[10-Q] Kinetic Seas Inc. Quarterly Earnings Report
Kinetic Seas Incorporated reported modest consulting revenue growth but remains in a fragile financial position for the quarter ended September 30, 2025. Consulting revenue rose to $91,537 for the quarter (from $64,966 a year earlier) and $159,408 for the nine months (from $137,291), while the quarterly net loss narrowed to $206,111 from $1,053,518. Operating expenses fell sharply year over year, reflecting lower start-up and professional costs. However, the company ended the period with no cash, total assets of $149,932, a stockholders’ deficit of $852,610, and short-term notes and related-party debt carrying interest rates up to 36%. Management discloses a going concern uncertainty, citing a working capital deficit of about $928,153, continued operating losses, and dependence on external financing, including dilutive equity issuances and high-cost borrowings.
Positive
- None.
Negative
- None.
Insights
Early AI revenue growth is overshadowed by zero cash, heavy deficits, and going concern risk.
Kinetic Seas is transitioning from a shell into an AI consulting and GPU infrastructure business, with consulting revenue of
Despite this, the balance sheet is highly strained. The company reports no cash, total assets of
Management explicitly states that these conditions raise substantial doubt about the company’s ability to continue as a going concern and expects operating losses to continue over the next twelve months. The business plan depends on raising additional equity and debt financing, including issuances for services and conversions of preferred stock, which have already expanded common shares outstanding to 51,439,000 as of
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
Or
For the transition period from ______ to ______
Commission file number
| (Exact name of registrant as specified in its charter) |
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(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
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| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area
code (
| (Former name, former address and former fiscal year, if changed since last report) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of exchange on which registered | ||
| N/A | N/A | N/A |
Securities registered pursuant to Section 12(g) of
the Act:
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. ☒
Indicate by check mark whether the registrant has
submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit such files). ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth 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 Act.) Yes ☐ No
The number
of shares outstanding of the registrant’s common stock as of September 30, 2025 was
KINETIC SEAS INCORPORATED
QUARTERLY REPORT ON FORM 10-Q
For the Three and Nine Months Ended September 30, 2025
| PART I – FINANCIAL INFORMATION | ||
| Item 1. | Financial Statements (unaudited) | 4 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 17 |
| Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 21 |
| Item 4. | Controls and Procedures | 21 |
| PART II – OTHER INFORMATION | ||
| Item 1. | Legal Proceedings | 23 |
| Item 1A. | Risk Factors | 23 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 23 |
| Item 3. | Defaults Upon Senior Securities | 23 |
| Item 4. | Mine Safety Disclosures | 23 |
| Item 5. | Other Information | 23 |
| Item 6. | Exhibits | 24 |
| SIGNATURES | 25 | |
| 2 |
PART I – FINANCIAL INFORMATION
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Information contained in this quarterly report on Form 10-Q contains “forward-looking statements.” These forward-looking statements are contained principally in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend” or “project” or the negative of these words or other variations on these words or comparable terminology. The forward-looking statements herein represent our expectations, beliefs, plans, intentions or strategies concerning future events, including, but not limited to: our ability to consummate the Merger, as such term is defined below; the continued services of the Custodian as such term is defined below; our future financial performance; the continuation of historical trends; the sufficiency of our resources in funding our operations; our intention to engage in mergers and acquisitions; and our liquidity and capital needs. Our forward-looking statements are based on assumptions that may be incorrect, and there can be no assurance that any projections or other expectations included in any forward-looking statements will come to pass. Moreover, our forward-looking statements are subject to various known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from future results, performance, or achievements expressed or implied by any forward-looking statements. These risks, uncertainties and other factors include but are not limited to: the risks of limited management, labor, and financial resources; our ability to establish and maintain adequate internal controls; our ability to develop and maintain a market in our securities; and our ability obtain financing, if and when needed, on terms that are acceptable. Except as required by applicable laws, we undertake no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.
As used in this quarterly report on Form 10-Q, “we”, “our”, “us” and the “Company” refer to Kinetic Seas Incorporated, a Colorado corporation, unless the context requires otherwise.
| 3 |
Item 1. Financial Statements.
KINETIC SEAS INCORPORATED
BALANCE SHEETS
| September 30, | December 31, | |||||||
| 2025 | 2024 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable | ||||||||
| Deferred charge | ||||||||
| Total current assets | ||||||||
| Right of use assets | ||||||||
| Property and equipment, net | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued liabilities | ||||||||
| Cash overdraft | ||||||||
| Accrued officer compensation | ||||||||
| Accrued interest | ||||||||
| Lease liabilities-short term | ||||||||
| Notes payable | ||||||||
| Notes payable related parties | ||||||||
| Total current liabilities | ||||||||
| Lease liabilities long term | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies | – | – | ||||||
| STOCKHOLDERS' DEFICIT | ||||||||
| Preferred A stock, $ | ||||||||
| Preferred B stock, $ | ||||||||
| Common stock, $ | ||||||||
| Additional paid-in-capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders' deficit | ( | ) | ( | ) | ||||
| Total liabilities and stockholders' deficit | $ | $ | ||||||
Note: Amounts may not foot due to rounding.
