10-K: BluSky AI Reports Significant Losses, Going Concern Doubt

BluSky AI Inc., transitioning to AI data centers, reported a net loss of $4.5 million for 2025 and faces substantial doubt about its ability to continue as a going concern.

Summary

• BluSky AI Inc. (formerly Inception Mining Inc.) completed a strategic transformation in March 2025, shifting from mining operations to becoming a pre-fabricated modular data center provider specializing in artificial intelligence (AI) and high-performance computing (HPC).
• The company reported a net loss of $4,515,516 for the year ended December 31, 2025, a significant increase from the $949,782 net loss in 2024.
• As of December 31, 2025, the accumulated deficit since inception reached $34,378,880, with a working capital deficit of $2,293,390 and a stockholders' deficiency of $930,493.
• Auditors and management have expressed substantial doubt about the company's ability to continue as a going concern due to recurring losses, negative cash flows from operations, and insufficient working capital.
• BluSky AI plans to deploy rapidly deployable SkyMod data centers, targeting initial sites ranging from 1 MW to 60 MW across various U.S. jurisdictions, leveraging existing power infrastructure.
• The company controls 51 acres in Milford, Utah, under a ground lease and has letters of intent for an additional 0.375-acre site in Nephi, Utah (4 MW potential power), and 9 other sites totaling over 100 acres with an estimated potential power capacity exceeding 150 MW, bringing total potential capacity to over 250 MW.
• A legal dispute with Mother Lode Mining Inc. regarding the divestiture of the Clavo Rico mine was settled on February 4, 2026, with a mutual dismissal of claims and no further amounts expected to be collected under the original Letter of Intent.
• The company's revenue model is planned to include leasing and subscription services for modular data centers, integrated infrastructure services, and strategic partnerships with commercial and governmental clients.
• BluSky AI relies heavily on related-party financing and stock issuances for services, including 20,000,000 shares issued to Digital Asset Medium, LLC (controlled by the CEO) for a solar power asset valued at $1,289,309, resulting in a deemed dividend of $8,510,691.
• The company raised $1,735,000 through a Reg D campaign in August and September 2025, which converted into 433,750 shares of common stock at $4.00 per share, leading to a $2,103,750 loss on extinguishment of debt.

Sentiment

Score: 2

Explanation: StockSavvy.ai views this filing with very low sentiment due to significant and increasing net losses, a substantial accumulated deficit, severe working capital deficiency, and explicit going concern doubt from both management and auditors. While the strategic pivot to AI data centers is positive, the current financial instability and heavy reliance on related-party financing overshadow future potential.

Positives

• The company has strategically rebranded and pivoted to the high-growth artificial intelligence (AI) and high-performance computing (HPC) data center market, which Grandview Research estimates will grow at a 35.9% annual CAGR over the next 7 years.
• BluSky AI's 'SkyMod' modular data center design offers potential advantages in speed-to-market, energy optimization, and scalability compared to traditional data centers.
• The company has secured control or letters of intent for multiple development sites across the western and central U.S., with a potential power capacity exceeding 250 MW, indicating a clear expansion strategy.
• The planned GPU-as-a-Service model provides flexible, consumption-based access to top-tier GPUs, addressing the surging demand for AI compute power without significant capital burden for clients.
• The settlement of the legal dispute with Mother Lode Mining Inc. resolves a significant legacy issue, allowing the company to focus on its new strategic direction.

Negatives

• Reported a substantial net loss of $4,515,516 for the year ended December 31, 2025, a significant increase from the prior year's loss.
• The company has an accumulated deficit of $34,378,880, a working capital deficit of $2,293,390, and a stockholders' deficiency of $930,493 as of December 31, 2025.
• Auditors have expressed substantial doubt about the company's ability to continue as a going concern due to recurring losses and insufficient cash resources.
• The company relies heavily on related-party financing and stock issuances for services, indicating a lack of traditional external funding sources.
• Significant loss on extinguishment of debt totaling $1,975,924 in 2025, primarily from mandatory conversions of convertible notes.
• General and administrative expenses increased substantially to $2,665,889 in 2025 from $520,378 in 2024, primarily due to consulting fees and investor relations.
• The company has minimal cash on hand ($960,436 as of December 31, 2025) and does not have sufficient working capital to fund operations for the next twelve months.
• The company does not carry property or casualty insurance, exposing it to significant financial risk from potential operational disruptions or natural disasters.
• Identified material weaknesses in internal control over financial reporting due to limited resources and lack of segregation of duties.

