncertain financial and operational risk.
Payments on the Ground Lease for the Milford, Utah land are being deferred until the company is in a better cash flow position.

Risks

**Going Concern**: Substantial doubt exists about the company's ability to continue as a going concern for the next year due to recurring losses and a significant working capital deficit.
**Liquidity Risk**: The company does not have sufficient working capital to execute its stated plan of operation for the next twelve months and is dependent on obtaining additional funding.
**Operational Risk**: The company's existence is dependent on management's ability to develop profitable operations in the new AI data center business and secure additional funding sources.
**Litigation Risk**: An ongoing lawsuit against Mother Lode Mining, Inc. for breach of contract, seeking over $2.2 million, has an uncertain outcome that could materially impact the company's financial position and results of operations.
**Internal Control Weaknesses**: Disclosure controls and procedures were deemed ineffective, increasing the risk of material misstatements in financial reporting.
**Pre-revenue Status**: The company is currently pre-revenue in its new AI data center business, relying entirely on financing to fund operations and development.
**Related Party Dependence**: Extensive reliance on related party financing and transactions introduces potential governance and conflict of interest risks.
**Market Risk**: Exposure to economic, social, and political conditions, global economic downturns, interest rate risks, and intense competition within the AI data center market.

Future Outlook

The company plans to organically grow its AI operations by developing multiple modular data center sites across various U.S. jurisdictions, focusing on leveraging existing or developable power capacities. This strategy aims to accelerate time to market and provide cost-effective solutions for the surging demand for advanced AI services. Management is actively working to achieve profitable operations and secure additional funding to support the company's cash needs for the next twelve months and beyond.

Management Comments

"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."
"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."
"Management concluded that our disclosure controls and procedures were not effective as of September 30, 2025."
"The Company intends to continue to pursue the lawsuit aggressively."

Industry Context

StockSavvy.ai notes that BluSky AI's pivot to AI-driven data center solutions and GPU-as-a-Service (GPUaaS) positions it in a rapidly expanding and high-demand sector. The 'Neocloud' concept, specializing in high-performance computing for AI/ML workloads, addresses a critical market gap. However, the company's pre-revenue status and significant losses highlight the substantial capital requirements and execution risks inherent in competing with established cloud providers and specialized AI infrastructure firms. The modular data center approach could offer agility, but scaling will require substantial, consistent funding.

Comparison to Industry Standards

The filing does not provide specific comparisons to industry benchmarks or competitors.
StockSavvy.ai notes that without revenue, direct comparison to established AI infrastructure providers like NVIDIA (GPUaaS through partners), Amazon Web Services (AWS), Google Cloud, or Microsoft Azure is not feasible.
The stated power cost of $0.068 per kWh for the Milford project is competitive, but the overall cost structure and operational efficiency remain unproven compared to industry leaders who benefit from economies of scale and established infrastructure.
The company's modular design and focus on 'powered land assets' aim to accelerate deployment, a strategy also pursued by other emerging players in the edge computing and specialized data center space, but BluSky AI's execution and market penetration are yet to be demonstrated.

Corporate Governance

Change Type	Description	Effective Date	Impact Assessment
Internal Control Weakness	Management concluded that disclosure controls and procedures were not effective as of September 30, 2025, due to the company's limited resources and number of employees.	2025-09-30	This weakness increases the risk of material misstatements in financial reporting and indicates a need for significant improvement in internal controls.

Legal Proceedings

On March 4, 2024, the company filed a complaint against Mother Lode Mining, Inc. and Robert Salna in the United States District Court for the District of Utah, Central Division.
The complaint alleges breach of contract and unjust enrichment, seeking not less than $2,237,800 (plus interest, additional costs, and attorneys' fees) related to the 2023 sale of Compaa Minera Cerros Del Sur, S.A. de C.V.
Mother Lode Mining filed a Motion to Dismiss For Failure to State a Claim on May 2, 2025, which the company disputes.
Management believes the ultimate liability, if any, may have a material impact on the company's business, financial position, results of operations, or liquidity.