The accompanying notes are an integral part of these financial statements.
| 4 |
KINETIC SEAS INCORPORATED
STATEMENTS OF OPERATIONS
(Unaudited)
| Three months | Three months | Nine months | Nine months | |||||||||||||
| ended | ended | ended | ended | |||||||||||||
| September 30, | September 30, | September 30, | September 30, | |||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Consulting Revenue | $ | $ | $ | $ | ||||||||||||
| Cost of sales consulting labor | ||||||||||||||||
| Gross margin (loss) | ||||||||||||||||
| Operating expenses | ||||||||||||||||
| Selling, general and administrative expenses | ||||||||||||||||
| Professional fees | ||||||||||||||||
| Payroll and benefits | ( | ) | ||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other (expense): | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total other expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net (loss) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Basic and diluted loss per share | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average number of shares outstanding: | ||||||||||||||||
| Basic and diluted | ||||||||||||||||
Note: Amounts may not foot due to rounding.
The accompanying notes are an integral part of these financial statements.
| 5 |
KINETIC SEAS INCORPORATED
STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(Unaudited)
| Preferred A Stock | Preferred B Stock | Common Stock | Additional Paid In | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | |||||||||||||||||||||||||
| Balance, December 31, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||
| Common stock issued for cash | – | – | – | – | – | ||||||||||||||||||||||||||||
| Net loss | – | – | – | – | – | – | – | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, Mar 31, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||
| Common stock issued for services | – | – | – | – | – | – | |||||||||||||||||||||||||||
| Common stock issued in error to be returned | – | – | – | – | – | ||||||||||||||||||||||||||||
| Common stock issued in private placement | – | – | – | – | – | ||||||||||||||||||||||||||||
| Conversion of common stock to preferred stock | – | – | – | ( | ) | ( | ) | – | – | ||||||||||||||||||||||||
| Net loss | – | – | – | – | – | – | – | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, June 30, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||
| Preferred A Stock | Preferred B Stock | Common Stock | Additional Paid In | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | |||||||||||||||||||||||||
| Balance, December 31, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||
| Conversion of Preferred A to common stock | ( | ) | – | – | – | ( | ) | – | – | ||||||||||||||||||||||||
| Conversion of Preferred B to common stock | – | – | ( | ) | – | ( | ) | – | – | ||||||||||||||||||||||||
| Conversion of common shares to Preferred A | – | – | – | ( | ) | ( | ) | – | – | ||||||||||||||||||||||||
| Shares issued for services | – | – | – | – | – | ||||||||||||||||||||||||||||
| Net loss | – | – | – | – | – | – | – | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, March 31, 2025 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||
| Shares issued for services | – | – | – | – | – | ||||||||||||||||||||||||||||
| Shares issued in error to be recovered | – | – | – | – | – | ||||||||||||||||||||||||||||
| Shares issued for financing fees | – | – | – | – | – | ||||||||||||||||||||||||||||
| Common stock issued in private placement | – | – | – | – | – | ||||||||||||||||||||||||||||
| Net loss | – | – | – | – | – | – | – | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, June 30, 2025 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||
| Shares issued for services | – | – | – | – | – | ||||||||||||||||||||||||||||
| Shares issued for cash | – | – | – | – | |||||||||||||||||||||||||||||
| Common stock issued in private placement | – | – | – | – | – | – | – | – | – | ||||||||||||||||||||||||
| Net Loss | – | – | – | – | – | – | – | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, September 30, 2025 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||
Note: Amounts may not foot due to rounding.
The accompanying notes are an integral part of these financial statements.
| 6 |
KINETIC SEAS INCORPORATED
STATEMENTS OF CASH FLOWS
(Unaudited)
| Nine months | Nine months | |||||||
| ended | ended | |||||||
| September 30, | September 30, | |||||||
| 2025 | 2024 | |||||||
| Cash flows provided by (used in) operating activities | ||||||||
| Net (loss) from operations | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities | ||||||||
| Depreciation | ||||||||
| Common stock issued for financing fees | ||||||||
| Stock based compensation | ||||||||
| Changes in assets and liabilities | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Lease liability-net | ||||||||
| Deferred charge | ( | ) | ||||||
| Accounts payable | ||||||||
| Accrued liabilities | ( | ) | ||||||
| Accrued interest | ( | ) | ||||||
| Cash overdraft | ||||||||
| Accrued officer compensation | ( | ) | ||||||
| Net cash (used in) operating activities | ( | ) | ( | ) | ||||
| Cash flows provided by (used in) investing activities | ||||||||
| Purchases of property and equipment | ( | ) | ||||||
| Net cash (used in) investing activities | ( | ) | ||||||
| Cash flows provided by (used in) financing activities | ||||||||
| Proceeds from related party notes | ||||||||
| Proceeds from notes payable | ||||||||
| Repayments of notes payable | ( | ) | ( | ) | ||||
| Proceeds from common stock issued for cash | ||||||||
| Net cash provided by financing activities | ||||||||
| Net (decrease) in cash | ( | ) | ( | ) | ||||
| Cash, beginning of period | ||||||||
| Cash, end of period | $ | $ | ||||||
Note: Amounts may not foot due to rounding.
