10-K: T-REX Acquisition Corp. Faces Foreclosure Amid Deepening Losses

T-REX Acquisition Corp. reported a significant increase in net losses and a working capital deficit for fiscal year 2025, compounded by a facility foreclosure action and operational disruptions.

Summary

• Net loss for the fiscal year ended June 30, 2025, increased by 148% to $2,535,552, compared to $1,023,271 in fiscal year 2024.
• Revenues increased by 105% to $32,390 in fiscal year 2025, primarily due to recommencing mining operations and new hosting services.
• Cost of revenue rose significantly to $118,592 in fiscal year 2025 from $30,258 in fiscal year 2024, driven by expanded mining and hosting operations.
• Operating expenses surged to $2,029,189 in fiscal year 2025 from $981,379 in fiscal year 2024, mainly due to increased stock-based compensation and equity incentives.
• A working capital deficit of $1,236,974 was reported as of June 30, 2025, worsening from $1,107,612 in the prior year.
• The company's Orofino, Idaho facility, acquired in March 2025 for $500,000, is subject to a foreclosure action initiated on October 6, 2025, for approximately $335,000.
• An incident on July 23, 2025, at the Orofino facility caused operational disruption, equipment damage, and led to a full impairment loss of $192,500 for proprietary software.
• The company holds Bitcoin valued at $17,502 as of June 30, 2025, and early adopted ASU 2023-08 for fair value accounting of crypto assets.
• Numerous warrants were redeemed through cashless conversions into restricted common stock during fiscal year 2025.

Sentiment

Score: 2

Explanation: The company faces severe financial distress, including substantial losses, a worsening working capital deficit, and a critical foreclosure action on a key asset. Operational disruptions and asset impairment further compound the negative outlook, indicating significant challenges to its going concern status.

Positives

• Revenues increased by 105% to $32,390 in fiscal year 2025, driven by recommenced mining operations and new hosting services.
• Cash and cash equivalents increased significantly to $49,733 as of June 30, 2025, from $36 in the prior year.
• The company successfully acquired a co-location facility in Orofino, Idaho, in March 2025, expanding its operational infrastructure.
• Early adoption of FASB ASU 2023-08 enhances transparency in financial reporting for crypto assets by measuring them at fair value.

Negatives

• Net loss increased by 148% to $2,535,552 in fiscal year 2025, indicating worsening profitability.
• A substantial working capital deficit of $1,236,974 as of June 30, 2025, highlights severe liquidity issues.
• The Orofino facility, a key asset, is facing a foreclosure action for approximately $335,000, with a limited timeframe to cure the default.
• An operational disruption at the Orofino facility in July 2025, involving equipment removal and damage, led to a temporary halt in mining and co-location services.
• Proprietary software acquired for $210,000 was fully impaired by June 30, 2025, due to the facility disruption, resulting in a $192,500 loss.
• Operating expenses more than doubled, primarily due to high stock-based compensation and equity incentives.
• The company has a history of operating losses and an accumulated deficit of $9,559,350, raising substantial doubt about its ability to continue as a going concern.