Risks

• Reliance on third parties and disruptions in the supply chain for modular data center components and specialized equipment (e.g., liquid cooling systems) could cause significant delays and increased costs.
• Volatility in the global semiconductor supply chain, including shortages, geopolitical restrictions, and high demand from cloud and AI companies, impacts GPU availability and pricing, increasing procurement risks.
• Dependence on a few major GPU manufacturers (e.g., NVIDIA and AMD) increases exposure to their pricing and supply decisions.
• Risks related to the U.S. energy grid, including aging infrastructure, regulatory restrictions on energy consumption, sustainability requirements, and potential grid instabilities, could affect power supply and operational costs.
• Government contracts may be subject to renegotiation of profits or termination at the government's discretion, leading to financial losses and requiring compliance with evolving security and data protection requirements.
• Operating in a highly competitive data center market with larger, more established players (AWS, Google, Microsoft) who benefit from economies of scale and long-established supply chains.
• The occurrence of uncontrollable events, such as pandemics, could negatively affect operations, limit access to facilities, and impact financial condition.
• The company has incurred losses since its inception in 2007 and may never be profitable, raising substantial doubt about its ability to continue as a going concern.
• Exposure to legal proceedings and litigation, which can be expensive and unpredictable, with no property or casualty insurance to mitigate these risks.
• High competition in acquiring desirable 'powered lands' and technical expertise due to the company's size and limited funding compared to larger competitors.
• High infrastructure costs associated with developing and operating data centers, which may be constrained by limited financial resources.
• Difficulty raising additional capital to fund operations and expansion, potentially leading to reduced operational capacity, stalled plans, and dilution risks for shareholders.
• Complete dependence on Trent DAmbrosio (CEO/CFO), with the loss of this individual potentially leading to a complete failure of the company.
• Rapid technological change in AI compute technology (e.g., quantum encryption, GPU chips) may render current solutions obsolete or give competitors an advantage.
• Uncertainty and unpredictability in results of operations due to potential delays in the integration and deployment of modular container centers and renewable energy sources.
• Breakdown or change in strategic partnerships with key technology suppliers and energy infrastructure providers could impact deployment capabilities.
• Uncertainty about the pace of market adoption for AI compute infrastructure, customer retention, and profitable scaling of operations.
• A changing regulatory landscape and increasing compliance costs related to energy use, environmental standards, and cybersecurity.
• Advanced security requirements and risks due to potential vulnerabilities in quantum encryption technology or sophisticated cyberattacks.
• Additional costs and obligations associated with the commitment to sustainability and green power initiatives, including fluctuating renewable energy prices or new environmental regulations.
• Reputational risks from bad publicity or adverse operational results, particularly concerning ESG performance or security lapses.
• Regional operational challenges due to variations in local regulatory environments, infrastructure readiness, and market demand across different states or regions.
• Common stock trading on the OTCID Basic Market tier, which may be volatile and sporadic, depressing the market price and making it difficult for stockholders to resell shares.
• The company's stock is classified as a 'penny stock,' imposing additional sales practice requirements on broker-dealers, which may limit trading activity and marketability.
• Limited trading volume and price fluctuation of common stock, which could adversely impact its value without regard to operating performance.
• FINRA sales practice requirements may further limit a stockholder's ability to buy and sell the company's stock.
• A decline in the common stock price could affect the ability to raise further working capital, potentially leading to business failure.
• The company has never paid a cash dividend and does not anticipate doing so in the foreseeable future.
• Lack of voluntarily implemented corporate governance measures (e.g., independent directors, audit committee), potentially limiting shareholder protections.
• Difficulties in managing growth, including hiring, improving controls, and training personnel, could adversely affect results of operations.
• Offers or availability for sale of a substantial number of shares of common stock may cause the price to decline due to an 'overhang' effect.

Future Outlook

BluSky AI Inc. plans to grow its AI operations organically, developing multiple modular data center sites across various U.S. jurisdictions with a focus on AI/ML. The strategy involves leveraging existing power infrastructure for faster time to market, scalable deployment, and cost-effectiveness. The company aims to revolutionize the AI compute landscape by addressing the global supply shortage with rapidly deployable, plug-and-play 'SkyMods' on powered land assets. BluSky AI anticipates generating revenue through leasing and subscription services, integrated infrastructure services, and strategic partnerships, including government contracts. The company's R&D team is developing new modules with advanced power management, enhanced cooling, and remote monitoring capabilities. BluSky AI expects to increase its number of employees as it grows to implement adequate segregation of duties within the internal control framework.