The accompanying notes are an integral part of these financial statements.
| 7 |
NOTES TO UNAUDITED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024
NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS
Nature of Operations
Kinetic Seas Incorporated (the “Company”) was formed on January 3, 2015, as a Colorado corporation with the name ONCO Merger Sub, Inc. On January 5, 2025, the Company merged with Oncology Med, Inc. as part of a holding company reorganization involving Oracle Nutraceuticals Company, under which the Company was the surviving entity in the merger. On January 18, 2015, the Company changed its name to Oncology Med, Inc. On September 16, 2016, the Company changed its name to Bellatora, Inc. On January 19, 2024, the Company changed its name to Kinetic Seas Incorporated.
The Company is an Artificial Intelligence (“AI”) consulting, research and development, infrastructure, and software company with a primary focus on GPU Cloud Hosting.
By a written consent dated December 14, 2023, the Board of Directors of the Company approved the appointment of Edward Honour, Jeffey Lozinski, Joseph Lehman, and Robert Jackson to the Board of Directors of the Company, and appointed Edward Honour as Chairman (the “New Directors”). At the same time, the Board of Directors approved the issuance of 21,600,000 shares of common stock at $0.001 per share to the New Directors and certain new employees, of which 19,950,000 were acquired by the New Directors. In addition, the Board of Directors also approved a private offering of 10,000,000 shares of common stock at $0.05 per share. An affiliate of a New Director purchased the initial 1,000,000 shares in this offering. As a result of both transactions, the New Directors and their affiliates acquired an aggregate of 20,950,000 Shares of common stock, which constituted approximately 84% of the issued and outstanding common shares of the Company at the time.
The appointment of the New Directors to the Company’s board, and the sale to the New Directors of a controlling interest in the Company, were made to enable the Company to enter the business of artificial intelligence hosting, research & development, and consulting. Before the change in control to the New Directors, the Company was a shell company.
The Company’s accounting year-end is December 31.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The financial statements of the Company have been prepared in accordance with GAAP. This basis of accounting involves the application of accrual accounting and consequently, revenues and gains are recognized when earned, and expenses and losses or recognized when incurred.
| 8 |
Use of Estimates
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of accrued liabilities and the reported amounts of revenues and expenses during the reporting period. The most significant estimates relate to revenue recognition, valuation of accounts receivable, the allowance for doubtful accounts, inventories, and contingencies. The Company bases its estimates on historical experience, known or expected trends, and various other assumptions that are believed to be reasonable given the quality of information available as of the date of these financial statements. The results of these assumptions provide the basis for making estimates about the carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates.
Revenue Recognition and Cost of Consulting Labor
The Company adopted Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”), using the modified retrospective method applied to those contracts that were not completed as of January 1, 2018.
The Company will recognize revenue in accordance with Accounting Standards Codification No. 606, “Revenue from Contracts with Customers” (“ASC606”). ASC 606 directs entities to recognize revenue when the promised goods or services are transferred to the customer. The amount of revenue recognized should equal the total consideration an entity expects to receive in return for the goods or services. The Financial Accounting Standards Board (FASB) created a five-step approach that entities should apply when determining the amount and timing of revenue recognition:
Step 1: Identify the contract with a customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.
During the nine months ended September 30, 2025, we
generated $
Cash and Cash Equivalents
Cash and cash equivalents consist of highly liquid
investments with an original maturity of three months or less. As of September 30, 2025, the Company had
Stock-based Compensation
The Company accounts for stock-based compensation using the fair value method following the guidance outlined in Section 718-10 of the FASB Accounting Standards Codification for disclosure about Stock-Based Compensation. This section requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service in exchange for the award- the requisite service period (usually the vesting period). No compensation cost is recognized for equity instruments for which employees do not render the requisite service.
| 9 |
Income taxes
The Company accounts for income taxes under FASB ASC 740, “Accounting for Income Taxes”. Under FASB ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under FASB ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. FASB ASC 740-10-05, “Accounting for Uncertainty in Income Taxes” prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities.
The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. The Company assesses the validity of its conclusions regarding uncertain tax positions quarterly to determine if facts or circumstances have arisen that might cause it to change its judgment regarding the likelihood of a tax position’s sustainability under audit.
