KSEZ 10-K & 10-Q changes, risk factors and insider trading

Our use of GPU hosting platformservices incorporates software and and services from third-party vendors. The performance and reliability of these third-party components are critical to our overall service delivery. Dependence on third-party vendors places us at risk if these vendors fail to perform. Issues such as software bugs, service disruptions, or unavailability can directly impact the quality and continuity of our services.

Our use of GPU hosting servicesservice require substantial investment in hardware and contractual obligations to ensure we can meet customer demand and maintain a competitive edge. To finance these capital expenditures, we may need to seek additional funding. However, there are uncertainties surrounding our ability to secure such financing. The availability of financing is subject to various market conditions that may be beyond our control. During times of economic uncertainty or market instability, securing financing can be particularly challenging. If financing is available, the interest rates and terms may not be favorable. Unfavorable terms could place a significant strain on our future cash flow and profitability. Should we resort to equity financing, it could result in dilution of our current shareholders' equity and could potentially lead to downward pressure on our stock price.

As of MarchMay 1,26, 2024,2026, our executive officers, directors, significant shareholders and affiliated persons and entities collectively,collectively beneficially owned approximately 74.5%36.38% of our outstanding common,common and as a result control the votes on any matter submitted to a vote of shareholders.stock. As a result, these persons and entities may have the ability to exercise controlsignificant influence over most matters thatsubmitted require approval byto our stockholders,stockholders for approval, including the election of directors and approval of significant corporate transactions. CorporateAccordingly, actioncorporate mightactions may be taken even if other stockholders oppose them. This concentration of ownership might may also have the effect of delaying or preventing a change in control of our company that other stockholders may view as beneficial.

During the year ended December 31, 20242025, the Company incurredrecorded $129,916 intotal other expenses,expense asof $32,565, compared to $39,424other expense of other expenses$129,916 during the prior year ended December 31, 2023.2024. Other income and expense during fiscal 2025 consisted primarily of $110,502 in interest expense offset by $65,540 of investment income and the gain on debt extinguishment of $12,396. In eachfiscal year, 2024, other expensesexpense consisted primarily of interest accrued on loans made to the Company by entities affiliated with management. The higherdecrease levelin of interestnet other expense induring fiscal 20242025 aswas compared to fiscal 2023 isprimarily attributable to higherlower loanfinancing costs balances in 2023 asand the Companyrecognition borrowedof money toinvestment finance its ongoing generalincome and administrativegain expenses.on debt extinguishment.

DuringAs the year endedof December 31, 20242025, the Company had a netcash on losshand of ($3,897,122).$7,767 compared to cash on hand of $4,947 as of December 31, 2024.

Cash flows used in investing activities were ($100,178)$0 for the year ended December 31, 20242025, compared to cash flows used in investing activities of $13,326$(100,178) for the year ended December 31, 2024. 2023. TheThere entirewere increaseno during the fiscal 2024 period compared to fiscal 2023 in cash flows used bysignificant investing activities isduring duefiscal to the purchase of equipment to be used in our new of business.2025.

Cash flows provided by financing activities were $1,159,334$556,749 for the year ended December 31, 20242025, compared to cash flows provided by financing activities of $163,600$1,159,333 for the year ended December 31, 2023.2024. The increase in cashCash flows provided by financing activities during fiscal 2025 consisted primarily of $255,000 in proceeds from the issuance yearof endedcommon Decemberstock 31,for 2024cash, $252,858 in proceeds from notes payable, and $56,501 in proceeds from related party notes, partially offset by repayments of related party notes of $(15,682). The decrease in financing cash flows during fiscal 2025 compared to Decemberfiscal 2024 31, 2023 iswas primarily attributable to $911,050lower proceeds received from theequity private placement of common stock and $231,164 in the 2024 period compared to $71,600 in proceeds from common stock issued for cash and $92,000 in advances by related parties in the 2023 period.financings.

Management intends to fund our working capital requirements through a combination of ourrevenues existinggenerated fundsfrom operations and future issuances of debt or equity securities. Our working capital requirements are expected to increase in line with the continued implementation of aour business planplan, expansion of operations, and growth of the Company’s AI and commencementtechnology-related ofbusiness operations.activities.