Management Comments

• BluSky AI Inc. is rapidly emerging as a pivotal force in the Neocloud ecosystem, with plans to deliver high-performance infrastructure tailored for artificial intelligence workloads.
• SkyMods next-generation, scalable AI Factories provide speed-to-market and energy optimization to support high-performance machine learning workloads.
• BluSky AI plans to empower small, mid-sized, enterprise, and academic entities from start-up to scale-up to drive innovation without compromise.
• Our unique offering may minimize technical deployment risks while maximizing opportunities for immediate incremental revenue generation and rapid market capture.
• We believe BluSky AI's unique approach to its future operations—combining turnkey-powered land assets, rapid deployment, and scalable modular compute centers—could deliver the critical infrastructure needed to bridge the AI compute gap that exists in the marketplace today.
• While today's market focus is primarily on the 80% demand coming from Large Language and Training Models, 80% of the future demand will rely on inferencing needing low-latency millisecond compute. Our solutions not only address today's pressing needs but also lay a solid foundation for AI inference for sustained growth and technological advancement in the future of AI.
• 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.

Industry Context

StockSavvy.ai notes that BluSky AI's pivot to modular AI/HPC data centers aligns with a significant industry trend driven by the explosive growth in AI workloads and the increasing demand for specialized, high-density computing infrastructure. The company's 'Neocloud' approach positions it as an alternative to traditional hyperscalers, focusing on rapid deployment and energy efficiency, which are critical competitive differentiators in a market facing supply constraints for GPUs and powered land. The estimated 35.9% annual CAGR for this market over the next seven years underscores the immense opportunity, but also the intense competition from established giants like AWS, Google, and Microsoft, as well as other specialized providers. BluSky AI's strategy to target smaller, under-50MW sites and leverage existing power infrastructure could allow it to capture market share by offering faster time-to-value, a key advantage in a rapidly evolving technological landscape.

Comparison to Industry Standards

• BluSky AI's 'Neocloud' model, purpose-built for AI/ML and HPC, aims to differentiate from traditional hyperscalers like Amazon Web Services (AWS), Google Cloud, and Microsoft Azure, which offer broader cloud services but may not be as specialized or agile for specific AI workloads.
• The company's focus on rapidly deployable 'SkyMod' data centers and leveraging existing power infrastructure is a competitive strategy against the multi-year buildout timelines of large-scale data centers by industry leaders, potentially offering faster deployment similar to specialized modular data center firms.
• The GPU-as-a-Service model directly competes with offerings from major cloud providers and dedicated GPU cloud platforms, aiming to provide flexible access to top-tier GPUs from vendors like NVIDIA and AMD, which are in high demand across the industry.
• BluSky AI's targeting of sites with 1 MW to 60 MW capacity positions it to serve a segment of the market that may be underserved by hyperscalers focused on much larger deployments, potentially comparable to smaller, regional data center operators or specialized AI infrastructure providers.
• The company's commitment to ESG goals around energy optimization and infrastructure reuse aligns with growing industry trends and regulatory pressures, such as the EU's revised Energy Efficiency Directive, but specific benchmarks against leading sustainable data center projects are not provided in the filing.

Management Changes

Corporate Governance

Legal Proceedings

• On March 4, 2024, the company filed a complaint against Mother Lode Mining, Inc. and Robert Salna seeking damages of not less than $2,237,800 for breach of obligations related to the 2023 sale of Compaa Minera Cerros Del Sur, S.A. de C.V. (CMCS).
• On February 4, 2026, the company and the defendants entered into a settlement agreement resolving all disputes, agreeing to a mutual dismissal with prejudice of all claims and a mutual general release. No further amounts are expected to be collected under the LOI.