On December 18, 2019, the Financial Accounting Standards Board (FASB) released Accounting Standards Update (ASU) 2019-12, which affects general principles within Topic 740, Income Taxes. The amendments of ASU 2019-12 are meant to simplify and reduce the cost of accounting for income taxes. The FASB has stated that the ASU is being issued as part of its Simplification Initiative, which is meant to reduce complexity in accounting standards by improving certain areas of generally accepted accounting principles (GAAP) without compromising information provided to users of financial statements. The Company adopted this guidance on January 1, 2021, which had no impact on the Company’s financial statements.
Net Loss per Share
Net loss per common share is computed by dividing net loss by the weighted average common shares outstanding during the period as defined by Financial Accounting Standards, ASC Topic 260, “Earnings per Share.” Basic earnings per common share (“EPS”) calculations are determined by dividing net income by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per common share calculations are determined by dividing net income by the weighted average number of common shares and dilutive common share equivalents outstanding.
Recent Accounting Pronouncements
There have been no new or material changes to the significant accounting policies discussed in the Company’s audited financial statements in its Annual Report on Form 10-K for the fiscal year ended December 31, 2024 as filed with the SEC on April 24, 2025, that are of significance, or potential significance, to the Company.
NOTE 3 – GOING CONCERN
The accompanying financial statements have been prepared
assuming the Company will continue as a going concern, which contemplates the realization of assets and the settlement of liabilities
in the normal course of business during the twelve months following the issuance of these financial statements. The Company has incurred
significant operating losses since inception and continues to rely on external financing to support operations. As of September 30, 2025,
the Company had an accumulated deficit of $
The Company does not expect to generate operating cash flows sufficient to fund currently anticipated operating activities, which raises substantial doubt regarding its ability to continue as a going concern. Management intends to seek additional funding through potential private placements of equity and debt financing arrangements. The Company will be required to continue securing external capital until operations generate positive cash flow. However, there can be no assurance that additional financing will be available on terms acceptable to the Company, or available at all.
| 10 |
NOTE 4 – ACCRUED LIABILITIES
As of September 30, 2025 and December 31, 2024, the Company had $
The accrued liabilities balance at September 30, 2025 consists of the following:
$
$
NOTE 5 – RELATED PARTY TRANSACTIONS
On September 18, 2021, the Company entered into a
$
On December 14, 2023, the Company and CIP agreed to
convert $
The conversion of debt into stock reduced the balance
owed on the Promissory Note to $
As of September 30, 2025, the balance outstanding
on the promissory note related to related parties was $
Additionally, CIP entered into a new note with the
Company and advanced $
On September 20, 2024, Lisa Lozinski (“the Lender”),
the spouse of a Company director, made a $
| · | Maturity date: | |
| · | ||
| · | ||
| · | The 50,000 restricted common shares received piggyback registration rights to be included in the Company’s next registration statement filed with the SEC. |
| 11 |
The Company failed to pay the principal and accrued interest in full by the maturity date. As a result, the Company issued the Lender as a penalty payment of 100,000 restricted common shares.
As of September 30, 2025, the Company had
related-party notes payable totaling $
During the nine months ended September 30, 2025, Jeff
Lozinski, an officer of the Company, advanced funds on an interest-free basis to support operations. These advances are unsecured, carry
no stated maturity date, and remain outstanding at September 30, 2025. Additional related-party borrowings during the period were made
under promissory note agreements bearing interest at
During the year ended December 31, 2024, the Company
issued
Management believes that continued access to related-party financing is critical to ongoing operations; however, such financing is not guaranteed and raises uncertainty regarding future liquidity. The Company may be required to seek additional external capital, and failure to obtain such funding could materially affect operations and financial condition.
NOTE 6 – EQUITY
The Company is authorized to issue
Issuance of Common Stock
On December 14, 2023, the Board of Directors approved
an offering of up to
On March 19, 2024, the Board of Directors approved
an offering of up to
During the six months ended June 30, 2024, the Company
also issued
On July 15, 2024, the Company commenced a new offering
of
| 12 |
During the three months ended March 31, 2025, Preferred
A and Preferred B shareholders converted all of the preferred shares into
During the three months ended June 30, 2025, the Company
issued
During the nine months ended September 30, 2025, the Company issued common stock through service-based compensation agreements and financing-related equity transactions, resulting in a significant increase in shares outstanding. These issuances were made to support operating needs, compensate service providers, and secure funding.
During the period, the Company issued:
| · |
| · |
| · |
| · |
| · |
As a result of these issuances and other equity activity,
the number of common shares outstanding increased to
The Company expects that future equity issuances may continue to be a source of liquidity; however, there is no assurance that such financing will remain available on similar terms, or at all.