Based upon our current operations, we domay not haverequire sufficientadditional working capital to fund our operations over the next 12 months. The Company needsrequires substantial capital to carryoutcarry out its current business,business plan, and there iscan be no assurance that theadditional Companycapital will be ableavailable toon raiseacceptable additionalterms, if at all. Any future capital raises ormay that the terms of any capital raise are notbe dilutive to currentexisting shareholders or carry othercontain terms that are unfavorable to the Company and its shareholders.

Additional issuances of equity or convertible debt debt securities will result in dilution to our current shareholders. Further, such securities mightmay have rights, preferences, or privileges senior senior to our Common Stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or or are not available on acceptable terms, we may not be able to take advantage of prospective new business endeavorsopportunities, or opportunities, which could significantly materially and materiallyadversely restrictaffect our business operations.

We anticipate that we willmay continue to incur operating losses losses as we expand our operations and invest in the nextgrowth 12of months.our business. Our prospects must be considered in light of the risks, expenses expenses, and difficulties frequently encountered by companies in their earlygrowth stageand ofdevelopment development.stage. Such risks for us include, but are not limited to, an evolving and unpredictable business model, recognition of revenue sources, management of growth, competition, and the managementability of growth. To address these risks, we must, among other things, develop, implement,to and successfully execute our businessattract and marketing strategy, respond to competitive developments, and attract, retain, and motivateretain qualified personnel. There can be no assurance that we will be successful in addressing such risks, and the failure to do so could have a material adverse effect on our business prospects, financial condition, and results of operations.

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 August 31, 2021 there were no common stock equivalents that were dilutive.

The Company secures clients through its proprietary Skilliks™ platform, which is designed to evaluate a client's software development and technology requirements and create comprehensive development strategies. Skilliks™ utilizes artificial intelligence to identify opportunities for automation, workflow optimization, software modernization, and the incorporation of AI-powered features thatintended canto enhance business operations and customer engagement.

The Company's consulting and development services assist organizations in designing, developing, and deploying custom software applications and AI-enabled solutions. Through these engagements, the Company helps clients integrate emerging AIartificial intelligence technologies into existing business processes while developing long-termtechnology roadmaps technology roadmaps aligned with each client's strategic objectives.

Comparison of Results of Operations for the ThreeSix Monthsmonths Ended MarchJune 31,30, 2026 and 2025.

During the three months ended MarchJune 31,30, 2026 and 2025, the Company generated no consulting revenuerevenue. of $25,895 and $67,871, respectively. In addition, duringDuring the three months ended March 31,June 30, 2026, the Company recognized product sales revenue of of$519,750, compared with no product sales during the corresponding 2025 period. Accordingly, total revenue was $519,750 relatedand to the satisfaction of performance obligations associated with previously deferred customer contracts. Total revenue$0 for the three months ended MarchJune 31,30, 2026 and 2025 was $545,645 and $67,871,2025, respectively.

DuringCost of sales related to consulting labor was $0 and $12,977 for the three months ended MarchJune 31,30, 2026 and 2025, the cost of consulting labor incurred to generate consulting revenue was $0 and $57,162, respectively. The Company did not record any direct costs of product sales during the three months ended MarchJune 31,30, 2026. Software development expenditures are included within Selling,in Generalselling, general and Administrative administrative expenses because the underlying software, artificial intelligence models, code base,base and technology infrastructure are developed for use across multiple current and prospective customer engagements and future commercialization opportunities. Management doesThese costs are not allocate these costs allocated to specific customer contracts or product sales because the technologies developed aremay be utilized across numerous current and futuremultiple projects and may support multiple revenue-generating activities. As a result, gross profit for the three months ended March 31, 2026 was $545,645, compared to $10,709 for the three months ended March 31, 2025.

During the three months ended MarchJune 31,30, 2026, the the Company incurred total operating expenses of $363,246,$242,334, compared towith $204,352$965,044 during the three months ended MarchJune 31,30, 2025.2025, a decrease of approximately $722,710, or 75%. The increase in operating expensesdecrease was primarily attributable to highersubstantially lower professional fees, consulting expenses, public company compliance costs, commissions, investor relations activities,fees and otherpayroll and benefit expenses, partially offset by higher selling, general and administrative expenses associated with the Company's growth initiatives, financing activities, and expansion of operations.expenses.