Risks

• History of operating losses and inability to achieve or sustain profitability.
• Unproven business model in the blockchain and cryptocurrency mining industry, which is new and evolving.
• Potential for other cryptocurrencies to supplant Bitcoin, negatively impacting demand and conversion spot price.
• Risk of sustained, substantial reduction in Bitcoin demand, forcing reconfiguration or replacement of ASIC miners at increased costs and potential business interruption.
• Inability of energy provider (Clearwater Electric) to supply sufficient economical electric power, potentially requiring relocation of miners to less advantageous facilities.
• Failure to effectively manage growth could strain managerial, operational, and financial resources.
• Significant contributors to the Bitcoin network could propose amendments to protocols and software that negatively impact business and operations, leading to excessive costs and inefficiencies.
• Open-source structure of the Bitcoin network protocol may result in inconsistent or ineffective changes, damaging the network.
• Challenges in adopting technology to respond to changing security needs, exposing digital assets to theft, loss, or destruction.
• Limited legal recourse and lack of insurance protection for digital asset losses, exposing the company to unrecoverable losses.
• Regulatory changes requiring registration as a money services business (MSB) or money transmitter (MT) could incur significant compliance costs.
• Unclear status of Bitcoin regulation under the CEA by the CFTC, potentially leading to additional compliance costs.
• Possible imposition of regulations by federal banking or Federal Reserve agencies if cryptocurrency activity expands.
• Unfavorable global economic, business, or political conditions could adversely affect business, financial condition, or results of operations.
• Future success is highly dependent on the value of Bitcoin; inability to mine and sell at favorable prices will negatively impact results.
• Volatility in the price of common stock, making it difficult for investors to sell shares at a fair price.
• Common stock may be categorized as 'penny stock,' making it more difficult for investors to sell due to suitability requirements and FINRA sales practice rules.
• Elimination of monetary liability against directors, officers, and employees under Nevada law and indemnification rights may result in substantial expenditures and discourage lawsuits.
• Future issuance of additional shares of common stock could cause significant dilution to all stockholders.
• Anti-takeover effects of certain provisions of Nevada state law may hinder a potential takeover.
• No intention to pay cash dividends in the foreseeable future, meaning stockholders will only receive a return if they sell their shares.

Future Outlook

The company's strategic focus is to secure and operate within the Bitcoin distributed ledger network and explore additional distributed ledger protocols and infrastructure opportunities. It plans for revenue streams to extend beyond direct crypto mining into co-location hosting, equipment sales, infrastructure development, software-as-a-service (SaaS), power curtailments, and renewable energy credits. The company intends to meet liquidity requirements and fund business expansion through cash flow from Bitcoin sales and issuance of debt or equity. It is actively seeking to purchase additional ASIC miners and applied for lease financing for 275 latest generation ASIC S21 miners. The company intends to implement a formal cybersecurity risk management program before the end of 2025.

Management Comments

• Management believes that the actions presently being taken to further implement its business plan and generate revenues provide the opportunity for the Company to continue as a going concern.
• Management cannot determine if it has intent to continue in the related party office lease arrangement for more than 365 days, as future operational plans may require other facilities.
• Management is in the process of gathering facts on the Orofino facility disruption and has filed an insurance claim, evaluating options to restore conditions and resume operations.
• Management is currently reviewing multiple financing proposals to refinance the outstanding debt on the Orofino property.

Industry Context

The cryptocurrency mining industry is highly competitive and rapidly evolving, facing challenges from established and emerging companies with greater financial resources and economies of scale. Competitors benefit from lower costs for equipment and energy, and better access to capital. The industry is also subject to significant fluctuations in cryptocurrency values and potential regulatory changes. Environmental concerns surrounding Proof-of-Work mechanisms like Bitcoin's may push users toward greener alternatives, posing ESG risks. The company aims to diversify its revenue streams beyond direct mining into hosting, equipment sales, and software services to navigate this competitive landscape.

Comparison to Industry Standards

• The company defines its principal competitors as other publicly traded Bitcoin miners, including Marathon Digital Holdings, Inc., Riot Platforms, Inc., CleanSpark, Inc., Hut 8 Mining Corp., Hive Blockchain Technologies, LTD., and Iris Energy Limited.
• Compared to these larger, more established competitors, the company faces disadvantages in financial resources, operating histories, access to capital, economies of scale, and ability to secure mining equipment and energy at lower costs.
• The company's strategy to expand into co-location hosting, equipment sales, and software-as-a-service (SaaS) aligns with broader industry trends of diversification among crypto miners to mitigate reliance on direct mining rewards and volatile cryptocurrency prices.
• The company's early adoption of FASB ASU 2023-08 for fair value accounting of crypto assets aligns with evolving regulatory practices and enhances transparency, a standard that larger, publicly traded competitors would also be adopting.