Issuance of Preferred A Stock
In February 2023, the Board of Directors approved
the issuance of one series of preferred stock, the Series A Convertible Preferred Stock (the “Series A Preferred”), for
During the six months ended June 30, 2025, the
As of September 30, 2025, the number of Preferred
A shares outstanding remained unchanged at
| 13 |
The Series A Preferred has the following rights:
Dividends: Each share of Series A Preferred is entitled to receive non-cumulative dividends equal to the amount of dividends that the holder of such share would have received if such share of Series A Preferred were converted into shares of common stock immediately before the record date of the dividend declared on the common stock.
Liquidation Preference: The Series A Preferred Stock is entitled to receive, before any distribution to any junior class of securities, an amount equal to $0.01 per share, plus any accrued but unpaid dividends, as a liquidation preference before any distribution may be made to the holders of any junior security, including the common stock.
Voting Rights: Each holder of Series A Preferred Stock shall vote with holders of the common stock upon any matter submitted to a vote of shareholders, in which event it shall have the number of votes equal to the number of shares of common stock into which such share of Series A Preferred Stock would be convertible on the record date for the vote or consent of shareholders.
Voluntary Conversion Rights: Each share of Series A Preferred Stock is convertible into 1,000 shares of common stock.
Mandatory Conversion Rights: The Company may convert all outstanding shares of Series A Preferred Stock into common stock, at the same ratio as the voluntary conversion rights held by the holders, at any time that there are fewer than 200,000 shares of Series A Preferred Stock outstanding.
Rank: The Series A Preferred ranks senior to the common stock and any other class or series of preferred stock that may be authorized and which is designated as junior to the Series A Preferred Stock.
Issuance of Preferred B Stock
On July 13, 2024, the Board of Directors approved
the issuance of a second series of preferred stock, the Series B Convertible Preferred Stock (the “Series B Preferred”), for
During the three months ended March 31, 2025, the
During the three months ended September 30, 2025,
the Company issued
The Series B Preferred has the following rights:
Dividends: Each share of Series B Preferred is entitled to receive non-cumulative dividends equal to the amount of dividends that the holder of such share would have received if such share of Series B Preferred were converted into shares of common stock immediately before the record date of the dividend declared on the common stock.
Liquidation Preference: The Series B Preferred Stock is entitled to receive, before any distribution to any junior class of securities, an amount equal to $0.01 per share, plus any accrued but unpaid dividends, as a liquidation preference before any distribution may be made to the holders of any junior security, including the common stock.
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Voting Rights: The Series B Preferred Stock does not have the right to vote on any matter submitted to a vote of shareholders, but is entitled to notice of any shareholder meeting or any action proposed to be taken by shareholders instead of a meeting.
Voluntary Conversion Rights: Each share of Series B Preferred is convertible into 1,000 shares of common stock, provided that no holder of Series B Preferred may convert its shares into common stock to the extent the holder would be the beneficial owner of more than 4.99% of the Company’s common stock immediately after the conversion, and further provided that the holder has the right to waive this limitation on at least 61 days prior notice to the Company.
Mandatory Conversion Rights: The Company may convert all outstanding shares of Series B Preferred Stock into common stock, at the same ratio as the voluntary conversion rights held by the holders, at any time that there are fewer than 200,000 shares of Series B Preferred Stock outstanding.
Rank: The Series B Preferred ranks senior to the common stock and any other class or series of preferred stock that may be authorized and which is designated as junior to the Series B Preferred. The Series B Preferred ranks junior to the Series A Preferred.
On July 24, 2024, the Company changed its Articles of Incorporation and filed a Certificate of Designation to create 10,000,000 shares of Series B Convertible Preferred Stock. The Series B preferred shares are junior to Series B Preferred Stock and have the same rights as Series A Preferred, with one exception. Series B preferred holders cannot hold more than 4.99% of the number of shares of Common Stock outstanding immediately after giving effect to the conversion.
Warrants
The Company has outstanding
Reverse Stock Split
On June 5, 2023, the Company effected a 1 for 50,000
reverse split immediately followed by a 500 to 1 forward split. The net impact was a
NOTE 7 – NOTES PAYABLE
As of September 30, 2025, the Company had a total
of $
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NOTE 8 – LEASES
During 2024, the Company
entered into a non-cancellable four-year lease for which it recorded a right-of-use asset and liability based on the present value of
the lease payments in the amount of $
The weighted average remaining
lease term is
As of September 30, 2025, the Company had total operating
lease liabilities of $
Future minimum lease payments under the Company’s existing non-cancellable operating lease agreement are expected to be paid within the normal lease term. Lease expense is recognized on a straight-line basis over the lease period.
NOTE 9 – SUBSEQUENT EVENTS
In accordance with ASC 855-10, the Company evaluated subsequent events occurring after September 30, 2025 through December 4, 2025, the date on which the financial statements were issued. Based on this evaluation, the Company did not identify any subsequent events requiring adjustment to, or disclosure in, the accompanying financial statements.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Plan of Operation
From January 1, 2023, to December 14, 2023, the Company had no operations or revenues from a continuing business other than the general and administrative expenditures related to running the Company.