Related Party Transactions

• Trent DAmbrosio (CEO, CFO, Director): Has $1,386,788 in deferred salaries in accounts payable and accrued liabilities as of December 31, 2025. Received 500,000 restricted shares of Common Stock valued at $200,500 for services rendered on June 10, 2025. Controls Digital Asset Medium, LLC (DAM).
• Digital Asset Medium, LLC (DAM): Managing member is Trent DAmbrosio. Assigned exclusive right to utilize solar and grid-interconnected power at a Milford, Utah data center project to the company on July 7, 2025. In exchange, received 20,000,000 shares of restricted common stock, valued at $9,800,000 (solar asset valued at $1,289,309, difference of $8,510,691 treated as a deemed dividend). Formalized unsecured Short-Term Promissory Notes totaling $480,000 on January 9, 2025, bearing 15.00% interest. Issued 13,007 shares of common stock valued at $77,782 on September 30, 2025, for conversion of $29,129 accrued interest and $35,908 accounts payable.
• Debra DAmbrosio (Immediate Family Member of Director): Had multiple unsecured Short-Term Promissory Notes. Issued 9,408 shares of common stock valued at $51,744 on September 24, 2025, for conversion of $47,042 accrued interest. Notes totaling $50,395 and $62,851 were formalized in 2024 and paid off in 2025. A $406 note formalized on January 1, 2025, was paid off on September 1, 2025. As of December 31, 2025, a gross balance of $422,618 remains on a re-negotiated non-interest bearing note maturing December 31, 2026.
• Whit Cluff (Director): Received 100,000 restricted shares of Common Stock valued at $40,100 for services rendered on June 10, 2025. Has an unsecured Short-Term Promissory Note with a gross balance of $837 as of December 31, 2025, extended to December 31, 2026.
• Dan Gay (COO, Director): Entered into a consulting agreement on April 1, 2025, for $5,000 per month and 200,000 shares of common stock (valued at $102,000). A new consulting agreement on September 1, 2025, increased base compensation to $10,000 per month.
• Cluff-Rich PC 401K (Affiliate Controlled by Director): Has an unsecured Short-Term Promissory Note with a gross balance of $51,000 as of December 31, 2025, extended to December 31, 2026.
• Francis E. Rich (Immediate Family Member of Director): Has a re-negotiated non-interest bearing note with a gross balance of $100,000 as of December 31, 2025, extended to December 31, 2026.
• Pine Valley Investments, LLC (Affiliate Shareholder): Has a re-negotiated non-interest bearing note with a gross balance of $295,000 as of December 31, 2025, extended to December 31, 2026.

Stakeholder Impact

• Shareholders: Face significant dilution risk from ongoing stock issuances for services and debt conversions. The 'penny stock' classification and limited trading volume on OTC markets pose liquidity challenges. The substantial doubt about going concern raises the risk of losing their entire investment. The deemed dividend to a related party may raise concerns about value distribution.
• Employees: The company currently employs 5 full-time and 4 part-time employees. Future growth plans suggest potential for increased employment, but the company's financial instability and reliance on consultants for growth could impact job security and expansion opportunities.
• Customers: Potential customers for AI/HPC data center services may benefit from the planned 'Neocloud' offerings, but the company's financial health and operational risks could raise concerns about service reliability and long-term viability.
• Suppliers: Critical component suppliers (e.g., for GPUs, transformers, cooling systems) face risks related to BluSky AI's ability to secure funding and manage supply chain disruptions. Delays in payments or project cancellations could impact supplier relationships.
• Creditors: Current creditors face significant risk due to the company's working capital deficit, accumulated losses, and going concern doubt, which may affect the collectability of outstanding debts. The conversion of convertible notes to equity has reduced some debt but also resulted in losses on extinguishment.

Next Steps

• Grow AI operations organically, developing multiple modular data center sites across various U.S. jurisdictions.
• Accelerate development efforts to enhance the suite of SkyMod AI factories, integrating advanced power management, enhanced cooling, and remote monitoring capabilities.
• Expand Neocloud footprint through strategic site acquisitions and partnerships, leveraging existing energy infrastructure.
• Negotiate managed services contracts with top vendors to utilize their employees and expertise in data management.
• Form and implement an audit committee as soon as practicable.
• Adopt a code of ethics that applies to principal executive and accounting officers.
• Increase the number of employees as the company grows to implement adequate segregation of duties within the internal control framework.
• Management will continue to search for additional financing to meet the company's need for cash during the next twelve months and beyond.

Key Dates

Recommendation

A seasoned investor or institution would issue a 'strong sell' recommendation for BluSky AI Inc. based on this filing. The company's financial position is extremely precarious, marked by substantial and increasing net losses, a massive accumulated deficit, and a severe working capital deficiency. The explicit 'going concern' doubt from both management and independent auditors signals a high probability of insolvency or significant restructuring that would severely impair shareholder value. While the strategic pivot to the high-growth AI data center market is conceptually sound, the company's current financial instability, heavy reliance on related-party financing, and identified material weaknesses in internal controls indicate a profound inability to execute its ambitious plans without significant, uncommitted external capital. The stock's 'penny stock' status and limited marketability further exacerbate the investment risk, making it highly speculative with a strong downside bias.

Keywords

AI data centers, high-performance computing, HPC, modular data centers, SkyMod, GPU-as-a-Service, Neocloud, artificial intelligence infrastructure, SEC 10-K, financial reporting, going concern, semiconductor supply chain, energy grid, related party transactions, corporate governance, OTC Markets, penny stock