Management Changes

Corporate Governance

Legal Proceedings

• A foreclosure action was initiated by the seller of the Orofino facility on October 6, 2025, due to default on a promissory note. The company has approximately 115 days to cure the default of approximately $335,000.
• Management is not aware of any other legal proceedings contemplated by any governmental authority or any other party involving the company or its properties as of the date of the Annual Report.

Related Party Transactions

• Leases office space from President Frank Horkey at $250 per month, with $3,000 accrued rent expense as of June 30, 2025.
• Owed Squadron Marketing $227,000 for management advisory fees as of June 30, 2025, down from $480,000 in 2024, with $270,000 settled via common stock issuance.
• Owed compensation payable of $190,663 to key management personnel (Frank Horkey, Lazarus Asset Management LLC, Antonio Oliveira) as of June 30, 2025, with $120,000 converted into a promissory note.
• Owed board of director/advisory board member fees of $90,500 as of June 30, 2025, with $63,000 settled via common stock issuance.
• Frank Horkey provided funds for the Orofino facility purchase, resulting in a $207,630 Senior Secured Convertible Promissory Note bearing 12% interest, due March 5, 2026, secured by a first lien on the property.
• Various officers advanced funds for operating expenses, reported as 'Due to related party advances' totaling $5,150 as of June 30, 2025 (non-interest bearing, unsecured, due on demand).
• Acquired intangible assets of Baoblock, Inc. (owned by newly appointed CTO Antonio Oliveira) for $210,000, paid via 600,000 restricted common shares and $10,000 cash.

Stakeholder Impact

• **Shareholders:** Significant dilution from numerous stock and warrant issuances, increased net losses, and substantial doubt about the company's ability to continue as a going concern pose high risks to investment value. The foreclosure action on a key asset could further erode shareholder value.
• **Employees/Consultants:** Management and consulting fees are a significant expense, with compensation often paid in stock and warrants, indicating reliance on equity for remuneration. The operational disruption at Orofino could impact job security for facility management.
• **Creditors:** The company's default on a promissory note and subsequent foreclosure action on the Orofino facility highlight significant credit risk. Increased total liabilities and a worsening working capital deficit suggest challenges in meeting financial obligations.
• **Customers (Hosting Services):** The operational disruption at the Orofino facility directly impacts hosting services, potentially leading to service interruptions and loss of customer trust.
• **Suppliers:** The company's financial instability and reliance on debt/equity financing could pose risks to timely payments for goods and services.

Next Steps

• Refinance the Orofino property through third-party lenders to cure the default and avoid foreclosure.
• Restore conditions and resume mining and co-location operations at the Orofino facility following the July 2025 disruption.
• Pursue lease financing or equity financing to acquire 275 latest generation ASIC S21 miners to scale cryptocurrency mining operations.
• Implement a formal cybersecurity risk management program before the end of 2025.
• Continue to evaluate the related party office lease annually based on current rental needs and future operational plans.

Key Dates

Recommendation

The company is in a precarious financial position, evidenced by substantial and increasing net losses, a worsening working capital deficit, and an accumulated deficit of over $9.5 million. The most critical factor is the foreclosure action on its primary operational asset, the Orofino facility, which directly threatens its core business. This is compounded by an operational disruption at the same facility and the full impairment of recently acquired software. While revenues increased, they are dwarfed by costs and losses. The 'going concern' uncertainty, high reliance on equity compensation, and the highly competitive and volatile nature of the cryptocurrency mining industry further amplify the risks. Given these severe financial and operational challenges, a seasoned investor would likely recommend a strong sell to mitigate further losses.

Keywords

Cryptocurrency Mining, Bitcoin, SEC Filing, 10-K, Financial Report, Digital Assets, Co-location Hosting, ASIC Miners, Foreclosure, Operational Disruption, Going Concern, Nevada Corporation, TRXA