On December 14, 2023, our Board of Directors approved the appointment of Edward Honour, Jeffrey Lozinski, Joseph Lehman, and Robert Jackson to the Board of Directors of the Company, and appointed Edward Honour as Chairman (the “New Directors”). Erik Nelson remained a director of the Company. At the same time, the Board of Directors approved the issuance of 21,600,000 shares of common stock in the Company’s offering at $0.001 per share, of which 19,950,000 were acquired by the New Directors and the remainder were acquired by new employees. In addition, the Board of Directors also approved a private offering of 10,000,000 shares of common stock at $0.05 per share, and the spouse of a New Director purchased the initial 1,000,000 shares in such an offering. As a result of both transactions, the New Directors and their affiliates acquired an aggregate of 20,950,000 Shares of common stock in the Company, which is control of a majority of the issued and outstanding common shares of the Company at the time.
On December 14, 2023, the Board of Directors approved a resolution to enter the business of artificial intelligence hosting, research & development, and consulting (collectively, “AI”), and since has entered into several contracts and raised a material amount of capital from the private placement of its common stock to capitalize the business. As a result, the Company believes it no longer qualifies as a shell company.
In December 2023, following the change to the composition of our Board of Directors on December 14, 2023, we began implementing our business plan. We generated our first consulting revenue in the three months ended March 31, 2024.
We have identified five basic segments of our AI business: technical consulting; GPU infrastructure and rental (Kinetic Cloud); open source software and libraries; software and platform as a service (SaaS/PaaS); and education and training. We are focusing our initial efforts on our education and training segment, which is targeted toward educating and training existing non-AI businesses in how they incorporate AI technology to optimize the performance of their existing business. We believe that developing a respected education and training business will create a natural sales channel for our other segments, such as consulting and GPU hosting and rental. Secondarily, we are marketing our consulting and implementation services to the growing body of AI startups that may lack the in-house expertise to implement their AI business.
Results of Operations
Comparison of Results of Operations for the Three Months Ended September 30, 2025 and 2024
Revenues and Cost of sales consulting labor
During the three months ended September 30, 2025 and 2024, we generated $91,537 and $64,966, respectively, in consulting revenue. The increase in revenue during the 2025 period reflects execution of AI consulting engagements following the strategic repositioning of our service model and the proportional share of the license agreement for Skilliks valued at $2,000,000 over a 5 year term. While we anticipate continued revenue generation from these client engagements, there can be no assurance that future revenue levels will be consistent or that growth will occur. As we remain in early-stage operational development, revenue may fluctuate materially from period to period.
During the three months ended September 30, 2025 and 2024, cost of consulting labor was $0 and $52,490, respectively. The additional costs of the license agreement will be realized as further development is allocated to the long-term project. During the three months ended September 30, 2024, the Company recognized consulting revenue relating to services that were performed and invoiced under net-30 terms. The related consulting labor was incurred and expensed during the prior quarter ended June 30, 2025, resulting in zero cost of sales associated with this revenue in the current quarter.
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Operating Expenses
During the three months ended September 30, 2025, we incurred $249,831 in operating expenses, as compared to $1,055,870 during the same period in 2024. The 2024 operating expenses were materially higher due to professional fees and start-up related activities, including consulting and legal costs associated with business formation and market entry. In future periods, operating expenses, including sales, general and administrative expenses, payroll and benefits, and professional fees, may increase as we expand operations, hire personnel, and grow our service delivery capacity.
Other (Expense)
During the three months ended September 30, 2025, we incurred $47,817 in other expenses, compared to $10,125 during the three months ended September 30, 2024. In both periods, other expense consisted solely of interest expense on outstanding loans. The increase in 2025 is attributable to a higher balance of notes payable and related interest accruals.
Net (Loss)
As a result of the foregoing, during the three months ended September 30, 2025, we incurred a net loss of $(206,111), or <$(0.01) per share, compared to a net loss of $(1,053,518), or $(0.06) per share for the three months ended September 30, 2024.
Comparison of Results of Operations for the Nine Months Ended September 30, 2025 and 2024
Revenues and Cost of sales consulting labor
During the nine months ended September 30, 2025 and 2024, we generated $159,408 and $137,291 in consulting revenue, respectively. The increase year-over-year reflects a ramp-up in commercial activity following the refinement of our AI consulting service model. However, because we are still in early operational stages, revenue levels may vary significantly in future periods and there is no assurance that revenue growth will continue.
During the nine months ended September 30, 2025 and 2024, the cost of consulting labor was $70,139 and $106,749, respectively.
Operating Expenses
During the nine months ended September 30, 2025, we incurred $1,419,228 in operating expenses, compared to $1,711,583 for the same period in 2024, The 2024 operating expenses were higher due to professional fees and start-up related activities.