Selling, general and administrative expenses increased to $210,813 during the three months ended March 31, 2026, compared to $82,490 during the comparable prior-year period. Professional fees increased to $133,027 from $5,422, reflecting increased legal, accounting, consulting, transfer agent, SEC reporting, and other public company compliance costs. Payroll and benefits were $19,405$148,565 for the three months ended MarchJune 31,30, 2026, comparedfrom to $116,440$89,320 for the threecomparable prior-year period, an increase of approximately months$59,245, endedor March66%. 31,The 2025.increase was primarily attributable to higher commission expenses associated with the Company's commercial activities, including its Sagtec-related arrangement, and software and technology-related expenditures.

The Company includes all software development expenditures within Selling, Generalselling, general and Administrativeadministrative expenses. ManagementSuch believesexpenditures these costs are not directly attributablerelate to any specific customer contract, product sale, or revenue stream because the Company's software platforms, artificial intelligence models, code libraries, applications, applications and related technology infrastructure are developed for use across multiple current and prospective customer engagements and commercialization future commercialization opportunities. Accordingly,Because nothese software development costsexpenditures are not directly attributable to a specific customer contract or product sale, they are not classified as direct costs of revenue.

During the three months ended MarchJune 31,30, 2026, the Company recorded total other income of $74,711, compared to total other expense of $1,558,007, compared to $30,247$40,757 during the three months ended MarchJune 31,30, 2025. Other income (expense) during the 2026 period consisted primarily of a loss on debt extinguishment of $1,602,602, partially offset by investment income of $98,296, and interest expense of $53,702.

The increaseimprovement in other income (expense) during the three months ended June 30, 2026 was primarily attributable to investment income recognized during the period and lower interest expense compared to the prior-year period. The Company did not recognize any material loss on debt extinguishment during the three months ended June March30, 31, 2026 was primarily attributable to transactions involving the settlement and restructuring of outstanding indebtedness, which resulted in a significant non-cash loss on debt extinguishment. These charges were partially offset by investment income earned during the period. The Company also continued to incur interest expense on its outstanding borrowings.2026.

As a result of the foregoing, during the threesix months months ended MarchJune 31,30, 2026, the Company incurred a net loss of $(1,375,6081,023,481), or $(0.03) per basic and diluted share, compared to a net loss of $(223,8911,242,668), or $(0.010.03) per basic and diluted share during the threesix months ended MarchJune 31,30, 2025.

As of MarchJune 31,30, 2026, the CompanyCompany's hadbalance sheet reflected cash of $205,667.approximately $0.

During the threesix months ended MarchJune 31,30, 2026, the Company incurred a net loss of $(1,375,608).approximately $1,023,482.

Cash flows provided by or used in investing activities were $0 for the three months ended March 31, 2026 and $0 for the threesix months ended MarchJune 31,30, 2025.2026.

Cash flows provided by financing activities were approximately primarily$381,204 attributable tofor proceedsthe receivedsix frommonths financingended arrangementsJune and30, equity2026. issuancesFinancing activities during the threeperiod monthsincluded endedapproximately March$461,563 of 31,proceeds 2026.from Duringnotes thepayable, period, theoffset by approximately $80,358 of activity associated with repayment of notes payable. The Company obtainedcontinues to additional funding throughutilize debt financingfinancing, equity transactions, strategic commercial relationships, and other available sources of capital raising transactions to support its operations, working capital requirements, software development activities, and commercialization efforts, and corporate growth initiatives.efforts.

Management intends to fund its working capital requirements through a combination of existingavailable cash resources, revenues generated from operations, strategic commercial relationships, potential realization of value from strategic assets, and future issuances of debt and equity securities. The Company's working capital requirements are expected to increasecontinue as it continuesdevelops toand expandcommercializes its artificial intelligence, intelligence and software development,technologies, cloudsupports its technology infrastructure, and commercializationexpands its commercial activities.

For the three months ended June 30, 2026, the Company reported net income and, accordingly, potentially dilutive securities were evaluated for inclusion in the calculation of diluted earnings per share. Potentially dilutive securities outstanding as of MarchJune 31,30, 2026 included 500 shares of Series A Convertible Preferred Stock,Stock and 4,917 shares of Series B Preferred Stock, andtogether certainwith debt andany financingother outstanding instruments that may be convertible into or exercisable for shares of the Company's common stock. Because the effect of theseSuch securities wouldare haveincluded been anti-dilutive, they were excluded from the calculation ofin diluted net lossearnings per share foronly to the threeextent months endedtheir Marcheffect 31,is 2026 and 2025.dilutive.