Related Party Transactions

**Digital Asset Medium, LLC (DAM)**: Managing member, Trent D'Ambrosio, is also the Company's CEO. Issued 20,000,000 restricted common shares to DAM for the assignment of a 9.3 MW solar and grid-interconnected power commitment, valued at $1,289,309. Formalized unsecured Short-Term Promissory Notes totaling $480,000 on January 9, 2025, bearing 15.00% interest. Issued 13,007 shares of common stock on September 30, 2025, for conversion of accrued interest ($29,129) and accounts payable ($35,908).
**Debra D'Ambrosio (Immediate Family Member of Director)**: Multiple unsecured Short-Term Promissory Notes totaling $446,210 (principal) and $81,204 (accrued interest) were renegotiated into one non-interest bearing note. Additional notes totaling $50,395, $62,851, and $406 were formalized and subsequently paid off. Issued 9,408 shares of common stock on September 24, 2025, for accrued interest of $47,042.
**Cluff-Rich PC 401K (Affiliate Controlled by Director)**: Holds an unsecured Short-Term Promissory Note with a gross balance of $46,000 as of September 30, 2025. Issued 5,143 shares of common stock on February 1, 2023, to settle $18,000 in accrued interest.
**Whit Cluff (Director)**: Holds an unsecured Short-Term Promissory Note with a gross balance of $15,327 as of September 30, 2025. Issued 100,000 restricted shares of Common Stock on June 10, 2025, for services rendered, valued at $40,100.
**Francis E. Rich (Immediate Family Member)**: Holds an unsecured note with a gross balance of $100,000 as of September 30, 2025. Issued 16,429 shares of common stock on February 1, 2023, to settle $57,500 in accrued interest.
**Pine Valley Investments, LLC (Affiliate Controlled by Director)**: Holds an unsecured note with a gross balance of $295,000 as of September 30, 2025. Issued 32,929 shares of common stock on February 1, 2023, to settle $115,250 in accrued interest.
**Wild Mustang Ventures LLC (Affiliate)**: Entered into a Ground Lease with an Option to Purchase for 51.6 acres in Milford, Utah, with an annual base rent of $90,000, with payments currently deferred.
**Trent D'Ambrosio (CEO/Director)**: Has an employment agreement for $300,000 annually, with $1,311,788 in deferred salaries as of September 30, 2025. Issued 500,000 restricted shares of Common Stock on June 10, 2025, for services rendered, valued at $200,500. Along with other officers/directors, has paid company expenses on personal credit cards, accruing $104,839 in accounts payable.

Stakeholder Impact

**Shareholders**: Face significant dilution from recent and potential future stock issuances to fund operations and settle debt. The 'going concern' warning and increasing losses pose substantial risk to share value.
**Employees**: Deferred salaries indicate potential cash flow issues that could impact employee compensation and morale.
**Creditors**: Related party creditors are providing significant financing, some with deferred or non-interest bearing terms, indicating their critical role in the company's liquidity. Unrelated creditors face heightened risk due to the company's financial distress.
**Customers**: As a pre-revenue company in its new business, there is no direct impact on current customers, but the successful execution of the AI data center strategy is vital for future customer acquisition and retention.
**Suppliers**: Potential for delayed payments or renegotiated terms due to the company's cash flow constraints and reliance on external funding.

Next Steps

Develop profitable operations in the AI-driven data center solutions business.
Obtain additional funding sources to meet cash needs for the next twelve months and beyond.
Continue to aggressively pursue the lawsuit against Mother Lode Mining, Inc.
Build out the Milford data center project to enable the utilization of the solar power asset.
Complete additional agreements for the power commitment, including a system impact study and an energy services agreement from the local provider.
Finalize the acquisition of 36.06 acres in Walsenberg, Colorado.