We expect operating expenses including compensation, professional services, and administrative overhead to continue to increase in future reporting periods as the Company expands its operational footprint, executes strategic growth initiatives, and scales personnel resources.
Other (Expense)
During the nine months ended September 30, 2025, we incurred $118,821 in other expenses, compared to $29,397 for the same period in 2024. In both periods, other expense consisted entirely of interest expense. The increase year-over-year is attributable to higher outstanding note balances and the continued accrual of interest during 2025.
Net Loss
As a result of the foregoing, we recorded a net loss of $(1,448,780) for the nine months ended September 30, 2025, compared to a net loss of $(1,710,438) for the nine months ended September 30, 2024. Basic and diluted loss per share was $(0.03) and $(0.07) respectively.
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Liquidity and Capital Resources
As of September 30, 2025, the Company reported no cash on hand and a cash overdraft of $(864).
During the nine months ended September 30, 2025, the Company recorded a net loss of $(1,448,780).
Cash flows used in operating activities were $(338,129) for the nine months ended September 30, 2025, compared to $(853,954) for the nine months ended September 30, 2024. The reduced operating cash burn in 2025 was primarily driven by changes in working capital, including increases in accounts payable, accrued interest, accrued liabilities, and stock issued in lieu of cash compensation.
Cash flows used in investing activities were $0 for the nine months ended September 30, 2025, compared to $(100,178) during the nine months ended September 30, 2024, which consisted solely of equipment purchases in the prior year.
Cash flows provided by financing activities totaled $333,182 for the nine months ended September 30, 2025, compared to $950,169 for the nine months ended September 30, 2024. The reduction reflects lower stock issuance proceeds and decreased borrowing levels during the 2025 period.
Management intends to fund operations through external financing, including potential future issuances of equity and/or debt securities. Working capital requirements are expected to increase as operational activity scales, revenue development advances, and headcount expands.
Based on current operating conditions, the Company does not have sufficient liquidity to sustain operations through the next 12 months. Continued losses, limited cash resources, and dependence on external funding raise substantial doubt regarding the Company’s ability to continue as a going concern. Additional capital will be required, and there is no assurance that financing will be available on acceptable terms, or at all. Any completed financing may be dilutive to existing shareholders or include rights senior to common equity.
Future issuances of equity or convertible instruments will result in shareholder dilution and may contain features that adversely impact existing holders. If the Company is unable to secure additional financing as needed, its ability to execute its business plan, support growth initiatives, and maintain operations may be materially impaired.
We expect operating losses to continue over the next twelve months. Successful execution of the business model will require raising capital, increasing revenue generation, expanding personnel, and scaling operations effectively. Failure to achieve these objectives may materially affect financial results, liquidity, and overall business viability.
Critical Accounting Estimates
General
Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of our financial statements requires management to make estimates, assumptions, and judgments that affect the reported amounts of assets, liabilities, net sales, and expenses, and related disclosure of contingent assets and liabilities. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
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We describe in this section certain critical accounting policies that require us to make significant estimates, assumptions, and judgments. An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are uncertain at the time the estimate is made and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the financial statements. Management believes the following critical accounting policies reflect its most significant estimates and assumptions used in the preparation of the financial statements. For further information on the critical accounting policies, see Note 1 of the Financial Statements.
Basis of Presentation
The accompanying financial statements have been prepared in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”), which is the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) in the United States.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of expenses during the reporting period. The most significant estimates relate to income taxes and contingencies. The Company bases its estimates on historical experience, known or expected trends, and various other assumptions that are believed to be reasonable given the quality of information available as of the date of these financial statements. The results of these assumptions provide the basis for making estimates about the carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates.
Cash and cash equivalents
The Company considers all highly liquid temporary cash investments with an original maturity of three months or less to be cash equivalents.
Stock-based Compensation
The Company accounts for stock-based compensation using the fair value method following the guidance outlined in Section 718-10 of the FASB ASC for disclosure about stock-based compensation. This section requires a public entity to measure the cost of employee and non-employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which service is provided. No compensation cost is recognized for equity instruments for which service is not provided or rendered.
Related party transactions
The Company follows ASC 850, Related Party Disclosures, for the identification of related parties and disclosure of related party transactions. In accordance with ASC 850, the Company’s financial statements include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business, as well as transactions that are eliminated in the preparation of financial statements.
Net Loss per Share
Net loss per common share is computed by dividing net loss by the weighted average common shares outstanding during the period as defined by ASC Topic 260, “Earnings per Share.” Basic earnings per common share calculations are determined by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per common share calculations are determined by dividing net income (loss) by the weighted average number of common shares and dilutive common share equivalents outstanding. As of September 30, 2025, there were no common stock equivalents that were dilutive.