Key Dates

Date	Description
2007-07-02	Incorporated as Golf Alliance Corporation in Nevada.
2010-03-05	Amended articles of incorporation to change name to Silver America, Inc. and increase authorized common stock.
2010-06-23	Amended articles of incorporation to change name to Gold American Mining Corp.
2013-01-11	Issued an unsecured Promissory Note to Phil Zobrist in the principal amount of $60,000.
2013-01-28	Inception Development, Inc. incorporated in Idaho.
2013-02-25	Asset Purchase Agreement closed with Inception Resources, LLC for the U.P. and Burlington Gold Mine.
2013-05-17	Amended articles of incorporation to change name to Inception Mining, Inc.
2015-10-02	Consummated a merger with Clavo Rico Ltd.
2019-04-01	Employment agreement with CEO Trent D'Ambrosio became effective.
2020-02-21	Sold the Up & Burlington property and mineral rights to Ounces High Exploration, Inc.
2023-01-01	Six notes outstanding with D. DAmbrosio with outstanding balance of $446,210 and accrued interest of $81,204.
2023-01-01	Two notes outstanding with Francis E. Rich with outstanding balance of $100,000 and accrued interest of $47,500.
2023-01-01	Three notes outstanding with Pine Valley Investments, LLC with outstanding balance of $295,000 and accrued interest of $115,250.
2023-01-12	Entered into a non-binding Letter of Intent (LOI) with Mother Lode Mining, Inc. to sell its wholly-owned subsidiary, Compaa Minera Cerros Del Sur, S.A. de C.V. (CMCS).
2023-01-24	The LOI with Mother Lode Mining, Inc. became binding.
2023-02-01	Renegotiated notes with D. DAmbrosio, Francis E. Rich, and Pine Valley Investments, LLC into single non-interest bearing notes.
2023-03-01	Monthly payments from Mother Lode Mining, Inc. began.
2023-03-21	Issued an unsecured Promissory Note to Antczak Polich Law, LLC.
2023-09-22	Entered into a consulting agreement with William McCluskey.
2024-01-23	Issued an unsecured Convertible Promissory Note to 1800 Diagonal Lending, LLC for $63,250.
2024-03-04	Filed a complaint against Mother Lode Mining, Inc. and Robert Salna.
2024-03-28	Issued an unsecured Short-Term Promissory Note to Whit Cluff for $15,327.
2024-05-03	Issued an unsecured Convertible Promissory Note to 1800 Diagonal Lending, LLC for $116,550.
2024-06-10	Issued 1,100,000 restricted shares of Common Stock to five individuals for services rendered.
2024-08-02	Issued 20,870 restricted shares of Common Stock to 1800 Diagonal Lending LLC upon conversion of debt.
2024-10-01	Formalized unsecured Short-Term Promissory Notes to D. DAmbrosio totaling $50,395.
2024-11-01	Formalized unsecured Short-Term Promissory Notes to D. DAmbrosio totaling $62,851.
2024-12-31	Fiscal year ended.
2025-01-01	Formalized unsecured Short-Term Promissory Notes to D. DAmbrosio totaling $406.
2025-01-09	Formalized unsecured Short-Term Promissory Notes to Digital Asset Medium, LLC totaling $480,000.
2025-01-09	Negotiated settlement of both notes with 1800 Diagonal Lending LLC and paid in full.
2025-03-01	Company focused its operations on artificial intelligence compute infrastructure.
2025-03-10	Reverse stock split (1,000-for-1) became effective.
2025-04-01	Issued 200,000 restricted shares of Common Stock to an individual for services rendered.
2025-05-02	Mother Lode Mining filed a Motion to Dismiss For Failure to State a Claim against the Company.
2025-06-10	Issued 500,000 restricted shares of Common Stock to Trent DAmbrosio for services rendered.
2025-06-10	Issued 100,000 restricted shares of Common Stock to Whit Cluff for services rendered.
2025-06-24	Issued 500,000 restricted shares of Common Stock to an individual for services rendered.
2025-07-07	Entered into an Acquisition and Power Assignment Agreement with Digital Asset Medium, LLC.
2025-07-11	Entered into a Ground Lease with an Option to Purchase with Wild Mustang Ventures LLC for 51.6 acres in Milford, Utah.
2025-07-16	Made a payment of $5,000 towards the Cluff-Rich PC 401K note.
2025-08-01	Regulation D offering of convertible promissory notes issued to 13 accredited lenders.
2025-08-05	Paid-off the balance of a D. DAmbrosio note of $45,965.
2025-08-26	Entered into a Contract to Buy and Sell Real Estate (Land) with Snowy River Ranches, LLC.
2025-09-01	Paid-off the balance of a D. DAmbrosio note of $406.
2025-09-04	Issued 25,500 shares of common stock to five consultants per consulting agreements.
2025-09-23	Regulation D notes mandatorily converted into 433,750 shares of common stock.
2025-09-24	Issued 9,408 shares of common stock to D. DAmbrosio for the conversion of accrued interest.
2025-09-30	End of the quarterly period.
2025-09-30	Paid $10,000 towards the Antczak Polich Law, LLC note, with the remaining $55,000 converted into 11,000 shares of common stock.
2025-09-30	Issued 13,007 shares of common stock to Digital Asset Medium, LLC for the conversion of accrued interest and accounts payable.
2025-10-15	Raised $50,000 through a Regulation D offering, issuing a convertible promissory note (subsequent event).
2025-10-31	Issued 5,000 shares of common stock to a consultant (subsequent event).
2025-11-09	Raised $50,000 through a Regulation D offering, issuing a convertible promissory note (subsequent event).
2025-12-12	Lender elected to convert the November 9, 2025 note into 13,441 shares of common stock (subsequent event).
2025-12-15	Issued 2,500 shares of common stock to a consultant (subsequent event).
2026-01-10	Lender elected to convert the October 15, 2025 note into 13,694 shares of common stock (subsequent event).
2026-02-04	As of this date, there were 24,992,505 shares of common stock issued and outstanding.
2026-02-05	Filing date of the Form 10-Q.

Recommendation

strong sell

The company faces severe financial distress, evidenced by a substantial working capital deficit, rapidly increasing net losses, and an explicit 'going concern' warning from management. While the strategic pivot to the high-growth AI data center market is ambitious, the company is pre-revenue in this new venture and lacks the financial stability to execute its plans without significant, uncertain future capital raises. Ineffective internal controls and ongoing litigation further compound the risks, making the stock a highly speculative and risky investment.

Keywords

AI data centers, GPU-as-a-Service, Neocloud, Artificial Intelligence, Modular data centers, SEC 10-Q, Financial reporting, Going concern, Convertible notes, Related party transactions, Mining divestiture, Utah, Colorado

Disclaimer:The information provided here is for general informational purposes only and does not constitute financial advice, recommendation, or endorsement of any kind. It may contain errors or omissions. You should not rely on this information to make financial decisions. Always seek the advice of a qualified financial professional before making any investment or financial decisions. Use of this information is at your own risk.