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Income Taxes
Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes related primarily to differences between depreciation which is deductible for tax purposes prior to being deductible for book purposes. The deferred tax assets and liabilities represent the future tax return consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. Deferred taxes also are recognized for operating losses that are available to offset future taxable income.
From time to time, the Company may have differences in computing the book and tax bases of property and equipment; reserves for bad debts; capitalized overhead included in inventories; bonus plan payables, and accrued wages to shareholders/employees. Deferred tax expense or benefit is the result of the changes in the deferred tax assets, net of the valuation reserve, and liabilities.
The Company accounts for income taxes in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 740 (“FASB ASC 740”), Income Taxes, which clarifies the accounting and disclosure requirements for uncertainty in tax positions. It requires a two-step approach to evaluate tax positions and determine if they should be recognized in the financial statements. The two-step approach involves recognizing any tax positions that are “more likely than not” to occur and then measuring those positions to determine if they are recognizable in the financial statements. Management regularly reviews and analyzes all tax positions and has determined that no uncertain tax positions requiring recognition have occurred.
In general, the Company’s income tax returns are subject to examination by the taxing authorities for six years after they were filed. The Company has not filed any tax returns.
Recent Accounting Pronouncements
All other newly issued accounting pronouncements, but not yet effective, have been deemed either immaterial or not applicable.
Off-Balance Sheet Arrangements
None.
Item 3. Quantitative And Qualitative Disclosures About Market Risk.
As a smaller reporting company, we are not required to provide the information called for by this Item.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures.
Our management is responsible for establishing and maintaining a system of “disclosure controls and procedures” (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) that is designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Management has concluded that its disclosure controls were effective as of June 30, 2025.
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Management’s Report on Internal Control over Financial Reporting.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that:
| · | pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; | |
| · | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and | |
| · | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements. |
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness in future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate.
Our management assessed the effectiveness of our internal control over financial reporting based on the parameters set forth above and has concluded that as of June 30, 2025, our internal control over financial reporting was not effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles as a result of the following material weaknesses:
| · | The Company does not have written documentation of our internal control policies and procedures. |
We plan to rectify these weaknesses by establishing written policies and procedures for our internal control of financial reporting and hiring additional accounting personnel.
Changes in Internal Control over Financial Reporting.
Since our prior fiscal year ended on December 31, 2024, we have concluded that some of our internal control deficiencies have been remediated. Specifically, we previously identified insufficient segregation of duties within the accounting function, and overreliance on outside financial consulting for financial reporting as internal control weaknesses. With the recent addition of experienced officers and other employees, we no longer consider these issues to be internal control weaknesses.
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PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
The Company may be involved in certain legal proceedings that arise from time to time in the ordinary course of its business. Legal expenses associated with any contingency are expensed as incurred. The Company’s officers and directors are not aware of any threatened or pending litigation to which the Company is a party or which any of its property is subject and which would have any material, adverse effect on the Company.
Item 1A. Risk Factors.
Reference is made to the risks and uncertainties disclosed in Item 1A (“Risk Factors”) of our Annual Report on Form 10-12G which sections are incorporated by reference into this report, as the same may be updated from time to time.
As a smaller reporting company, the Company is not required to disclose material changes to the risk factors.
Item 2. Unregistered Sales of Equity Securities and Use Of Proceeds.
During the three months ended March 31, 2025, Preferred A and Preferred B shareholders converted all of the preferred shares into 26,600,000 shares of common stock. Additionally, one shareholder converted 500,000 shares of common stock into 500 shares of Preferred A stock. Also, during the three months ended March 31, 2025, the Company issued 2,125,000 shares to two investor relations firms.
During the three months ended June 30, 2025, the Company issued 3,200,000 common shares for service, 425,000 common shares issued in error which will be returned to the Company, 400,000 shares for financing fees due to non-payment of loans by the maturity date and 250,000 common shares were sold in a private placement for $0.20 per share yielding $50,000 in proceeds to the Company.
During the three months ended September 30, 2025, the Company issued 2,000,000 shares of common stock for services, valued at $227,500. Additionally, the Company issued 2,000 shares of Preferred B stock for cash proceeds of $57. No Preferred A activity or conversions occurred during the quarter.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
During the quarter ended September 30, 2025, no director
or officer
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Item 6. Exhibits.
The exhibits listed on the Exhibit Index below are provided as part of this report.
| Exhibit No. | Description | |
| 31.1* | Certification of principal executive and financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as amended | |
32.1*
|
Certification of principal executive officer and principal financial officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as amended | |
| 101.INS | Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104 | Cover Page Interactive Data File (formatted in IXBRL, and included in Exhibit 101. |
______________
* Filed herewith.
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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.
| KINETIC SEAS INCORPORATED | ||
| Dated: December 10, 2025 | By: | /s/ Edward Honour |
| Ed Honour | ||
Chief Executive Officer and Chief Financial Officer Principal Executive Officer, Principal Financial Officer | ||
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